Malaysia palm-fuel project successful, says official
Malaysia palm-fuel project successful, says official
KUALA LUMPUR (Reuters): Crude palm oil (CPO) mixed with medium fuel oil has been successfully burned as industrial fuel by Malaysia's state utility Tenaga Nasional Bhd, an industry official said on Wednesday.
"The burning works very well," said M.R. Chandran, chief executive of the Malaysian Palm Oil Association (MPOA), which groups the private sector of the oil palm plantation industry in the world's largest producer country.
The government will officially launch the burning of CPO as industrial fuel at Tenaga's plant in Prai district in northern Penang next Monday, but commercial burning had already started, said Chandran.
"This is only the official launch. But in the meantime, the burning has already started," he added.
Last week, a total of 5,000 tons of CPO mixed with medium fuel oil (MFO) were loaded into vessels for shipment to Prai from Malaysia's main port, Port Klang, Chandran said.
"Commercial burning commenced after the blending of...CPO and medium fuel oil on April 3 in Port Klang. The following day, commercial burning had commenced in Prai. We are hoping to burn about 400,000 tons this year," he said.
At 0920 GMT on Thursday, benchmark third-month June crude palm oil futures were quoted at 844 ringgit ($222.10) a ton after trading as low as 830 ringgit on overnight losses on the Chicago Board of Trade (CBOT) and poor exports.
"You may say there was some covering sparked by news about the burning. But in general, everybody knows the government will burn the CPO," said one trader in Kuala Lumpur.
"There are even jokes whether the government really burns the CPO. Some say the government is actually burning diesel oil, which is claimed to be CPO," he added.
The MPOA is working together with the government to promote the use of CPO as fuel in order to help ease stocks. Its members have supplied the initial 50,000 tons of CPO to be used by Tenaga at a price of 725 ringgit ($190.78) a ton.
The Malaysian government is trying to convince the skeptical market that CPO mixed with medium fuel oil, a type of diesel oil used by Tenaga to run boilers and generators, can be burned just like diesel to create energy.
Crude palm oil will be mixed with medium grade fuel oil in equal proportion to make it liquid enough to be supplied for burning. Tenaga plans to burn 50,000 tons of CPO as fuel each month starting in April.
"There is no need for the market to remain skeptical at all. That's my view. There is no repercussion to Tenaga boilers, like people have been reporting," said Chandran.
"What people are forgetting is whenever you use a naturally- formed oil like vegetable oil, it is safer. And in fact the maintenance and the upkeep and all that will be far better...because you are using vegetable oil," he added.
Malaysia wants to improve palm oil prices to 950 ringgit ($250) a ton this year by taking at least one million tons of oil from the market, which saw record high stocks of 1.52 million tons last November because of poor exports.
Malaysia aims to burn around 400,000 tons of crude palm oil as industrial fuel and replant 200,000 hectares of plantation areas, which yield 600,000 tons.
"Burning of vegetable oils is also being done in western countries. Rapeseed is being burned in Europe, soyoil is being burned in the U.S. and also in South America.
"We have done extensive trials on this prior to (burning)," Chandran said.
The Malaysian government has said it would purchase the remaining 350,000 tons of crude palm oil at market price.
The CPO to be supplied to Tenaga is priced at 700 ringgit a ton and the difference will be subsidized by a fund obtained through a tax on all CPO produced. The government aims to take in up to 90 million ringgit through cess collection.