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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

13/04/2001

NEWS PROVIDER

Mahamad Rodzi Abdul Ghani

NEWS SOURCE

NULL

CATEGORY

HEADLINE

Guest list revision delays palm oil's power sector
Guest list revision delays palm oil's power sector debut12 April 2001 Business Times - THERE is an apparent hitch in firing up theTenaga Nasional power plant in Prai with crude palm oil (CPO), originallyscheduled for today.

But it's nothing technical or logistic, and there has been no change ofheart regarding the exercise.

The maiden burning of CPO to generate electricity has been put off by aweek because the event has drawn much greater attention than expected, asource said, and the "organisers" of the ceremony have now to accommodatemore "guests".

The ceremony was initially supposed to be attended only by representativesof the Primary Industries Ministry, Malaysian Palm Oil Board (MPOB),Malaysian Palm Oil Association (MPOA), Tenaga Nasional, and the PenangState Government.

But power comes under the purview of the Energy, Telecommunications andMultimedia Ministry, and its minister Datuk Amar Leo Moggie surelydeserves an invitation.

"As a result, all ministers from relevant ministries will now be invitedto attend the function. . . . hence the postponement," the source said.

Malaysia is facing a serious palm oil glut which has put pressure on thecommodity's prices.

Production is expected to rise to 11 million tonnes this year, up from10.6 million tonnes last year, amid an already huge stock overhang of 1.45million tonnes.

The Government first proposed burning CPO as industrial fuel early thisyear, and plans are to remove at least 500,000 tonnes of the commodityfrom the market, or about 5 per cent of annual production.

To ensure that Tenaga has a steady supply of CPO for the project, MPOA andMPOB signed a pact last month.

MPOA will start delivering between 20,000 tonnes and 50,000 tonnes of CPOthis month to two tanks rented by MPOB with a capacity of 10,000 tonneseach at Port Klang.

The CPO will then be shipped in barges to Prai for mixing with medium fueloil (MFO) and then burned at the station.

The exercise is expected to be gradually extended to other Tenaga powerstations in the country.

MPOA, which represents about 91 plantation companies in the country, hasagreed to supply an initial 50,000 tonnes of CPO at RM700 a tonne.

At present, Tenaga buys MFO at RM600 per tonne.

The additional cost borne by Tenaga for implementing the project issubsidised by the industry via a cess collected by the Government.

Cess collection will be reinstated at RM11 per tonne, from RM7 introducedonly in February by MPOB and Malaysian Palm Oil Promotion Council.

The new cess takes effect on May 1 and will be reviewed from time to time.

Quarters which are sceptical about the project have said the burning of50,000 tonnes a month is too small to make an impact on palm oil prices.

"For it to be a viable venture, it should be at least 100,000 tonnes amonth," one analyst said.

She said burning 50,000 tonnes a month will still leave production thisyear at 11.6 million tonnes, and the end-stock will rise to 1.8 milliontonnes.

Another analyst said the project must also take into account that CPO isnot as efficient a fuel as, say, diesel.

"The project may end up using so much CPO that it does not make economicsense.

Palm oil prices may benefit, but how will it affect Tenaga?"