Singapore biofuels industry may hit snag as palm oil prices rise

Jessica Cheam, Straits Times 14 Nov 07

SINGAPORE'S fledgling biofuels industry - singled out as a strong area of growth by the Government - is set to hit a temporary snag, as palm oil prices hit record highs.

Biodiesel, a form of biofuel, is a processed fuel derived from biological sources or feedstock, such as palm and soya beans.

Prices of crude palm oil, used in the production of biodiesel, recently hit record highs of RM2,900 (S$1,257) per tonne on the back of a surge in crude oil prices, which have reached almost US$100 a barrel.

With prices unlikely to soften in the short term, Singapore's new biodiesel plants may have to scale back production.

One affected firm is Australia's Natural Fuel, which is slated to begin production during the first phase of its US$130 million project on Jurong Island - one of the world's largest.

Natural Fuel Singapore's chief executive, Mr Larry Tan, told The Straits Times that the company's first biodiesel train of 200,000 tonnes a year will go ahead, but future production will depend on palm oil prices.

'At the moment, crude palm oil is more expensive than biodiesel, partly because of a drop in supply from Malaysia this year. But we expect prices to soften in the future, when production ramps up in Indonesia and Malaysia,' he said.

Natural Fuel's plant will eventually have an annual capacity of 600,000 tonnes. There are two other plants in Singapore, each with a capacity of 100,000 tonnes a year. One has begun production, while the other is due to start by year-end.

Speaking at a two-day biofuels conference at the annual Global Entrepolis @ Singapore trade event yesterday, Mr Tan also addressed concerns facing the industry, such as sustainable ways of producing feedstock that does not compete with food.

For example, the pros and cons of jatropha, a fast-growing shrub touted as the 'fuel of the future', was hotly debated at the event.

The plant, thought to be drought-resistant, produces seeds from which inedible oil can be extracted for biodiesel.

Another speaker, Ms Connie Lo, business development manager of JJ-Lurgi Engineering, spoke on how Singapore can play a key role in the future of Asia's biofuels industry.

Singapore's strong infrastructure as an oil refinery centre and its proximity to feedstock in the region place it at an advantage, she said.

Earlier, Minister of State for Trade and Industry S. Iswaran singled out biofuels as a growth area, to be integrated into the chemical industry.


Biodiesel industry wavers as feedstock prices rise
Channel NewsAsia 13 Nov0 7

But analysts at the Asia Biodiesel Conference on Tuesday also noted that there has been a 30 to 40 percent increase in feedstock prices this year, making biodiesel production more costly.

Palm oil and soya are among the feedstock used for producing biodiesel fuel.

There are now about 100 biodiesel plants in Asia, with a total capacity of 3.5 million tonnes. This is expected to nearly double to 6.5 million tonnes by 2008.

Some industry players said margins are getting slightly better, but more help may be needed.

Connie Lo, Business Development Manager at JJ-Lurgi, said: "I think as you know, the oil prices are slowly or quickly moving to the mark of US$100 per barrel. But I think predominantly, biodiesel is still a very regulated market. It's subsidised by governments, either by giving tax incentives or mandating it.

"Without any government support, coupled with rising vegetable oil prices, it's still quite far from being economically viable. But if governments were putting on mandates and policies for the environment purpose, that would make it more viable."

There has been an increase of up to 40 percent in feedstock prices partly because feedstock such as soya and palm oil are being used for food as well.

Some industry players are now looking at non-edible alternatives like jatropha and pongoma.

Larry Tan, CEO of Natural Fuel, said: "I think in terms of demand growth, the demand will still be there. After all, biodiesel is used fundamentally for a good cause - with regards to the environment, to reduce carbon emissions and all that.

"In terms of demand growth, it will be there, but in terms of capacity growth, it will probably slow down in the next couple of years."

Singapore is estimated to account for 14 percent of Southeast Asia's biodiesel production in 2008.- CNA/so

Price rise, eco issues fuel biodiesel debate
Lin Yan qin, Today Online 14 Nov 07;

Subsidies, more awareness needed to spur the industry

Biodiesel could be a viable alternative to fossil fuels. Less polluting than petroleum diesel, it can easily be incorporated into existing engine systems in cars and power generation.

But rising palm oil prices — used by Asian renewable energy companies to produce biodiesel — have taken their toll in the past year, said industry players at the Asia Biodiesel Conference yesterday.

At about US$900 ($1,300) a tonne, palm oil prices are up 40 per cent due to rising energy demand from growing economies and food industries. Feedstock costs can comprise up to 90 per cent of operating costs.

A lack of awareness in Asia — due to a lack of government policies promoting the use of biodiesel — is also to blame. "Consumers are economy-driven," said Vance Bioenergy managing director Long Tian Ching. "If there are no subsidies or tax breaks to make biodiesel more attractive, it will not take off."

The Government has indicated interest in the trading of biofuels in its National Energy Policy Report but stated that fossil fuels will still be the main source of the nation's energy needs.

Biodiesel has also come under fire from environmentalists, who decry it as a "deforestation fuel". Environmental champion Greenpeace released a report last week entitled, How the Palm Oil Industry is Cooking the Climate, about the deforestation and loss of peatland in Sumatra to palm oil plantations. Peat — partially decayed organic matter — releases large amounts of carbon dioxide when burnt. Questions have also arisen about whether demand for palm oil is contributing to rising food prices, affecting the poor.

Mr Long disagrees. "That's a simplistic argument," he said. "It's not as simple as food versus fuel; high food prices can't be blamed on palm oil. It's a poverty issue."

Companies like his are part of the Roundtable on Sustainable Palm Oil, whose membership criteria include not using supplies from plants that have replaced high conservation value areas — like primary forests — after 2005.

Despite such obstacles, the industry is set to grow, with biodiesel capacity set to hit 6.5 million tonnes in Asia by next year.

Australian renewable energy group Natural Fuel will begin operating its US$130-million plant — the largest in the world — on Jurong Island by the end of this year, but not at full capacity. "A lot of these decisions were made two, three years ago, when palm oil prices were low," said chief executive officer Larry Tan.

The company will look to expanding operations to include distribution to "ride out" the high costs, and consider alternative feedstock.

"Biodiesel has large potential," said Mr Tan. "It's more environmentally-friendly than fossil fuels."