Issue 3 - American Palm Oil Council

Fortunately, a breakthrough in research at MPOB
enabled futher development of technology to
produce winter-grade fuel. This provided more
assurance of the feasibility for commercialisation.
A Detailed Feasibility Study was carried
out before deciding on
commercialisation. This not only
evaluated the technology in detail in
relation to yield of reactors, but also the
marketing potential of the products and
co-products and their prices. In this way,
the revenue streams from the project
could be projected.
The return of investment was calculated,
based on cost of investment in the plants
and revenue to be generated from output.
Interestingly, the integrated project of
bio-diesel production combined
with carotene and Vitamin E
extraction gave an IRR of
more the 40%, but the
project investors did not
want to proceed with
commercialisation at that
time.
Problems with the
suitability of palm bio-diesel
for use in cold countries had to
be solved. Fortunately, a
breakthrough in research at MPOB
enabled further development of
technology to produce winter-grade fuel.
This provided more assurance of the
feasibility for commercialisation.
Research was intensified to improve
project viability. For example, in addition
to the winter-grade fuel, the same project
can be commercialised to generate
carotene, vitamins, sterols, oleochemicals
and surfactants for high quality
detergence as co-products.
The use of a venture-capital approach
spurred commercialisation as well. In a
new industry, it is difficult for the banks
to approve loans, as there are no
precedents of bio-diesel plants in
Malaysia.
For a while, construction was limited. A
breakthrough suggestion was for MPOB
to construct three moderate size plants of
60,000 tonnes/year capacity each, and
lease these to partners who would provide
ancillary facilities such as land, tanks and
office buildings.
Banks then began approving loans to other
bio-diesel investors, and became more
confident after noting that the
government has made substantial
commitment to financially
invest in bio-diesel projects.
MPOB’s commitment in
building and leasing the
three plants using its
own technology inspired
many investors to further
invest in bio-diesel
production by constructing
plants.
However, the eventual number of
plants to be constructed by licenceholders
will depend on how the price of
palm oil responds. If it escalates, the profit
margin will be much reduced and biodiesel
investment will slow down.
Dr Yusof Basiron
CEO, MPOC
GLOBAL OILS & FATS BUSINESS MAGAZINE •VOL.3 ISSUE 3, 2006 13