Pacific Rim Panorama

Malaysia and the Philippines are building their exporting power as the market for biodiesel becomes increasingly global. China and Japan are investing heavily in feedstock development for their own biofuels industries. Other regions of Asia are also becoming hot spots, even though some suggest these developments may come at the expense of ancient, ecologically diverse landscapes.
By By Nicholas Zeman | September 18, 2009
Malaysian biodiesel exporters are motivated to fill some of the gap created by the implementation of anti-dumping measures imposed on U.S. B99 going to the European Union, and recent deals signal market interest in the area's products. While the quality and price of palm methyl esters (PME) are attractive to traders, there is growing opposition to the fuel in Europe mostly because of record-setting deforestation in Indonesia, which was preceded by destruction in Malaysia. These are practices that the notoriously conscientious European consumer does not want to be associated with. "They don't want dirty palm oil," says Rolf Skar of Greenpeace USA. "The marketplace is going to be more demanding than government regulations."

Now in the midst of its own indirect land use debate preceded by similar controversy in the United States, Europe is reassigning emissions values to varying types of methyl esters. On that note, palm has the highest oil yield per hectare of all vegetable oil feedstocks-seven times soybeans and three times rapeseed-but the practices behind its production are said to have destroyed countless millions of acres of the world's most amazing real estate and contribute to global warming. "We are concerned about market sentiment in regard to palm biodiesel," says Bryan See of Carotech Bhd, a palm oil and biodiesel producer located near Perak, Malaysia. "But the government of Malaysia does have regulations in place that serve to protect our forests."

The EU and the European Biodiesel Board have also been involved in an aggressive campaign to ensure fair competition in the market. The EU gives preferential treatment to so-called developing countries in regard to tariffs, but including Asian PME under that umbrella seems strange to European producers. "It doesn't make sense to consider Malaysia and Indonesia 'developing countries' when it comes to palm oil production," says Rafaello Garofalo, secretary general of the European Biodiesel Board. "Their palm oil industries are the most developed in the world."

Recent developments indicate Europe's market for PME is growing. Recently, South Korea's SK Chemicals has signed a $48 million contract with European trader Trafigura for palm oil-based biodiesel supplies. SK Chemicals will supply Trafigura, the third largest independent oil trader in the world, with a total of 60,000 metric tons (18 million gallons) of PME in 5,000-ton monthly shipments starting in January. SK Chemicals has completed the expansion of its Ulsan refinery, which tripled its biodiesel capacity to 2,450 barrels (102,900 gallons) per day, with plans for future expansion.

Trafigura has two blending terminals in South Korea and another in Singapore. Asia's installed biodiesel capacity currently stands at around 4 million tons per year and will continue to grow, the Foreign Agriculture Service reports. It estimates Asia-Pacific biodiesel exports around 500,000 tons per year. In Malaysia specifically, 12 biodiesel plants, with a combined capacity of about 1.5 million tons, are in operation, and the Pasir Gudang port in Johor, Malaysia, is the largest vegetable oil handling terminal in the world today, FAS reports.

The Roundtable on Sustainable Palm Oil is a certifying body that provides certain palm oil products with a "green stamp" of best production practices, although it does not make very strong demands of its members. "Their tools on the ground are not very reliable for verifying that palm oil is produced in a sustainable way," Skar tells Biodiesel Magazine. "Also, several of their members really have no interest in changing their businesses, but want to profit off the green stamp of belonging to the roundtable."

In late 2008, Carotech also inked a $57 million contract with Trafigura to supply between 60,000 and 84,000 tons of biodiesel a year to Europe. "This contract will account for 60 percent of our biodiesel capacity," says See. "This very significant contribution to the world market gives us a platform for consistent production in these difficult times."

The uncertainty of crude oil and palm oil prices is causing difficulties in Malaysia, along with fears that the EU could restrict or even prohibit PME from entering its ports because of sustainability criteria. "Palm oil biodiesel makes up less than 5 percent of the entire European market," Garofalo says. "So it has very niche sales."

Coconuts
The Philippines are also positioning to be a net exporter of biodiesel. Here, coconuts are a staple of the national economy and an excellent source of oil that can be used for biodiesel production. Twelve biodiesel producers are accredited by the Philippine Department of Energy. The Biofuels Act took effect in February 2007 and initially mandated B1 nationwide, which has since become a B2 mandate.
As a whole, the companies accredited by the Philippine Department of Energy to produce and supply coco methyl ester (CME), have a combined capacity that is three times more than the mandated volume requires. "We expect the mandated blend to increase to 3 percent in 2010," says Jun Lao of Chemrez Technologies in Manilla. "As for feedstock availability, the current consumption of coconut oil to serve the B2 mandate consumes 9 percent of the available feedstock supply, so there are significant amounts of coconut oil and coco-biodiesel available to the world market." Lao also says Japan has drafted a biodiesel standard so particular that only coco-biodiesel can meet it.

Approximately 1,168 gallons of coconut oil can be produced per hectare, compared with 296 gallons per hectare for rapeseed and 123 gallons per hectare for soybeans. The FAS reported that, for 2008, CME exports were up 1,488 tons from 2007 to 3,979 tons, and were mostly purchased by India and Italy. "Our export business is based around oleochemicals, of which coco-biodiesel is only a part," Lao says. "But we do expect stronger foreign sales of CME in the near future."

There are still more than 1 million hectares (2.5 million acres) of land intended for agriculture-coconut plantation under development in the Philippines, and some of these are from foreign countries. There is a Japanese group, Pacific Biofuels Holdings, which started to plant coconuts in the Ilocos region of the Northern Philippines intending to cover 100,000 to 300,000 hectares, according to Lao. "The intention is to produce coco-biodiesel for export to Japan," he says.

FAS Roundup
The FAS released detailed reports this summer on the biofuels industries in Asia. It has observed that while countries like Indonesia, Malaysia and the Philippines have developed biofuels industries and the power to be net exporters of the fuel, others in Asia such as Japan, China and India are looking to do the same. Japan's domestic annual production is virtually non-existent-around 2,640 gallons per year, but is engaged in a mixture of public and private investment and development projects in other countries.

Several Japanese trading companies have started to invest in Malaysia and Indonesia for producing biodiesel from palm oil and bioethanol from sugar cane and jatropha. Toyota is investing heavily in biofuels and has a multi-million research and development program based on jatropha with Temasek Life Sciences Laboratory in Singapore. Japanese firms may also be looking to start jatropha plantations in developing countries such as the Philippines or Malaysia. The trend of industrialized nations buying land for agricultural production in less developed countries-exploiting their resources-has received a lot of attention in the international press, and is sometimes referred to as agri-colonialism. "I think it's more positive than that," Lao says. "These companies are bringing jobs to lands that have been unproductive for years, so they are welcome."

In Asia as in the West, biofuels cannot flourish without considerable government support, and China has virtually no policies in place promoting the production or use of biofuels. China is the world's largest importer of soybeans and oils, however, the most common feedstock for biodiesel production in China is used cooking oil. But there is no standard or scale collection for used cooking oil and with spotty supply, production is relatively insignificant.

Currently, Chinese biodiesel plants are small-scale, ranging from 100 to 20,000 tons of production. These plants usually operate for only a few months out of the year due to lack of a sufficient supply of feedstock, resulting from the short supply of edible vegetable oils-China has instituted a ban on grains for use in biofuels production. Three demonstration projects for the manufacture of biodiesel from jatropha were approved by the state government in 2008 and there is ongoing work to study biodiesel production from oil bearing tree seeds or "energy trees."

Nicholas Zeman is an associate editor for Biodiesel Magazine. Reach him at (701) 738-4972 or nzeman@bbiinternational.com.
 
 
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