Oil palm biomass offers huge potential, RM30bil in income

  • Business
  • Wednesday, 21 Dec 2011

KUALA LUMPUR: The vision to mobilise maximum utilisation of oil palm biomass to generate an additional RM30bil in income for Malaysia by 2020 needs to be fully industry-driven and well-supported by the capabilities and incentives from the Government.

Agensi Inovasi Malaysia (AIM) executive vice-president and head, strategic impact-wealth creation, Bas Melssen said that palm oil industry players must quickly seize the huge opportunity in oil palm biomass, which could lead to the creation of new downstream operations such as pellets, biofuels and biobased chemicals, apart from the existing fertiliser, animal feed, wood products and bioenergy activities.

“We believe that a concerted effort from the Government, academia and the private sector, with private investment of about RM20bil to RM25bil cumulatively within the next five to 10 years, is needed to achieve Malaysia's goal by 2020,” he told StarBiz.

AIM also envisaged that 66,000 new jobs could be generated from the new high-value downstream operations by 2020, he added.

AIM, a statutory body established under the Prime Minister's Department in April this year, is the driving force towards establishing an “innovation economy” for Malaysia to achieve high-income nation status.

It is involved in preparing the National Biomass Strategy 2020: New Wealth Creation for Malaysia's Oil Palm Industry, which was recently launched by Prime Minister Datuk Seri Najib Tun Razak, Plantation Industries and Commodities Minister Tan Sri Bernard Dompok and AIM chief executive officer Datuk Dr Kamal Jit Singh.

Melssen said: “Malaysia currently has an abundant source of oil palm biomass of about 80 million tonnes, of which less than 10% are being exploited.

“This amount is poised to increase to 100 million tonnes by 2020 from higher yields and replanting activities.”

According to Melssen, the local industry players could fully exploit the lucrative biomass source, and also making sure biomass contributes to creating high-value industries and activities for the nation and instead of shipping it out or selling it as a commodity where other countries could benefit instead of Malaysia.

To mobilise Malaysia's biomass at a competitive rate, only biomass “mobilisable” at below a maximum US$80 a tonne has been considered. “This will give a potential competitively mobilisable amount of biomass of 25 million tonnes by 2020,” he said.

To this end, Melssen said the Government had decided to conduct the national biomass strategy lab, whereby all stakeholders industry players, academia and relevant Government bodies would meet next month.

“During the first and second week, all stakeholders will look at new entry point projects (EPPs) involving the oil palm biomass, identifying additional EPPs and also expanding on existing EPPs under the palm oil NKEA (National Key Economic Area).

“At the end of the month, they will look at identifying potential policy recommendations on oil palm biomass to the Government,” he added.

Melssen admitted that currently, many plantation owners were still reluctant to get seriously involved in new downstream activities, as “there were still no clear-cut business cases or incentives on how to capture the opportunities in oil palm biomass, except for bioenergy.”

On the part of upstream plantation players, AIM suggested they set up special in-house divisions that focused on how to mobilise their oil palm biomass efficiently and to develop and manage a portfolio of initiatives “in the money today” as well as more future focused and higher risk initiatives.

AIM also recommends having at least five to 10 of these entities for a truly market-driven environment. Smaller plantations and private mills could also jointly set up their own cooperatives to achieve economies of scale to manage their own portfolio of biomass initiatives.

“Upstream players will need to have a balanced portfolio management.

“They are strongly encouraged to undertake joint ventures or become stakeholders in the new downstream activities to capture the real value that is created downstream rather than just become a supplier to the downstream operators.

“This is critical to ensure it truly benefits the nation,” Melssen said.

Plantation owners would then also have the option of choosing the different portfolios, depending on their investment preference and appetite for risk.

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