Wednesday, October 31, 2007

Rare wildlife in Sumatran forest to be cleared


By Charles Clover, Environment Editor

Last Updated: 12:01am GMT 31/10/2007

Some of Asia's rarest and most endangered species including tigers, elephants, sun bears and clouded leopards have been found by scientists in Sumatran forests currently being allocated by the Indonesian government for oil palm plantations.

  • In pictures: Images captured during the study
  • The survey of a logged, unprotected and partly inhabited forest adjacent to a national park found evidence of tigers throughout the area, groups of elephants with calves in half the area and many records of other species such as tapirs and golden cats.

    A family of elephants (top) and one of the tigers caught by the camera traps
    A family of elephants (top) and one of the tigers caught by the camera traps

    The animals were found by scientists from the Zoological Society of London using camera traps to assess the wildlife interest of "production forest" that the Indonesian government is in the process of allocating for oil palm or timber plantations.

    Demand from the west for cooking oils and biofuels has created huge demand for oil palm and local developers have been lobbying for land to develop plantations.

    Adnun Salampessy, on of the Society's field researchers, said: "We were astonished when we saw the images from the camera traps, which included an entire elephant family and at least five different tigers, identifiable by their stripes.

    "Although we always believed these areas were important, it is incredibly encouraging to have actual, incontrovertible proof of the animals' presence. We hope that this evidence will help persuade the government that such areas are highly important for conservation."

    The survey covered nearly 2000 square kilometres of degraded, logged and partially settled forest adjacent to Bukit Tiga Puluh National Park in central Sumatra, which has recently been allocated for clearance.

    The surveys were led by the Society, with survey teams including members of the Frankfurt Zoological Society wildlife protection teams and Indonesian forestry department staff from Bukit 30 National Park.

    The Society is now calling for the land allocation policy to be changed to recognise the value of forest that has been logged – and which would recover to near-primary forest if it were left alone – at a time when the eyes of the world are on finding ways of paying countries such as Indonesia to keep forest standing.

    Sarah Christie, carnivore programme manager at the Society said: "This work shows that the criteria for developing land in Sumatra need to be urgently reassessed. Just because forests have been logged does not mean they have lost their value for biodiversity.

    "Many of these areas are playing a vital role in supporting the last remaining Sumatran tigers. Before any land is allocated for conversion it is vital that thorough assessments are made of the remaining value to wildlife so that important areas can be avoided whilst areas that have to be developed can be done so sustainably."

    Indonesia, one of the most biodiverse regions in the world, lost over a third of its forest between 1985 and 1997 and was recently named as the third largest carbon-emitter in the world. While the government is taking steps to prevent further loss of primary forest, development of "degraded" or secondary forest by industry is being actively encouraged.

    Under a proposal being brokered at the talks on a new climate change treaty to replace the Kyoto protocol, due to take place in Bali, Indonesia, in December, rainforest countries could be paid to leave existing forest standing as "carbon sinks." This would applied to degraded forest as well as primary forest.

    However, international agreements are slow and may not come into force for several years. The Society says that for the wildlife in the area of forest it surveyed the agreement will come too late as a company has been allocated the land.

    However, in a sign of agreements that could result from the deal this December, the Royal Society for the Protection of Birds recently bought a 200,000 acre logging concession in Sumatra which had many of the species found in the ZSL survey – then said it would not log it. The law had to be changed to make this possible.

    Friday, October 26, 2007

    Emil Salim: Energi Biofuel Seharusnya Prioritas Terendah

    [ Republika ]

    Pakar lingkungan hidup, Emil Salim mengatakan, energi biofuel yang kerap digembar-gemborkan pemerintah seharusnya menjadi prioritas terendah setelah seluruh alternatif sumber energi lainnya diberdayakan.

    "Biofuel harusnya diletakkan sebagai prioritas yang paling rendah setelah kita kembangkan sumber-sumber energi lain seperti panas matahari, angin, dan sungai," katanya dalam diskusi tentang "Global Warming" yang diselenggarakan Universitas Paramadina di Jakarta, Jumat.

    Emil Salim yang juga menjabat sebagai anggota Dewan Pertimbangan Presiden Wantimpres) itu menuturkan, energi biofuel berasal dari "palm oil" atau pohon kelapa sawit sehingga membutuhkan banyak lahan untuk menanam tanaman tersebut.

    Hal itu, lanjut Guru Besar Ekonomi Studi Pembangunan Universitas Indonesia itu, tentu saja terasa kontradiktif dengan Indonesia yang merupakan negara kepulauan yang luas lahannya relatif lebih sedikit dibandingkan luas lautannya.

    "Tanah di Indonesia seharusnya 'diselamatkan' terlebih dahulu untuk mencukupi bahan pangan," kata mantan Menteri Negara Kependudukan dan Lingkungan Hidup itu. Selain itu, Emil merasa kecewa karena tidak sedikit pohon kelapa sawit di tanah air yang ternyata tidak ditanam di tanah yang terdegradasi tetapi pada daerah hutan.

    Sementara itu, pembicara lainnya yaitu Juru Kampanye Iklim dan Energi Asia Tenggara untuk Greenpeace, Nur Hidayati mengemukakan bahwa merupakan hal yang ironis untuk mengedepankan pemakaian biofuel karena kebutuhan untuk energi terbarukan seperti biofuel itu juga mempercepat laju kerusakan hutan di tanah air.

    "Permintaan minyak kelapa sawit yang lebih banyak dari negara maju seperti negara di benua Eropa untuk memperoleh energi biofuel akan mempercepat laju deforestasi (kerusakan hutan-red)," kata Nur Hidayati. Laju deforestasi akan bertambah, ujar dia, karena pembukaan lahan untuk tanaman kelapa sawit di lahan gambut seperti yang terjadi di Provinsi Riau dan Pulau Kalimantan membutuhkan pembersihan secara total yang dilakukan dengan cara dibakar.

    Sedangkan Direktur Eksekutif Wahana Lingkungan Hidup Indonesia (Walhi), Chalid Muhammad menyerukan kepada pemerintah agar mencabut izin pengelolaan dari perusahaan yang memiliki daerah lahan atau hutan yang terbakar. "Ini karena hanya ada dua kemungkinan, yaitu lahan atau hutan tersebut sengaja dibakar atau perusahaan tersebut lalai dalam mengontrol kebakaran," kata Chalid. antara/mim

    Thursday, October 25, 2007

    Conservatives demand strict sustainability rules for biofuels

    [ ]

    In a debate in parliament this afternoon, the government is seeking to establish the first fixed targets for biofuels. The Conservatives have been calling for greater use biofuels for several years but are deeply concerned that the measure being put forward by the government today allows targets to be met using biofuels which do not come from sustainable sources.
    In reply to the government proposals Julian Brazier, Shadow Minister for Transport (aviation and shipping) will say:
    (check against delivery)

    "Having listened to the concerns expressed to us by many of our constituents and by organisations such as Greenpeace, Friends of the Earth and aid charities, and in the light of increasing scientific evidence of the problems biofuels can cause if they are produced in a way which is environmentally insensitive, we believe that the measure being put forward by the government today is deeply disappointing.

    "If biofuels are to play a successful part in the fight against climate change, it is absolutely vital that they come from sustainable sources. Without clear and binding rules on sustainability, this proposal could damage the environment not protect it. It would be madness if UK biofuel targets actively encouraged people to rip up the rainforest. According to Friends of the Earth, unsustainable biofuels have already contributed to 87% of the deforestation of Malaysia; indeed the destruction of 98% of rainforests there and in Indonesia and the further widespread damage in Brazil are all predicted."

    "Serious concerns also need to be addressed regarding the impact of large scale biofuel production on food prices. Most recently the UN special rapporteur on the right to food, Jean Ziegler earlier this month described current approaches to biofuels as: "… a total disaster for those who are starving."

    "We support sustainable biofuels and believe that the government should take its proposals away and bring them back in a form which has effective safeguards against the environmental and biodiversity damage that expert evidence now tells us that some types of biofuel production can cause."

    Conservatives believe that this statutory instrument, by deferring sustainability criteria until at least 2011, represents a massive missed opportunity to benefit the environment.

    Cargill to turn Indonesian feedlot waste to energy

    [ Reuters ]

    CHICAGO, Oct 23 (Reuters) - U.S. agribusiness company Cargill Inc [CARG.UL] said on Tuesday it began constructing a facility on an Indonesian cattle feedlot to convert animal waste into energy.

    The anaerobic digester, scheduled to begin operating by February 2008, on PT Santosa Agrido's Lampung Bekri 23,000-cattle feedlot operation in Lampung/Sumatera, Indonesia, will convert cattle manure into 900 tonnes of methane gas per year that will be used to generate energy for the feedlot.

    "Cargill has taken the responsibility to develop, fund and implement the project, including managing of all permitting and registration issues. That allows us to concentrate on what we're here for, which is to reinforce our position as the largest cattle feed lot business in the region," Samuel Wibisono, PT Santosa Agrindo's president director of its beef division, said in a statement.

    The project is designed to reduce the greenhouse gas equivalent of 188,000 tonnes of carbon dioxide emitted into the atmosphere over 10 years. A byproduct of the process will be an organic corn fertilizer.

    The technology, managed and funded by Cargill's Environmental Finance group, will generate carbon credits that can be traded on global climate exchanges.

    Minneapolis-based Cargill, the second-largest privately held U.S. company, is a global provider of food, agricultural and trading services.

    Tuesday, October 23, 2007

    Skeptical Indonesians turn their backs on liquid petroleum gas

    Published: October 22, 2007

    JAKARTA: Siti Chairoh earns her living selling liquid petroleum gas. But she will not cook with the fuel.

    "I'm afraid to use it," said Chairoh, who runs her business from the home she shares with her son, his wife and two grandchildren in Jakarta. "I don't care if people say I'm old-fashioned. I'm too scared the cylinder will blow up."

    Fear is hindering Indonesia's drive to persuade poor people to use liquid petroleum gas, or LPG, instead of kerosene, a switch that would save them money and cut government fuel subsidies by 23 trillion rupiah, or $2.5 billion - almost half the Indonesian education budget next year.

    After six months of marketing and education campaigns in Jakarta, the plan has stalled because of the inability of the state energy company PT Pertamina to persuade people that LPG is safe. Protests erupted in Jakarta, the capital, in August, when kerosene supplies ran short after Pertamina cut deliveries because of an expected drop in demand. The government plans to convert the entire nation to LPG by 2011.

    "The idea is brilliant," said Fauzi Ichsan, chief economist at the Indonesian unit of Standard Chartered. "Implementation is the problem."

    Money is also an issue, even though Pertamina is providing free stoves and three-kilogram, or seven-pound, LPG canisters to every household.

    In a country where half of the 235 million people survive on less than $2 a day, consumers need as little as 1,500 rupiah to buy a half-liter of kerosene, enough for the typical family to cook a single meal. It costs about 13,000 rupiah for a canister of liquid petroleum gas, which lasts a family about a week.

    "There will be cash-flow problems," said Ibnu Bramono, senior consultant in Singapore at Facts Global Energy, a consulting firm. "It was even difficult in Jakarta. In remote areas it will be worse."

    In the long run, households switching to LPG will save at least 24,000 rupiah a month, Pertamina estimates.

    While Indonesia subsidizes all fuel for nonindustrial use, the switch will save money for the government because subsidies for LPG are lower than those for kerosene. State aid reduces the price of LPG by 53 percent, compared with 68 percent for kerosene, according to Pertamina. In 1998, demonstrations against fuel price increases helped topple the 32-year dictatorship of President Suharto.

    Indonesia, a member of the Organization of Petroleum Exporting Countries, is the world's biggest exporter of liquefied natural gas, though it is a net importer of oil products like kerosene.

    Educating new liquid petroleum gas users is not easy, said Marwan, an LPG retailer who uses just one name. While conducting demonstrations at his kiosk in south Jakarta, Marwan places LPG cylinders in buckets of water to prove they do not leak. Even so, many customers return asking for kerosene, frightened because they cannot replicate some aspect of the lessons, he said.

    The transition might have been smoother if the government had been more involved, said Huzna Zahir of the Indonesian Consumers Association.

    The ministries of energy, women's affairs and small business could have helped educate consumers, Zahir said. Those ministries and Pertamina should place advisers in communities until people adjust to the new fuel. "That way people will have someone to turn to when they have questions," she said.

    Pertamina was chosen to implement the switch because it successfully ran a pilot program in 2006 and maintained a distribution network of agents and retailers, said Energy Minister Purnomo Yusgiantoro. The company will continue to lead the effort, although government ministries will now help, he said.

    Chairoh, the LPG retailer, is not budging. A former kerosene seller, she keeps gas stoves out of her kitchen and stores about 100 LPG canisters in a shed away from her brick house.

    Oilex drilling at Indonesian West Kampar indicates potential oil zones

    [ AFX News Limited ]

    10.23.07, 4:10 AM ET

    LONDON (Thomson Financial) - Oilex Ltd said drilling at Indonesia's West Kampar Pendalian-3 well has indicated potential oil zones at depths similar to the nearby Pendalian-1 well.

    The company said once the logging program is complete, the well will be cased and a comprehensive 14 day multi-zone testing program will be undertaken.

    Oilex has a 45 pct participating interest in the West Kampar production sharing contract, while Sumatera Persada Energy holds the remaining 55 pct stake.

    Wednesday, October 17, 2007

    RI may earn $6b in revenue from Senoro LNG plant

    [ The Jakarta Post ]
    Ika Krismantari, Jakarta

    The government is projected to earn up to US$6 billion in revenue under a 15-year production split scheme for the LNG plant in Senoro, Central Sulawesi, a source close to the deal says.

    The revenue is based on a production split arrangement, under which the government will gain 85 percent, while the Senoro block operators -- state oil and gas firm PT Pertamina and Medco Exploration and Production (E&P) -- will gain 15 percent, Medco E&P president director Lukman Mahfoedz said Tuesday.

    The plant uses a complicated downstream business structure, under which the gas producers -- Pertamina and Medco -- will sell the gas to LNG plant owners Pertamina, Medco and Japanese firm Mitsubishi, who will then sell the liquefied gas to third parties.

    The LNG plant is 51 percent owned by Mitsubishi, 29 percent by Pertamina and 20 percent by Medco.

    Lukman said construction of the LNG plant, designed to produce a total capacity of two million tons per annum, could begin in the first quarter next year.

    Construction costs are estimated at around $1 billion, with the plant expected to start production in the second quarter of 2011.

    It was earlier reported that gas from the LNG plant would be exported to Japan despite increasing domestic demand, according to Pertamina vice president director Iin Arifin Takhyan.

    The fact that a Japanese company, Mitsubishi, is involved in the Senoro LNG project as a majority shareholder supports the idea LNG from the plant would be shipped there, Iin said.

    Japan, one of the country's biggest gas buyers, is hoping Indonesia will continue to supply LNG.

    Japan reportedly demanded the continuity of Indonesia's gas exports in the economic partnership agreement (EPA) recently signed between the two countries.

    However, Indonesia will only be able to commit an export total of three million tons per year after the current contracts end in 2010.

    Under existing contracts, Indonesia supplies 12 million tons of LNG a year to Japan.

    Sunday, October 14, 2007

    Indonesia betting on biofuel crops as its regal forests dwindle

    [Taipei Times]

    By Samantha Brown
    Saturday, Sep 15, 2007, Page 9

    Southeast Asian nations are gearing up for a palm oil boom as interest in biofuels soars, but activists warn the crop may not satisfy a global thirst for green, clean energy and would require chopping further into forests.

    They caution that oil palm plantations require massive swathes of land -- either what's left of the region's disappearing forests, denuded plots that would be better off reforested, or land critical to supporting local people.

    Governments and companies have been scrambling to cash in since palm oil prices jumped last year amid spiking demand from China, India and Europe, where biofuels should comprise 10 percent of motor fuels by 2020.

    Indonesia has launched a particularly ambitious biofuels expansion program, which aims to source 17 percent of its energy needs from renewable sources by 2025.

    Evita Herawati, an assistant to Indonesia's minister of energy, said 5.5 million hectares will be set aside for biofuel plantations by 2010, 1.5 million hectares of which are for oil palm.

    The main objective is "to create jobs and alleviate poverty," with some 3.5 million new jobs being eyed by 2010.

    "A lot of forest has been cut down but they didn't use it at all. We would like to use it for this program," she said, adding that so far 58 deals worth a total of US$12.4 billion have been signed with companies.

    She estimated that just in Kalimantan, the Indonesian portion of Borneo island, about 5.5 million hectares are available for use -- an area far larger than Denmark and a bit smaller than Sri Lanka. Nine million additional hectares are available elsewhere, Herawati said.

    The issue of where the land will come from worries activists, who point out that much of Indonesia's peatland forests have already been destroyed, releasing huge amounts of carbon dioxide.

    Rully Syumanda, of Indonesia's environmental watchdog Walhi, said proposing palm oil plantations has been used in recent years in Indonesia "as a pretext to clear land and take the more valuable logs."

    He estimates that nearly 17 million hectares of Indonesia's forests have been cleared ostensibly for oil palm plantations since the 1960s, but only 6 million hectares have been cultivated.

    Though he concedes that the government is now making efforts to reforest, catch offenders and audit the industry, Syumanda said these were "insignificant compared to the damage that is being inflicted on the environment."

    Rudi Lumuru, from Sawit Watch, an industry monitor, meanwhile said much of this "empty" land is actually used by local people.

    He reckons more than 500 communities have been embroiled in conflicts with more than 100 palm oil companies, typically from Malaysia.

    "This land has been used since a long time ago by the people. They live on the land, they grow on the land," he said. "The government says people can make money, but it's about transition of culture. The culture of the farmers, it's rice, coffee, cocoa -- it's not palm oil."

    While compensation payments may be meted out, they end up meager thanks to endemic corruption, he said.

    The Indonesian industry says it is cleaning up its act.

    "The industry now is trying to avoid destroying land," said Derom Bangun, executive chairman of the Indonesian Palm Oil Association. "Companies no longer clear land by burning or in ways that harm the environment or wildlife."

    Indonesian companies have joined the Roundtable on Sustainable Palm Oil (RSPO), a WWF-led initiative to engage palm oil companies, and is trying to abide by their principles, he said.

    Technology minister Agusman Effendi said that economic factors as well as "sustainability of the environment and the way the government can give extra support to the poor" needed to be considered.

    "The `what' has been defined clearly, but the `how to' is the thing that has been criticized by the public," he said.

    Companies in Malaysia, the world's largest palm oil producer -- expected to be eclipsed by Indonesia this year -- are being lured here by the vast expanses of already-cleared land.

    Malaysian plantations minister Peter Chin insists palm oil production does not damage the environment and said Malaysian companies will boost productivity by replanting with higher yielding clones and adopting good agronomic practice.

    "We are committed to ensuring that whatever we do now is not at the expense of the environment and our future generations," he said.

    According to the Malaysian Palm Oil Board, 65 percent of Malaysia's total land area of almost 33 million hectares is comprised of forest. Palm oil plantations use 12 percent.

    Alvin Tai, plantation analyst at OSK Securities, said most of the companies listed on the Malaysian bourse are expanding in Indonesia as landbank in Malaysia is limited.

    He said most major plantation firms were RSPO members and "they have the resources to maintain those standards. It's the smaller plantation owners that are a concern".

    Meena Rahman from Friends of the Earth Malaysia disputes the government's claims and says that the group is particularly worried about projects in Sarawak, located on the Malaysian side of Borneo island.

    She says there is evidence that 1.5 million hectares of land that was to be set aside for protection and water catchment purposes has been planted with oil palm as well as pulp and wood trees.

    "Maybe what Peter Chin is saying is that they are planting palm oil in areas that have already been logged -- but they should allow reforestation to take place instead of allowing palm oil expansion," she said.

    Malaysia's northern neighbor Thailand is also getting in on the game.

    High prices for palm oil, driven by Bangkok's search for alternative fuels, have driven more and more farmers to convert rubber and fruit plantations to grow oil palm, an official from Thailand's agriculture ministry said.

    Local prices of palm oil have almost doubled to more than 4 baht (US$0.07) per kilogram from 2 baht last year.

    Last year Thailand had some 32,000 hectares planted with oil palm, but the area is expected to jump to 81,000 by year end. An additional 400,000 hectares of unused farmland in the south could also be used, the official said.

    The government has provided soft loans to help farmers make the switch, and is considering a floor price for the crop, she said, adding that "we don't have environmental issues" linked to palm oil, like Thailand and Malaysia.

    The Philippines meanwhile has about 25,000 hectares under cultivation, but some 454,000 hectares of "disposable land" -- pasture or shrubbery -- mostly in the south, has been earmarked as well, the agriculture department said.

    But so far, only one Singapore-based company has come sniffing, seeking at least 25,000 hectares of land. This story has been viewed 885 times.

    Green fuel gets a black name

    [ The Sydney Morning Herald ]

    The race for clean energy may be doing more harm than good, writes Marian Wilkinson.

    It is a sickening picture. A photograph of six soft-eyed baby orang-utans stamped with the words "Orphaned by Palm Oil companies". The image, along with scores of others showing adult apes staring out through the bars of cages, has created a public relations disaster for global companies buying the oil that many hoped would fuel a green energy boom.

    This week, as Greenpeace International launched a "Forest Defenders Camp" in the Indonesian province of Riau, where swathes of orang-utan habitat have been cleared by felling and fire for lucrative palm oil plantations, the "oil for ape" scandal hit Australia.

    Caught in the middle is a quietly spoken Sydney businessman who walked away from the petroleum industry several years ago convinced that price, supply and climate change made it yesterday's game. Barry Murphy, a former Caltex Oil chief, plunged into the heady world of "clean" energy hoping to fuel Australian industry with diesel made from the world's second most popular edible oil.

    "It would be foolish to ignore the fact that people are anxious about fossil fuel and its effect on the environment and that it's not sustainable," Murphy told the Herald last week. "People are naturally looking to palm oil." Why? "It has the highest yield of any of the vegetable oils. You can get 4000 to 5000 litres of oil per hectare per year." That is about 10 times more productive than soya beans.

    Perhaps unfortunately, Murphy is not alone in his thinking. In January this year, the China National Offshore Oil company reportedly signed contracts to develop 1 million hectares of palm oil plantations in Indonesia and Papua New Guinea.

    This thinking has sent palm oil stocks soaring. European countries hoping to slash their greenhouse gas emissions by using biofuels have also turned their attention to palm oil. Already a ubiquitous ingredient in supermarket products from margarine to lipstick, palm oil's promise as a clean biofuel supercharged the price which reached a staggering $US828 ($921) a metric tonne last month, a leap of more than $US300 in just one year.

    But the palm oil boom is proving to be an ecological disaster in Indonesia and Malaysia, which produce more than 80 per cent of the world supply. The trade has helped drive Indonesia's spectacular rate of deforestation and the burning of its peatlands. Early this year, the United Nations released a report on the crisis, finding that the explosion in palm oil plantations "is now the primary cause of permanent rainforest loss" in Indonesia and Malaysia. As the forest disappears, local environmentalists estimate that up to 50 orang-utans are dying each week.

    Palm oil furore could stymie green fuel plan

    [ The Sydney Morning Herald ]

    THE rush to replace carbon-emitting petroleum with "clean green" biofuels is threatening to stall in the face of rising food prices, Federal Government disincentives and growing opposition from environmental groups sounding the alarm about large-scale deforestation to support fuel crops.

    Now a planned $30 million biodiesel plant in Port Botany is under attack by the Greens because it will use palm oil from Indonesia and Malaysia. Its future is up in the air as the developer, Natural Fuels Australia, decides whether it should go ahead. The chairman of the company, Barry Murphy, said yesterday that the Federal Government clean fuels grant did not in reality encourage the use of pure biodiesel from crops and therefore "makes the economics difficult". He also acknowledged the price of feedstock and the global issues around climate change and deforestation made the decision a tough one.

    The Greens state MP Ian Cohen is demanding that NSW reject the planning request by Natural Fuels for the biodiesel plant, saying the minister, Frank Sartor, has failed to consider its effect on rainforest destruction because of the plant's proposed use of palm oil. Mr Cohen has written to Mr Sartor saying the plant, rather than helping climate change, "may worsen the global crisis whilst hastening the destruction of tropical forests".

    A spokesman for the Planning Department said the importation of palm oil was a Federal Government matter.

    This week Natural Fuels found itself at the centre of a political storm over its planned importation of palm oil for use in its plant in Darwin, which will come on line in December.

    The Federal Environment Minister, Malcolm Turnbull, announced Australia would push for international action on the sustainable sourcing of palm oil at the United Nations climate talks in Bali in December.

    The Federal Government provides a 38 cents a litre subsidy for biofuels, including those made from palm oil, as part of its push to encourage clean green fuel. But at the same time Mr Turnbull has pledged $200 million to stop deforestation in South-East Asia, caused partly by a huge expansion in palm oil plantations.

    Earlier this year the UN reported that the drive for new palm oil plantations was one of the greatest threats to the rainforests and the endangered orang-utans in the region. "In Indonesia and Malaysia it is now the primary cause of permanent rainforest loss," the report found. Plantations in Indonesia have expanded from 600,000 hectares in 1985 to an estimated 6.4 million hectares this year, the Palm Oil Action Group says.

    The devastation of rainforest and peatlands has caused some big European biofuel companies to shun palm oil as a source. But companies like Natural Fuels are anxious to create a "sustainable" source of palm oil and have joined forces with large companies such as Cadbury Schweppes and Unilever, and the environment group WWF, to form the Roundtable on Sustainable Palm Oil.

    At a meeting next month in Kuala Lumpur, the group will call on growers, wholesalers and retailers to accept a code of practice curbing destructive activities, including the clearing and burning of rainforest. Mr Murphy has been heavily involved in the reforms and said the company realised "these are real issues and need to be addressed".

    But several environmental groups, including Greenpeace, say the roundtable group is dependent on self-regulation and will be incapable of enforcing sustainable production.

    Kyushu Elec takes Indonesia geothermal project stake


    TOKYO, Oct 9 (Reuters) - Kyushu Electric Power Co Inc (9508.T: Quote, Profile, Research) said on Tuesday it had acquired a 25 percent stake in a geothermal power project in Indonesia from Indonesian energy explorer PT Medco Energi International Tbk (MEDC.JK: Quote, Profile, Research) for an undisclosed sum.

    Last year, Indonesian state electricity firm PT Perusahaan Listrik Negara (PLN) awarded a contract to a consortium of Medco, Ormat Technologies (ORA.N: Quote, Profile, Research) and Itochu Corp. (8001.T: Quote, Profile, Research) to build a 330-megawatt geothermal power plant in Sarulla in North Sumatra. Medco chief executive officer Hilmi Panigoro said in May that it wanted Kyushu to join the project because of its experience in the field.

    Panigoro said then that Medco had a 62.25 percent stake in the Sarulla project, Itochu 25 percent and Ormat 12.75 percent. Indonesia, the Asia-Pacific region's only OPEC member, is tapping alternative sources of energy to meet rising power demand and cut consumption of expensive crude oil as its own reserves dwindle.

    Thursday, October 11, 2007

    How to Beat the High Cost of Gasoline. Forever!


    Stop dreaming about hydrogen. Ethanol is the answer to the energy dilemma. It's clean and green and runs in today's cars. And in a generation, it could replace gas.By Adam Lashinsky and Nelson D. SchwartzJanuary 24, 2006: 4:09 PM EST

    (FORTUNE Magazine) - You probably don't know it, but the answer to America's gasoline addiction could be under the hood of your car. More than five million Tauruses, Explorers, Stratuses, Suburbans, and other vehicles are already equipped with engines that can run on an energy source that costs less than gasoline, produces almost none of the emissions that cause global warming, and comes from the Midwest, not the Middle East.

    These lucky drivers need never pay for gasoline again--if only they could find this elusive fuel, called ethanol. Chemically, ethanol is identical to the grain alcohol you may have spiked the punch with in college. It also went into gasohol, that 1970s concoction that brings back memories of Jimmy Carter in a cardigan and outrageous subsidies from Washington. But while the chemistry is the same, the economics, technology, and politics of ethanol are profoundly different.

    Instead of coming exclusively from corn or sugar cane as it has up to now, thanks to biotech breakthroughs, the fuel can be made out of everything from prairie switchgrass and wood chips to corn husks and other agricultural waste. This biomass-derived fuel is known as cellulosic ethanol. Whatever the source, burning ethanol instead of gasoline reduces carbon emissions by more than 80% while eliminating entirely the release of acid-rain-causing sulfur dioxide. Even the cautious Department of Energy predicts that ethanol could put a 30% dent in America's gasoline consumption by 2030.

    We may not have to wait that long. After decades of being merely an additive to gasoline, ethanol suddenly looks to be the stuff of a fuel revolution--and a pipe dream for futurists. An unlikely alliance of venture capitalists, Wall Streeters, automakers, environmentalists, farmers, and, yes, politicians is doing more than just talk about ethanol's potential. They're putting real money into biorefineries, car engines that switch effortlessly between gasoline and biofuels, and R&D to churn out ethanol more cheaply. (By the way, the reason motorists don't know about the five-million-plus ethanol-ready cars and trucks on the road is that until now Detroit never felt the need to tell them. Automakers quietly added the flex-fuel feature to get a break from fuel-economy standards.)

    What's more, powerful political lobbies in Washington that never used to concern themselves with botanical affairs are suddenly focusing on ethanol. "Energy dependence is America's economic, environmental, and security Achilles' heel," says Nathanael Greene of the Natural Resources Defense Council, a mainstream environmental group. National- security hawks agree. Says former CIA chief James Woolsey: "We've got a coalition of tree huggers, do-gooders, sodbusters, hawks, and evangelicals." (Yes, he did say "evangelicals"--some have found common ground with greens in the notion of environmental stewardship.)The next five years could see ethanol go from a mere sliver of the fuel pie to a major energy solution in a world where the cost of relying on a finite supply of oil is way too high. As that happens, says Vinod Khosla, a Silicon Valley venture capitalist who has become one of the nation's most influential ethanol advocates, "I'm absolutely convinced that without putting any more land under agriculture and without changing our food production, we can introduce enough ethanol in the U.S. to replace the majority of our petroleum use in cars and light trucks."

    Filling up on ethanol isn't new. Henry Ford's Model Ts ran on it. What's changing is the cost of distilling ethanol and the advantages it brings over rival fuels. Energy visionaries like to dream about hydrogen as the ultimate replacement for fossil fuels, but switching to it would mean a trillion-dollar upheaval--for new production and distribution systems, new fuel stations, and new cars. Not so with ethanol--today's gas stations can handle the most common mixture of 85% ethanol and 15% gasoline, called E85, with minimal retrofitting. It takes about 30% more ethanol than gasoline to drive a mile, and the stuff is more corrosive, but building a car that's E85-ready adds only about $200 to the cost. Ethanol has already transformed one major economy: In Brazil nearly three-quarters of new cars can burn either ethanol or gasoline, whichever happens to be cheaper at the pump, and the nation has weaned itself off imported oil.

    And have you heard about GM's yellow gas caps? In the next few weeks the auto giant is set to unveil an unlikely marketing campaign drawing attention to E85 and its E85-ready cars and trucks like the Chevy Avalanche. They will sport special yellow gas caps, and if you already own such a vehicle, GM will send you a gas cap free. California governor and Hummer owner Arnold Schwarzenegger is backing a ballot initiative that would encourage service stations to offer ethanol at the pump. Even big oil companies like Royal Dutch Shell and Exxon Mobil are funding ethanol research. Says Beth Lowry, GM's vice president for energy and environment: "People's perception used to be 'The agricultural lobby is very interested in it.' Now people are waking up and saying, 'This isn't just about the Midwest. This is about the U.S. as a whole.' " Adds Daniel Yergin, one of the country's top energy experts: "I don't think I've seen so many kinds of renewable energy fermenting and bubbling as right now. The very definition of oil is broadening."

    Not that ethanol will replace gasoline overnight. There are 170,000 service stations in the U.S.; only 587 (count 'em!) sell E85. To refine enough ethanol to replace the gas we burn (140 billion gallons a year) would require thousands of biorefineries and hundreds of billions of dollars. Yet one of capitalism's favorite visionaries is convinced that very soon filling up on weeds and cornhusks will be no more remarkable than tanking up on regular. Says Richard Branson, whose Virgin Group is starting an ethanol-inspired subsidiary called Virgin Fuels: "This is the win-win fuel of the future."

    In Decatur, Ill., nobody is waiting around for the future; demand for ethanol from corn is booming right now. This grain-elevator-dotted town is home to agribusiness giant Archer Daniels Midland, which makes it the capital of the old-school heavily subsidized U.S. ethanol industry. On a blustery January day, the air is thick with fog, sleet, and condensation from the corn mills on the 600-acre complex next to ADM's corporate office. Outside the ethanol plant, the air smells like grape juice gone bad. Inside, with its giant vats and fermentation towers, the biorefinery resembles a winery, but it's much noisier.

    ADM used to call itself "Supermarket to the World." Today, reflecting its emergence as an alternative-energy supplier, it boasts of being "Resourceful by Nature." The company created the corn-ethanol industry when Jimmy Carter asked it to in 1978--the oil-shocked President wanted a homegrown alternative to gasoline. ADM now pumps out more than a billion gallons of ethanol per year. While the fuel accounts for just 5% of the company's $36 billion in annual sales, analysts estimate that it generates 23% of ADM's operating profit. Says Allen Andreas, the courtly 62-year-old CEO: "We've always been feeding people and looking for better alternatives; now we're doing the same thing in energy."

    ADM aims to be a big player in what Andreas calls the shift "from hydrocarbons to carbohydrates." But for now it's ignoring E85 and cellulosic ethanol in favor of keeping pace with demand that is already booming. Corn ethanol's main use is as an additive that helps gasoline burn more efficiently. ADM sells nearly its entire output to oil companies, which use ethanol as a substitute for MTBE, a petroleum-based additive that is toxic and is now banned in California and 24 other states. With two billion gallons of MTBE still in use annually and 25 states that have yet to ban it, the ethanol industry could grow 50% simply by replacing MTBE.

    In September, ADM announced a nearly 50% expansion project, or 500 million new gallons of annual production capacity. Archrival Cargill is belatedly ramping up ethanol production, and new entrants are using private capital to build ethanol plants. The only publicly traded pure-play ethanol maker, Pacific Ethanol of Fresno, plans to build five plants in California and has raised a total of $111 million, including $84 million from Bill Gates. (For a guide to playing the ethanol boom, see Investing.) All told, the planned projects represent a nearly $2.6 billion investment and will increase U.S. ethanol capacity by 40%.

    Other major players are making long-term ethanol bets. Ford is working with VeraSun, a startup in South Dakota, to promote E85 fueling stations. Shell is the primary backer of Canada's Iogen, which is attempting the first large-scale production of cellulosic ethanol--the kind made from cornstalks and grasses--at a pilot plant in Ottawa (see following story, "Biorefinery Breakthrough"). Exxon Mobil has pledged $100 million to Stanford University for research into alternative fuels. The oil giant's new CEO, Rex Tillerson, visited the campus last year to hear what researchers are cooking up. Biology professor Chris Sommerville says the change in the industry is palpable: "I went to six scientific conferences on biofuels last year; the previous 29 years I didn't go to any."The biggest alternative-fuels player of all, of course, is Uncle Sam. Oil refiners receive a 51-cent tax credit for every gallon of ethanol they blend into their gasoline. That alone will cost taxpayers more than $7 billion over five years, estimates the Congressional Budget Office. The U.S. has also funded research into biodiesel, which uses deep-fryer grease and other nontoxic ingredients to replace regular diesel fuel. (See box at left.) But ethanol will never really take off unless consumers demand it, and while the U.S. industry still relies on taxpayer largesse, Brazil has leaped to the next step: a profitable free-market system in which the government has gotten out of the way.

    Near the prosperous farm town of Sertãozinho, some 200 miles north of São Paulo, the fuel that will fill the tanks of nearly three million Brazilian cars in a few months is still waist-high. Lush sugar-cane fields stretch as far as the eye can see, interrupted only by the towering white mills where the stalks of the plants will be turned into ethanol when the harvest begins in March.

    Brazil boasts the biggest economy south of Mexico, and with annual GDP growth of 2.6%, it is a powerhouse you might expect to consume growing amounts of oil, coal, and nuclear energy. But Brazil also happens to have the perfect geography for growing sugar cane, the most energy-rich ethanol feedstock known to science. And so, for Brazil's 16.5 million drivers, there is ready access to what's known in Portuguese as álcool at nearly all of the country's 34,000 gas stations. "Everyone talks about alternative fuels, but we're doing it," says Barry Engle, president of Ford Brazil. Ethanol accounts for more than 40% of the fuel Brazilians use in their cars.

    While oil frequently has to be shipped halfway around the world before it's refined into gasoline, here the sugar cane grows right up to the gates of Sertãozinho's Santa Elisa mill, where it will be made into ethanol. There's very little waste--leftovers are burned to produce electricity for Santa Elisa and the local electrical grid. "The maximum distance from farm to mill is about 25 miles," says Fernando Ribeiro, secretary general of Unica, the trade association that represents Brazilian sugar-cane growers. "It's very, very efficient in terms of energy use."

    Although Brazilians have driven some cars that run exclusively on ethanol since 1979, the introduction three years ago of new engines that let drivers switch between ethanol and gasoline has transformed what was once an economic niche into the planet's leading example of renewable fuels. Ford exhibited the first prototype of what came to be known as a flex-fuel engine in 2002; soon VW marketed a flex-fuel car. Ford's Engle says flex-fuel technology helps avoid problems that had plagued ethanol cars, such as balky starts on cold mornings, weak pickup, and corrosion.

    Consumers loved flex-fuel because it meant not having to choose between ethanol and gas models--memories were still fresh of the 1990 sugar-cane shortage, when ethanol-car owners found themselves, well, out of gas. Today "nobody would buy an alcohol-only car, even with tax incentives," says sales manager Rogerio Beraldo of Green Automoveis, a sprawling dealership in São Paulo. "Brazilians are traumatized by our earlier experience, when supplies ran out. But with flex-fuel, there's no risk of that."With Brazilian ethanol selling for 45% less per liter than gasoline in 2003 and 2004, flex-fuel cars caught on like iPods. In 2003, flex-fuel had 6% of the market for Brazilian-made cars, and automakers were expecting the technology's share to zoom to 30% in 2005. That proved wildly conservative: As of last December, 73% of cars sold in Brazil came with flex-fuel engines. There are now 1.3 million flex-fuel cars on the road. "I have never seen an automotive technology with that fast an adoption rate," says Engle.

    Ethanol's rise has had far-reaching effects on the economy. Not only does Brazil no longer have to import oil but an estimated $69 billion that would have gone to the Middle East or elsewhere has stayed in the country and is revitalizing once-depressed rural areas. More than 250 mills have sprouted in southeastern Brazil, and another 50 are under construction, at a cost of about $100 million each. Driving to lunch at his local churrasco barbecue spot in Sertãozinho, the head of the local sugar-cane growers' association points to one new business after another, from farm-equipment sellers to builders of boilers and other gear for the nearby mills. "My family has been in this business for 30 years, and this is the best it's been," says Manoel Carlos Ortolan. "There's even nouveaux riches."

    The key to Brazil's success is that consumers are choosing ethanol rather than being forced to buy it. Brazil's military dictators tried the latter approach in the 1970s and early 1980s, by offering tax breaks to build mills, ordering state-owned oil company Petrobras to sell ethanol at gas stations, and regulating prices at the pump. This bullying--and cheap oil in the 1990s--nearly killed the market for ethanol until flex-fuel came along. The regime wasn't good for much, says consultant Plinio Nastari, but it did create the distribution system that enables drivers to fill up on ethanol just about anywhere.Even though the U.S. will never be a sugar-cane powerhouse like Brazil, investors now view Rio as the future of fuel. "I hate to see the U.S. ten years behind Brazil, but that's probably about where we are," says one shrewd American freethinker, Ted Turner.

    There are venture capitalists, and then there's Vinod Khosla. A co-founder of Sun Microsystems and a partner at Kleiner Perkins, he was an early backer of Juniper Networks, whose technology helped end decades of dominance by traditional telecom manufacturers. A lean, 50-year-old native of India, Khosla says, without a hint of modesty, "I love the challenge of breaking monopolies."

    Frustrated that Kleiner Perkins wasn't taking enough risks after the dot-com crash, Khosla opted out of Kleiner's most recent fund and started his own group, Khosla Ventures. He'd been dabbling in environmentalism but never expected to become an investor. Brazil's success, however, made him wonder about ethanol's U.S. potential. "I spent two years trying to convince myself that this was never going to be more than another minor alternative fuel," he says. "What I discovered was that ethanol might completely replace petroleum in this country. And a lot of countries. This was a great shock to me."

    Pretty soon Khosla was surprising plenty of others. He put together a PowerPoint presentation, "Biofuels: Think Outside the Barrel," which he fires up on a moment's notice. He has made the pitch on ethanol to the President's Council of Advisors on Science and Technology and elsewhere in the White House. He is also behind California's upcoming ballot initiative to fund a subsidy for gasoline retailers that add E85 fuel pumps. "Getting distribution going is the real problem," says Khosla. "We need to increase blending and then introduce E85 pumps, and the possible will become the probable."

    His conversion to energy investing is part of a Silicon Valley trend, as VCs seek the rapid growth and giant markets that computers once offered. VantagePoint Venture Partners in San Bruno, for instance, established a fund called New Energy Capital that invests in ethanol, wind power, and other energy projects. Nth Power, a San Francisco energy-investment firm, estimates that $700 million of the $21 billion flowing into venture funds last year were earmarked for "clean technology" startups.

    No one, not even a professionally optimistic VC, thinks we're anywhere near getting rid of gasoline. The oil superstructure is simply too efficient and too entrenched to just go away. Nor could corn ethanol generate enough fuel to run America's cars, pickups, and SUVs. Already ethanol gobbles up 14% of the country's corn production. Converting a bigger share into fuel would pinch the world's food supply--a favorite objection of skeptics. Critics also contend that producing fuel from crops consumes more energy than it yields. On this topic of endless Internet bickering, the Energy Department recently reported, "In terms of key energy and environmental benefits, cornstarch ethanol comes out clearly ahead of petroleum-based fuels, and tomorrow's cellulosic-based ethanol would do even better."

    Because cellulosic ethanol comes from cornstalks, grasses, tree bark--fibrous stuff that humans can't digest--it doesn't threaten the food supply at all. Cellulose is the carbohydrate that makes up the walls of plant cells. Researchers have figured out how to unlock the energy in such biomass by devising enzymes that convert cellulose into simpler sugars. Cellulose is abundant; ethanol from it is clean and can power an engine as effectively as gasoline. Plus, you don't have to reinvent cars. Ratcheting up production of cellulosic ethanol, however, is a gnarly engineering problem.

    The onus now is on companies like Genencor, a Palo Alto biotech. Its biological enzymes are used to break down stains in Tide detergent and achieve just the right distressed look in blue jeans. But making underpants whiter and denim bluer is nothing compared with breaking America's longstanding addiction to gasoline. The best way to do this would be to bring down the cost of ethanol to the point where consumers clamor for it. Before flex-fuel engines came along, Brazilians would mix their own rabo de galo (cocktail) of ethanol and gasoline when filling up, simply because it was cheaper than straight gas. Genencor says its enzymes have cut the cost of making a gallon of cellulosic ethanol from $5 five years ago to 20 cents today. Now refiners have to learn how to scale up production. Canada's Iogen is the furthest along in commercialization; another hopeful is BC International, a Dedham, Mass., company that's building a cellulosic ethanol plant in Louisiana.

    There's still a role for government--and we don't mean more handouts for corn growers or distillers. The recently enacted energy bill takes steps in the right direction, like mandating the use of 250 million gallons of cellulosic ethanol a year by 2013, but much more can be done. Easing the tariff of 54 cents per gallon on imports of ethanol from Brazil and other countries would certainly help. Because sugar cane generates far more ethanol per acre than corn, Brazil can produce ethanol more cheaply than the U.S. Not only would importing more of it broaden access to ethanol for U.S. buyers, but it would also make it cheaper for the ultimate consumers--us. That in turn would spur demand at the pump and encourage service station owners to offer ethanol more widely. What's also needed is for someone big--like Shell or BP, which tout themselves as green companies--to commit to cellulosic ethanol on a commercial scale. Shell's bet on Iogen is minuscule compared with the $20 billion it plans to spend on producing oil and gas off Russia's Sakhalin Island.

    Of course, the timing of when ethanol goes from dream to reality isn't just a matter of an investment here or a subsidy there. It took decades of ferment in Brazil before serendipity in the form of high gas prices and flex-fuel engines made ethanol an everyday choice for consumers. But the sooner we start, the greater our ability to shape a future that's not centered on increasingly expensive oil and gas. It's not as if gasoline demand is going to go down: As long as the Chinese and the Indians want our lifestyle--and they do--you can forget about oil at $10 or even $20 a barrel. Whatever the technological challenges, a world of abundant, clean ethanol is suddenly looking a lot more realistic than a return to the days of cheap, inexhaustible oil.


    Uni Eropa lirik biofuel Indonesia

    [Bisnis Indonesia]

    JAKARTA, 06/03/07: Uni Eropa melirik Indonesia sebagai sumber bahan bakar nabati (BBN) atau biofuel, menyusul arahan Komisi Eropa bahwa 5,75% bahan bakar untuk transportasi di kawasan tersebut harus berasal dari BBN pada 2010.

    Dengan diliriknya Indonesia sebagai sumber BBN internasional, menurut Deputi Menko Perekonomian Bidang Pertanian dan Kelautan Bayu Krisnamurthi, maka pengembangan bahan bakar nabati tidak boleh setengah hati. Sebab selain Indonesia, potensi BBN Brasil juga diperhitungkan oleh Uni Eropa.

    "Jadi Indonesia harus proaktif dalam merebut pasar Eropa, mengingat kawasan tersebut baru tahap awal untuk meningkatkan penggunaan BBN secara signifikan," ujarnya di Jakarta, baru-baru ini.

    Guru Besar Corporate Governance Fakultas Ekonomi Universitas Indonesia (FEUI) Akhmad Syakhroza membenarkan Uni Eropa mulai melakukan diversifikasi bahan bakar ke energi nabati.

    "Pengembangan BBN dilakukan oleh negara-negara Eropa sebagai jawaban atas kebutuhan untuk melakukan diversifikasi energi. Baik karena alasan kelestarian lingkungan maupun karena desakan akibat kenaikan harga bahan bakar fosil," paparnya.

    Bahkan upaya tadi, menurut dia, diperkuat dengan arahan Komisi Eropa untuk mengefektifkan penggunan 5,57% BBN bagi transportasi pada 2010.

    Akan tetapi arahan Komisi Eropa bersifat mandatory. Artinya, menurut undang-undang, jumlah pemakaian BBN yang ditetapkan harus dipenuhi. UU tersebut diperkirakan mulai berlaku akhir 2007 atau awal 2008.

    Komisi Eropa telah menyatakan bahwa BBN untuk Eropa tersebut tidak dapat dipenuhi oleh produksi dari Eropa sendiri. Saat ini kebutuhan bahan bakar untuk transportasi di Eropa sekitar 38 juta ton per tahun, dengan kontribusi BBN baru mencapai 1%-1,5%.

    "Meningkatnya konsumsi BBN lebih dari 1,5 juta ton dalam 3 tahun merupakan tantangan besar bagi industri Eropa. Terutama karena telah timbul kekhawatiran kompetisi sumber daya untuk BBN dan sumber daya untuk pangan," papar Syakhroza.

    Renewable Energy Indonesia Trade Shows

    Start Date 31-OCT-2007 End Date 03-NOV-2007
    Venue Jakarta International Expo (JIExpo), Kemayoran, Jakarta, Indonesia

    Event Profile:
    Renewable Energy Indonesia is an international event for renewable energies and their applications. The exhibition encourages this promising new market offering operational and reliable alternatives for the housing, service sector and individual markets.

    Visitor's Profile:
    Electricity producers, Power distributors, Fitters: electricians, heating engineers, building contractors, architects, technical consultants, building economists, Local and regional authorities, social housing departments, hospitals, Investors, developers, industrialists, house builders, hotel managers, End users, Distributors, Operators, Institutional decisionmakers are the target visitors.

    Exhibitor's Profile:
    Profile for exhibit include electrical components, measuring devices, inverters and transformers, storage: batteries, silos, spare parts, installation, maintenance, connections, cables, attachments for solar panels, vehicles, handling, transport etc.

    P. T. Pamerindo Buana AbadiDeutsche Bank Building, 13th Floor, Jl. Imam Bonjol No. 80,Jakarta, Indonesia.Tel: +(62)-(021)-3162001Fax: +(62)-(021)-3161981/3161983/3161985

    Energy or Food? – Overcoming the Biofuels Dilemma

    Mriganka Jaipuriyar, Platts News Editor

    Biofuels offer new sources of energy but attention has increasingly focused on the threat of higher food prices. Some options may, however, avoid the problem.

    IN ITS AGRICULTURE OUTLOOK 2007-2016, the Organization for Economic Cooperation and Development highlighted that growing demand for biofuels is fundamentally changing agricultural markets and driving world food prices up. Against this background, some biodiesel producers are turning to jatropha curcas as their preferred feedstock amid soaring prices of traditional feedstocks such as palm oil.

    Jatropha curcas is an inedible shrub that can be grown on semi-arid land, and therefore does not compete for space with good agricultural land. Under optimum conditions jatropha seeds can yield up to 40% oil content. Seeds are crushed to produce oil for refining into biodiesel.
    Moreover, jatropha-based biodiesel producers typically have control over the entire value chain from plantations to refining, and hence are better able to manage costs. By comparison "buying palm oil from the 'big boys' means that we will have to buy at international prices, dictated by others," according to Peter Cheng, CEO of Van Der Horst Holdings.

    Cheng's company has embarked on a project to build a 200,000 mt/year biodiesel plant in Singapore. It will break away from conventional palm oil to use jatropha as feedstock, affording the company more control over its raw material costs.

    "We intend to grow our own agricultural oil from japtropha curcas and marine algae," Cheng said. "By employing manpower to harvest our own jatropha from our own plantation means that we are in control of our own feedstock."

    A similar story comes from the Philippines which currently produces some 115 million liters of biodiesel annually from coconut and palm oil. Planned jatropha projects are expected to significantly lower costs, Peter Anthony A. Abaya of state-owned Philippine National Oil Co-Alternative Fuels Corp. said. PNOC-AFC was set up in 2006 to lead the country's biofuels development.

    "According to our calculations, we can sell jatropha-based biodiesel at Peso 35/liter and still make a profit," Abaya said.

    PNOC-AFC has signed an agreement with South Korea's Samsung to set up an integrated jatropha plantation and biofuels plant project. Their preliminary plan is to develop a 120,000 hectare jatropha plantation and a 200,000 mt/year biofuels refinery.

    However, not all biodiesel producers favor alternative crops such as jatropha. Andrew Goh, chief financial officer of Malaysia-based Carotech, said his company would not use jatropha. "We would not use such feedstock as it does not allow us to maximize our return. With palm oil, we are able to produce biodiesel, glycerin, palm vitamin E, beta carotene and sterols (steroid alcohols)."

    "You will not be able to extract the vitamin E, beta carotene and sterols from jatropha," Goh said. "Therefore, assuming the cost of jatropha oil is the same as those of palm-a very optimistic assumption-we will lose 50% of our revenue by using jatropha."

    But jatropha has powerful supporters. Oil major BP is setting up a joint venture with UK biodiesel producer D1 Oils that aims at becoming the world's biggest producer of jatropha oil. D1 Oil specializes in making biodiesel from jatropha with plantations in India, southern Africa and Southeast Asia.

    The venture plans to invest $160 million over the next five years and produce up to 2 million mt of jatropha oil a year by 2011.