KL starts burning palmoil as fuel

KL starts burning palmoil as fuel

KUALA LUMPUR (Reuters): Malaysia will start burning crude palm
oil as industrial fuel in April and also plans to set up a plant
to process CPO into diesel to help cut a surplus in stocks and
improve prices, officials said on Thursday.

"Malaysia will start burning CPO as fuel in April. The Primary
and Industries Ministry has discussed the issue with Tenaga," a
ministry official told Reuters.

Officials at Malaysia's largest power firm, Tenaga Nasional
Bhd, were not available for comment.

Malaysia, the world's largest palm oil producer, has decided
to reduce palm oil supply by 600,000 metric tons this year
through replanting 200,000 hectares and using 500,000 tons of CPO
to run power plants.

The government has also asked producers to set aside five
percent of output for sale to the government at a fixed price of
725 ringgit ($190.78) a ton.
The oil will be used as industrial fuel.

Also on Thursday, Primary Industries Minister Lim Keng Yaik
said the government planned to build a plant with an initial
capacity to process 500,000 tons of crude palm oil into diesel as
part of its long term efforts to stabilize prices, which
currently hover around a 10-year low.

The national Bernama news agency quoted Lim as saying the
plant's capacity could be expanded to one million tons, adding
that the processed CPO would become an import substitute for
petroleum diesel.

Bernama did not say when or where the plant would be built and
officials at the ministry could not be reached for comment.
Malaysia is struggling to ease domestic stocks, which reached a
record high of 1.52 million tons last November, because of poor
exports and fierce competition with the world's second largest
producer and arch rival Indonesia.

Traders said news of plans to use CPO as fuel partly supported
the palm oil futures market on Thursday, but added that players
were keen to hear more from the government and Tenaga.

Traders said market-friendly export figures for the first 15
days of March were the main reason behind Thursday's gains.

"Tenaga still can't confirm anything and people are bit
cautious about the plan even though the government has said the
burning would start in April," said one trader in Kuala Lumpur.

The benchmark third-month May futures gained 13 ringgit to 845
ringgit ($222.36) a ton.