I WAS recently invited to an oleochemical industry engagement, and I accepted with more curiosity than confidence.
Oleochemicals are one of those subjects I have long wanted to understand better. Much of my working life was spent closer to the mud – plantations, palms, fruit bunches, mills and the practical business of producing oil.
Oleochemicals take us much further downstream, into atoms, molecules, reactors and chemistry. From mud to molecules, you might say.
Organic chemistry was never my strongest subject in school. I did not pursue it further, nor am I a chemical engineer.
Yet carbon has always fascinated me – this remarkably sociable atom capable of joining and rearranging itself into an extraordinary variety of useful compounds.
Years later, visiting oleochemical plants in Pasir Gudang and elsewhere, I would stare at the maze of pipes, vessels, reactors and distillation columns with the curiosity of a student.
Somewhere inside all that stainless steel, oils originating from fruit bunches I knew so well were being split, purified and transformed into fatty acids, fatty alcohols, methyl esters, glycerine and other molecules that eventually find their way into detergents, shampoos, cosmetics, pharmaceuticals, lubricants, plastics, coatings and countless industrial products.
For the uninitiated, oleochemicals are broadly chemicals derived from natural fats and oils.
In South-East Asia, palm oil and particularly palm kernel oil are important renewable feedstocks, while coconut oil also contributes.
Their derivatives form some of the building blocks from which much more downstream chemistry develops.
Here, the Asean Oleochemical Manufacturers Group, or AOMG, brings together manufacturers from Malaysia, Indonesia and the Philippines.
A small warning for anyone Googling AOMG, however: make sure you arrive at the right one. The same four letters also belong to the South Korean hip-hop and R&B label founded by Jay Park.
I had fortunately been invited to discuss fatty alcohols, not South Korean rappers, although after encountering the industry’s acronyms, I was not entirely certain which group had the more challenging lyrics.
I was soon introduced to Lab and Labsa - Linear Alkylbenzene and Linear Alkylbenzene Sulphonic Acid. Every time somebody said Labsa, my Malaysian ears heard something suspiciously close to Laksa.
At least laksa I understood. One belongs in detergent and the other in a bowl; confusing them would certainly produce a memorable lunch.
For the non-chemist, think of Lab as the raw chemical building block.
Through a further step called sulfonation, it becomes Labsa, which can then be neutralised to form the active surfactant used widely in laundry and dishwashing detergents. In short, Lab starts the journey; Labsa brings it much closer to the detergent bottle.
Labsa belongs to a petrochemical surfactant route and is generally not a direct substitute for surfactants made from natural fatty alcohols.
Its strong cleaning and foaming characteristics make it particularly useful in laundry and industrial applications, while fatty-alcohol-derived surfactants often serve somewhat different uses, including personal care.
The two chemical routes can overlap in the broad cleaning market, but they are not simply interchangeable molecules.
What makes today’s market unusual is disruption.
Where availability of some petrochemical surfactant inputs becomes constrained, users may turn to natural alcohol alternatives.
That is an important business lesson for this chemistry novice: substitution is not always about finding something cheaper. Sometimes it is about finding something available.
Behind this alphabet soup lies serious economics, which became particularly clear listening to Dr Julian Conway McGill of Glenauk Economics at the recent AOMG executive dialogue event.
If chemistry explains what we can do to a molecule, economics explains why we choose to do it - and increasingly whether enough of that molecule will be available.
McGill began by taking us back almost 20 years. In 2008, the oleochemical industry was already worrying about almost one million tonnes of new fatty-alcohol capacity, delayed plant start-ups and dramatically higher palm kernel oil, or PKO, prices.
Nearly two decades later, another large wave of fatty-alcohol capacity has arrived, again accompanied by delays and high PKO prices.
The latest expansion cycle is now reaching its tail end, with much of the new capacity having finally started after delays.
One could be forgiven for wondering whether the industry has spent 20 years going around one enormous distillation column.
But McGill’s more important point was that the supply world behind those factories has changed fundamentally.
In the years around 2008, Indonesia’s oil-palm industry was still relatively young and expanding rapidly. New planting meant more oil palm trees, more fruit and eventually more kernels entering the system.
Today that plantation base is much more mature. The growth story has increasingly shifted from expansion towards rejuvenation, with replanting becoming more important relative to new planting.
For an oleochemical industry dependent upon future PKO supply, that is anything but a subtle change.
Twenty years ago, the industry worried about whether there would be too many factories. Today perhaps it should also ask whether there will be enough molecules to feed them.
The kernel hiding inside the story
Most discussions about oil palm naturally focus on crude palm oil, or CPO, but the fruit actually gives us two chemically very different oils.
The familiar orange-red flesh, or mesocarp, produces palm oil. Hidden inside the hard nut is a whitish seed - the kernel - which, when crushed, gives us palm kernel oil.
One fruit, two oils, and increasingly two different economic stories. For much of the oleochemical industry, the kernel is especially important.
PKO has a very different fatty-acid composition from palm oil and is rich in shorter-chain lauric-type fatty acids that make it especially valuable for fatty alcohols and downstream surfactants.
There is something quite remarkable here. The natural lauric-oil world rests essentially on two tropical oils - palm kernel and coconut.
McGill’s side note made the point memorably: natural fatty alcohol ultimately depends on these narrow agricultural sources.
Think about that the next time you reach for the shower gel.
A consumer standing under a shower in London, Shanghai or New York is unlikely to wonder whether part of the chemistry in the bottle began life inside a coconut or in the kernel of an oil-palm fruit somewhere in South-East Asia. Yet that is how deeply agriculture and chemistry are intertwined.
We tend to divide the world neatly into upstream and downstream, plantation and factory, agriculture and industry. The molecule ignores our organisational chart.
It was another small revelation for the planter in me. We naturally look at the big orange fruit bunch and ask how much CPO it will produce. The kernel is physically smaller and can easily become the supporting actor in the plantation story.
But downstream, size does not necessarily determine strategic importance. The tiny kernel contains chemistry the mesocarp cannot provide. Sometimes the smallest part of the fruit carries the biggest downstream question.
Historically, palm and PKO expansion helped overcome natural-oleochemical feedstock constraints. Tallow and coconut oil had previously been important sources, but neither expanded in the way palm did. That old era of abundant feedstock growth cannot simply be projected forever into the future.
There is another upstream wrinkle. McGill’s analysis suggests some newer oil palm planting materials may also have lower kernel extraction rates.
That observation transported me back to my own plant-breeding days. I remember one practical calculation used in evaluating oil palm breeding material. It was called Total Economic Product, or TEP: TEP = Oil Yield + (Kernel Yield × 0.6)
The 0.6 was not some sacred biological constant handed down from the oil-palm gods. As I recall, it was an economic shortcut used to express the value of kernel alongside mesocarp oil, broadly reflecting their relative economics at the time.
Oil-palm researcher Dr Hereward Corley wanted a practical way of comparing the total products of different breeding materials in value terms. It gave us a wonderfully simple reminder: Count the flesh, but don’t forget the nut.
I would not assume, however, that 0.6 remains the right coefficient today. Markets and relative product prices have moved greatly since the 1980s, and it would be interesting to recalculate the relationship before resurrecting the old formula as contemporary economics. The principle remains sound; the number need not be eternal.
That principle is becoming unexpectedly relevant. Oil-palm breeders have understandably spent decades pursuing more mesocarp and higher oil yield, and the industry has benefited enormously. Yet the palm produces two commercially valuable oils.
If genetic progress increases mesocarp-oil output while proportionately less kernel is recovered, the plant breeder may have achieved exactly what was intended while the downstream lauric industry discovers that its preferred feedstock is becoming relatively scarcer.
Nobody got the breeding wrong. The economics moved. And when economics moves far enough, yesterday’s secondary trait can become tomorrow’s strategic one. Perhaps, after all these years, the oleochemical producer has something useful to whisper back to the breeder.
Weather adds another uncertainty. McGill’s caution on El Niño was particularly interesting from a planter’s perspective. His argument was not that El Niño–Southern Oscillation should be ignored, but that one should be careful about translating a dramatic climate index directly into an equally dramatic palm-oil production forecast.
Timing matters. Geography matters. Rainfall distribution matters. The Oceanic Niño Index, Southern Oscillation Index and other indicators tell us something important about the climate system, but the palm itself does not read meteorological charts.
The plantation receives rainfall, not an index. For the crop, what ultimately matters is how many millimetres fall, when they fall, how long the dry period lasts and how severely soil moisture becomes depleted.
Haze, parthenocarpy and a little beetle
Then another obvious possibility was raised: haze may matter to kernel recovery too. This is where the science deserves careful wording.
The tiny oil-palm pollinating weevil, elaeidobius kamerunicus, performs the enormous task of transferring pollen and contributing to good fruit set.
Where fertilisation fails, some fruits can develop without a properly formed seed or kernel - what scientists call parthenocarpy. For the lay reader, think of it simply as producing the flesh but missing the nut.
McGill’s presentation raises haze as a possible concern for fruit set and therefore kernel recovery, but the causal bridge should not be overstated.
The evidence is not yet strong enough for us to claim confidently that haze directly suppresses pollinating weevils and consequently causes parthenocarpy.
Yet the wider biological question matters. Anything seriously interfering with pollination and successful fertilisation can ultimately affect fruit set and kernel formation.
If kernels become strategically more valuable downstream, these relationships become more economically important too.
There is something wonderfully humbling about this. We can build billion-ringgit chemical complexes and manipulate molecules with extraordinary precision, yet part of this sophisticated value chain still begins with a tiny beetle carrying pollen from one flower to another.
The central message therefore goes beyond today’s PKO price. The structural context has changed. Oil-palm acreage that once expanded rapidly is ageing. Replanting does not automatically reproduce the same kernel-growth trajectory.
Other natural lauric sources are limited. More fatty-alcohol capacity has arrived, while genetics, weather and fruit set introduce additional uncertainties.
For decades, palm helped liberate natural oleochemicals from feedstock scarcity. Now feedstock may once again become the strategic question - except this time there are many more claimants.
Oleochemical producers want the kernel. Food manufacturers want it. Indonesia wants to process more of it at home. China wants the molecules made from it. Regulators increasingly want to know where it came from.
Everybody wants the molecule. Unfortunately, nobody consulted the palm. So perhaps the important question is no longer merely how much oleochemical capacity the world can build. It is who gets the molecule - and who captures the value after getting it?
That is where Part 2 continues.
Joseph Tek Choon Yee has over 30 years of experience in the plantation industry, with a strong background in oil palm research and development, C-suite leadership and industry advocacy. The views expressed here are the writer’s own.
