Malaysia launches palm-fuel burning

Malaysia launches palm-fuel burning

PRAI, Malaysia (Reuters): Malaysia, the world's biggest
producer of palm oil, on Monday officially launched its first
large-scale scheme to burn the crude oil in power plants and use
it in other industries.

The move is part of a project to prop up sagging prices and
ease stocks.

Primary Industries Minister Lim Keng Yaik told reporters at
Tenaga's plant in Prai district in the northern state of Penang,
that the government was sticking to its original plan to use up
400,000 tons of the oil this year.

Originally it had planned that all this palm oil should be
burned in plants of the country's largest power company Tenaga
Nasional Bhd (TNB).

"Unfortunately, most of TNB power stations have been changed
to gas firing. Even the remaining MFO-fired (plants) -- what we
called the conventional thermal generator -- have already been
converted into gas firing," Lim said.

When used in power stations, palm oil is mixed with medium
fuel oil, or MFO, to make a type of diesel.

Lim said other industries, such as cement making, had the
potential to use crude palm oil mixed with medium fuel oil to run
their boilers. "We are looking for other clients. I can't depend
on TNB as my only client. (But) I will stick to the plan to burn
400,000 tons," he said.

Malaysia plans to improve palm oil prices to 950 ringgit
($250) a ton this year from around 815 ringgit currently.

As well as burning palm oil as industrial fuel, it plans to
replant 200,000 hectares of oil palm plantations, which would
have yielded 600,000 tons.

Malaysia's palm oil stocks reached a record 1.52 million
tons last November because of poor exports and stiff competition
from Indonesia, the world's second largest producer.

Malaysia's total consumption of diesel as an industrial fuel
totaled 3.6 million tons a year, said Lim, adding that he was
confident he could ask industry to replace 10 percent of their
fuel needs with crude palm oil.

The Malaysian government is trying to convince a skeptical
market that the CPO-based fuel can be burned just like diesel to
create energy.

Earlier, a joint statement issued by Lim and Energy Minister
Leo Moggie said under the palm-fuel project, the official
Malaysian Palm Oil Board (MPOB) had signed an agreement with CPO
producers for the supply of the oil at a fixed price of 725
ringgit per ton.

The MPOB would supply crude palm oil at 700 ringgit per ton,
with the price difference subsidized by the government.

"This arrangement is done for the first tranche, amounting to
50,000 tons. One thousand tons of this amount will be provided to
TNB free of charge for research and development purposes. To
date, the amount of CPO delivered to TNB is about 2,000 tons,"
the statement said.