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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

31/01/2005

NEWS PROVIDER

Mahamad Rodzi Abdul Ghani

NEWS SOURCE

Reuters

CATEGORY

HEADLINE

Vegetable oil producers look for energy windfall
Jan. 29, 2005, 9:43PM BOMBAY, INDIA - Use of edible oil as a fuel couldincrease in coming years as major vegetable oil producers from Malaysia toBrazil seek to cash in on high energy prices, industry executives saidthis month.

With crude oil prices more than $47 a barrel, energy-hungry countries mayfind that burning edible oil or blending it with diesel provides aneconomically viable alternative.

"High energy prices have created a whole new market for the vegetable oilindustry," Dorab Mistry, director of Godrej International, told Reuters.

Edible oil producers, suffering from a global glut, are eager to findother uses for their products, and some say the energy sector lookspromising.

But the executives were not able to provide details of the size of thecurrent energy-related demand for vegetable oils or what the potentialmight be for that market.

Some growth signsStill, there are signs that interest is growing. Rapeseed oil is beingsubstituted for fuel in Europe, Brazil has plans to use soybean oil, andMalaysia is looking to big energy consumers to boost exports of palm oil,the executives said.

"Today in Europe, more rapeseed oil is used for biodiesel than as edibleoil," Mistry said, although he gave no figures.

"Earlier this support from energy markets was not there, but last yearbecause of a huge upsurge in energy prices, it got a support, and today itis virtually a lifesaver to the vegetable oil producers," London-basedMistry said.

Output increasingAnd as global edible oil output increases, pressure is growing to findconsumers. Global supplies could rise significantly this year, with recordsoybean output in the leading producer, the United States, while bumpersoy crops are forecast in Argentina and Brazil. Malaysia and Indonesiaexpect good palm oil production.

"If the energy market breaks and crude oil prices go down below about $40a barrel, vegetable oil prices will also slide. But above $45 to $46, itmakes sense to burn vegetable oil," Mistry said.

Ethanol, an alcohol-based alternative fuel produced from biologicalfeedstock such as sugar cane and corn, is already used in many countries,including the United States and Brazil.

Brazil, the world's second largest producer of soybeans, has passed a billmaking it compulsory to blend 2 percent biodiesel, made from castor oiland soy oil, into diesel.

"It will become a compulsory 2 percent next year and then 5 percent in2008," said Carlo Lovatelli, president of Brazil's Vegetable Oils IndustryAssociation.

Setting up plantsHe said the industry in Brazil was preparing for the production ofbiodiesel by setting up new plants, because 5 percent of biodiesel willneed 2.2 million tons of edible oil.

Malaysia is promoting the use of palm as a fuel, with high energyconsuming countries such as Japan and South Korea showing keen interest,said Haron Siraj, chief executive officer of the Malaysian Palm OilPromotion Council.