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.