Malaysia, Indonesia To Use Palm Oil Surplus To Produce Biodiesel

Kuala Lumpur, Malaysia | August 08, 2008 by D-8 Secretariat

Malaysia and Indonesia Monday agreed to use the surplus from their palm oil stockpiles to produce biodiesel as part of the mechanism to boost the palm oil price. Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui and Indonesia’s Agriculture Minister Dr Anton Apriyantono said both countries would continue to do so until the edible oil commodity achieve a price equilibrium in the world market.

Both ministers told a news conference here that the decision was appropriate as the price of crude palm oil (CPO) at the moment was around US$871 per tonne, the lowest in 15 months. “We have palm oil stocks which are fetching unreasonably low price in the world market. So we want to increase its usage to produce biodiesel for the local market.

“This is only logical. If the price is low, then we might as well use the commodity ourselves,” Chin said.

Chin, who described the low price as worrying, said Malaysia had 1.9 million tonnes of surplus, and an equal amount in Indonesia, which would be used for the purpose.

“The palm oil will be use to produce biodiesel if the market is not willing to pay a reasonable price for our CPO,” he said.

The amount was over and above the six million tonnes of palm oil which both countries had agreed to set aside for biofuel production.

Chin hoped that the move could create a balance in the world palm oil market, resulting in a better price for the commodity.

Meanwhile, Anton said the move was to control supply in the market and prevent the price from going further down.

Both ministers gave assurance however, that the move would not result in the shortage of edible oil in the global market because it was implemented at a time when there was a surplus in the supply.

In a related development, Chin and Anton would hold a dialogue with European Union’s members of parliament in Brussels in September to explain various issues pertaining the palm oil industry.

Both ministers would also attend a forum on world sustainability in London, also in September.

D-8 member countries, Indonesia and Malaysia, are world’s highest producers of palm oil, supplying up around 90% of total world production. However, the usage of palm oil is still relatively limited to edible items, and has not yet effectively explored for the usage in bio-diesel purposes. The challenge between food and energy needs is yet the biggest hurdle to be solved. Indonesia is on a continous research to explore the possibilities to use janthropa to cover this need, but the result has not been reached yet. D-8 Director, Amb. Kia Tabatabaee said that D-8 Organization is putting all its effort to support the development of this sectors, and implied that it can also learn from other countries to seek further potentials in this promising fields.

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