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Palm oil to reduce dependence on fossil fuel

Oil palm plantations feed a growing global demand for cheap vegetable oil used in the production of food, cosmetics and fuel. Compared to the year 2000, demand for palm oil is predicted to more than double by 2030 and to triple by 2050.

Experts worldwide expect the demand for edible vegetable oil in general, and biodiesel in particular, to continue growing. As the demand is anticipated to greatly exceed the supply in the foreseeable future, prices are expected to rise.

The factors stimulating the growing demand for biofuels include:

Combating global warming

The fact that greenhouse gas emissions are a principal cause of global warming in no longer being disputed, and the need to reduce these emissions has become both widely recognized and increasingly urgent.

International treaties have been signed, and federal and state legislation has been enacted with the purpose of achieving this goal. Some countries and states also offer incentives to encourage such actions.

Experts worldwide expect the demand for edible vegetable oil in general, and biodiesel in particular, to continue growing

Current legal requirements include, among others:

The Kyoto Protocol to the International Framework Convention on Climate Change, which aims to reduce emissions of carbon dioxide and five other greenhouse gases to levels specified for each county in the treaty. Countries maintaining or increasing their emissions of these gases are required to engage in emissions trading. This obligation is also important in view of the limited availability of low carbon substitutes for transport fuels; for example, road transport segment GHG emissions represent nearly 20% of the EU total.

The EUís Biofuels Directive specifies the reference values for the percentage of biofuels that should substitute transport fuels in the EU; the indicative target set is 5.75% for 2010. New EU regulations also require that 10% of the European energy market needs will be satisfied by green energy sources by the year 2015.

In the USA, the Energy Independence and Security Act of 2007 calls for a substantial increase in the production of renewable fuels for use in the countryís fuel supply. It requires the production of 36 billion gallons (more than 136 billion liters) of such fuels by the year 2022 - nearly a fivefold increase from current production levels.

Additionally, public pressure to reduce harmful emissions is continuously increasing, and companies taking action to develop energy sources that are reusable, biodegradable and environmentally safe are looked upon favourably.

Security of supply

The number of countries that are in a position to supply mineral fuel is small, and that some of these resort to price hikes or political pressure to advance their interests, is perceived as a threat by many developed and developing countries. Consequently, there is a real need to reduce dependence on oil imports and to secure the supply of energy from alternative sources.

Support for the agricultural sector

The fact that biofuels are produced from agricultural products provides countries with the opportunity of reinforcing their agricultural sectors, creating new jobs and strengthening the national economy as a whole. Countries also benefit by gaining greater control over their energy sources due to the fact that raw material serving as feedstock for biofuels production originates within their boundaries, and the production itself is carried out on their territory.

The palm oil market

Crude palm oil is a commodity traded internationally, usually within the edible oils market. Palm oil presently accounts for a 21% share of the global edible oil market, and is therefore the second most consumed edible oil in the world, preceded only by soy oil.

Palm oil imports into the EU doubled in the recent years, mostly to substitute for rapeseed oil that was diverted from food to serve as feedstock for biofuels production.

In view of its increased use as feedstock for the biodiesel industry - in addition to its use by the food, health and cosmetics industries, it benefits from increased demand. The scope of trade in palm oil is therefore anticipated to continue growing.

The palm oil industry

Palm oil plantations exist, and continue to be established, mainly in tropical regions. The two main oil palm producing countries are located in Asia; they are Malaysia and Indonesia - each with more than two million hectares of oil palm plantations.

Malaysia is responsible for 50% of world production (of which it exports 85%); Indonesia is the second largest producer, responsible for close to 30% of the global production (exporting 40%).

Oil palm plantations in Malaysia are expected to expand, however at a reduced rate due to scarcity of land.

The countryís yield levels are stagnant or rising only slightly. In Indonesia, available land poses less of a constraint; however, the costs of establishing new plantations is expected to rise due to the gradual enforcement of legislation that imposes environmentally sustainable expansion and cultivation methods.

In view of the growing demand for palm oil, other countries are embarking on large-scale oil production, mainly Thailand, with more than 200,000 hectares. Papua New Guinea (with the third largest area covered by oil palm plantations) is also looking to further expand its plantations. Papua New Guinea Thailand, Philippines, India, Cambodia and Sri Lanka among others, are presently in the process of expanding their palm oil production.

Figures for Africa are difficult to obtain, since oil palms are native to many West African countries, and not all areas covered by oil palms are intended for industrial use. Nigeria, for example, has between 1 and 3 million hectares of oil palm plantations; however only a small share of them are industrially used.

However, it is significant to note that the focus is now shifting. In 2007, some of the most important leaders in the global palm industry, such as Olam and Willmar (which, untill now, have been active primarily in the Far East), have recognized the development potential in West Africa and have announced their intention to initiate activities in this region. One of these companiesí first investments was made in Ivory Coast.

As Biofuel and Biodiesel

Due to the increasing global urgency to reduce dependence on fossil fuels, palm oil biomass offers great potential as a cost-effective feedstock for biodiesel. In this capacity, it is capable of reducing carbon dioxide emissions by more than 80%.

There are constraints also, when palm oil is used as feedstock for biodiesel. As palm oil constitutes 80% to 90% of the biodiesel production cost, price fluctuations play a decisive role in the biodiesel vs. fossil fuel diesel competition. Price is very much affected by the ever increasing demands from overseas, crude oil price and climate variations.

Cleaner energy

R & D have demonstrated that palm diesel is a cleaner energy than fossil diesel, emitting less carbon dioxide, black smoke of carbon particulates, carbon monoxide and sulphur dioxide. Fuel switch from fossil to palm diesel is easy and economical as palm diesel can be used directly in unmodified diesel engines including stationary engines, passenger cars, buses and trucks. It gives good engine performance.

The palm biodiesel can be used neat or blended with petroleum diesel in any proportions. Recently, to overcome the long-standing pour point problem, (pour point = 15ÝC), Malaysia Palm Oil Board ( MPOB ) has developed a process to produce low pour point palm biodiesel (-21ÝC to 0ÝC) which is suitable for temperate countries.

Aviation industry

For many years, the aviation industry has been criticized for its high carbon GHG emission. Of the total global emissions, 56 % comes from burning of fossil fuels and 17 % from agriculture.

The aviation industry alone contributes 649,000,000 tonnes of GHG emission annually which represents 2 to 3 % of the total globally! The Boeing Company and other aviation industry operators held a Forum in Kuala Lumpur recently to explore new sources of renewable biofuels for the aviation industry.

In comparison, calculations reveal that emissions from the oil palm industry are indeed very small. The world oil palm area of 14 million hectares is only 0.25% of global agricultural land. Therefore, the GHG emission from the oil palm industry is 0.25% x 17% or 0.04% of the total global GHG emission.

At a country level, for example, Malaysiaís oil palm cultivated area of 4.85 million hectares represents 34.6% of the worldís oil palm cultivated area and hence its GHG footprint is 34.6% x 0.04 % or 0.014% of the global GHG emission. Even doubling the cultivated area for oil palm in Malaysia would see a negligible increase of its GHG footprint to 0.028% of global emission. The negligibly small GHG footprint of the oil palm industry has attracted the aviation industry operators to consider the use of palm oil biofuel to help reduce emission levels from the aviation industry. As indicated above, doubling the production of palm oil in Malaysia will not add much to the carbon footprint of the oil palm industry, instead, it will provide 18 million tonnes or 8.6 billion gallons more of potential jet biofuel.

Total consumption of aviation fuel per year is estimated at 70 billion gallons. A 12 % replacement of the world aviation biofuel can be achieved if the Malaysian production can be doubled to cater to this demand.

Road map

A road map proposed by Malaysia for inclusion of biofuel in aviation fuel begins modestly with an initial blend share of 1 % by 2015. This is expected to be increased gradually with an improvement of 1% additional biofuel in the fuel blend annually so that GHG emissions will be maintained at current levels despite exponential growth in future global air travels.

It has been said that Malaysian palm oil potentially fits the road map due to its ability to replace a moderate (12%) percentage of world aviation biofuel demand. Palm oil from other sources could also be considered until a long-term plan by the aviation industry to meet its target replacement of 50% blend of biofuel in aviation fuel is achieved.

Such large demand for bio-renewable aviation fuel can be supplemented if the biomass generated by the oil palm industry can be harnessed for conversion into aviation biofuel. Palm oil makes up only 10% of the biomass produced by the oil palm tree.

The remaining 90% (dry weight basis) can be partly converted into biofuel using BTL technology or bio-refinery which is being developed rapidly around the world.

Only palm oil can provide a solution for practical consideration.

Other oilseeds cannot produce the quantities envisaged because of the inherent low yield per hectare per year of between 5 to 11 times less than that of palm oil.

Countries that are capable of supplying excess vegetable oil into the world market are limited to Malaysian and Indonesian palm oil producers.

With doubling of production through productivity and hectarage expansion, and employing other palm biomass for further conversion into aviation fuel, the availability could well meet the future target of having 50% blend of biofuel into the aviation fuel mixture.

Palm oil meets the certification criteria for sustainability as many producers have volunteered to participate in the certification schemes and have obtained their certificates from certifying bodies such as the RSPO and ISCC.

A minor obstacle to the successful implementation of the aviation biofuel plan is the relatively high cost of biofuel in comparison to petroleum derived aviation fuel.

Lack of an excess supply from other vegetable oils and a high demand for palm oil for food will cause market forces to price palm oil above petroleum fuel. Otherwise, palm oil will be burned as fuel. This will ensure that its price will remain above the price of petroleum fuel and petroleum price will be the floor price for palm and other vegetable oils.

With the expansion of oil palm production, the necessary increase in supply to meet the needs of the aviation industry can be achieved.

The food versus fuel debate does not apply as the main consideration is which profitable crop to plant on a scarce available agricultural land (large areas of degraded land not under forest reserves) where oil palm can be grown.

Non-food oil crops such as jatropha can also be grown on degraded land but it yields only 20% that of oil palm and is far more expensive to produce thus making it a much less attractive solution.

Consumers worldwide must be willing to pay the cost to reduce carbon GHG emission from the aviation industry.

Plans by EU to impose carbon tax on the aviation sector are a step in the right direction. It is imperative that the money raised goes to compensate farmers who toil to produce the extra supply of raw material for the aviation fuel industry.

Currently, much emphasis has been placed on the certification process for sustainability that the administrative charge consumes up to 80% of the money raised to incentivize the production of renewable biofuel.

Ironically, the cost for employing auditors and paying for membership fee of certification bodies is more than the rate of compulsory research funding imposed on the palm oil industry! New opportunities for an increased supply of palm oil based aviation biofuel can be realised through more research.

However, if the cost of certification is higher than the investment in research, and if the carbon tax benefits only the bureaucracy, this will result in a slow development of aviation biofuel from oil palm sources.

Development of aviation biofuel from other vegetable oils will be next to impossible. Oil palm is the only viable solution in the long term.

Choice

The choice is limited for the aviation industry. It cannot harness hydro, wind or solar power to fly jet planes.

Most other plant biomass has low output to input energy ratio of 3:1 compared to 9:1 for oil palm. Oil palm is the best and only choice so far until miracles occur or algae technology becomes successful. Even petroleum fuel is not the most viable choice in the long-term; its supply is finite and will start to decline in a few years.

By then almost everything will be expensive except sustainably produced raw materials such as palm oil if future development in production capacity is well planned with adequate upfront investment in R & D.

Outlook

The rosier outlook lies in its future utilization as feedstock for second generation biofuel, where the entire waste biomass can be harnessed in the production of renewable energy, cellulosic ethanol, biogas, biohydrogen and bioplastic.

This energy is not only cheaper but also more efficient and environment-friendly than fossil fuels. The carbon credits derived under the CDM Kyoto Protocol increase the economic viability of palm diesel as a renewable fuel.

According to the UNEP - Year End (2010) Snapshot of the CDM, there are 4237 projects, that are either registered or in pipeline (see table 1). Some of these CDM projects include renewable energy projects, hydro and biomass from oil palm industry. There is huge CDM potential awaiting to be explored.

Table 1: CDM projects registered or in pipeline with the UNFCC, end 2010

Country CDM registered/pipeline (2010)
China 1157
India 1135
Brazil 330
Mexico 200
Malaysia 145
Indonesia 100

Meanwhile, large oil palm cultivators have to recognize that the path to the large and growing EU market may prove a tougher challenge in the coming years, unless they take additional initiatives to ensure stricter compliance in sustainable cultivation of oil palm.

 

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