FGV Biotechnologies Sdn Bhd (FGVB), one of Malaysia’s largest palm-based biodiesel producers, is looking at ramping up its production and boosting exports to the EU, China, the United States and South-East Asia.
FGVB, a subsidiary of agri-business conglomerate Felda Global Ventures Holdings Bhd (FGV), currently owns one palm methyl ester (PME) biodiesel plant in Kuantan, Pahang and is in the process of finalising the purchase of another plant next to the existing plant.
In addition, it also commissions third party PME players to increase its PME production.
Chief executive officer Wira Adam told StarBiz that the company was targeting to generate around RM1bil in sales revenue by 2016-2017 from its biodiesel business.
“We are looking at exporting over 70 per cent of our total PME production annually (100,000 tonnes) while the remaining are for the domestic market.
“The majority of our PME buyers are from the EU and China, which are also the two biggest global biodiesel markets.
“Considering that the newly implemented B7 biodiesel mandate can take up to 575,000 tonnes of palm biodiesel annually, the export markets will remain as the major focus for FGVB biodiesel products,” said Wira.
He explained that the palm oil biodiesel trade consists of flat priced prompt sales, forward sales, pricing formula as well as term contracts.
“The combination of the contract term sales will make it more flexible for both FGVB and its buyers to do business transaction, hence resulting in a more secured contract,” added Wira.
As at end-October this year, FGVB has exported about 52,000 tonnes of biodiesel worth around RM300mil in sales revenue.
On the local front, Wira expects demand for B7 biodiesel (the blending of 7 per cent palm methyl ester with 93 per cent diesel fuel) in which FGVB is a major producer, would help to potentially trigger an increase in the price of crude palm oil (CPO).
Wira also expects CPO prices to trade between RM2,300 and RM2,500 per tonne upon the nationwide implementation of B7 biodiesel programme.
FGVB also creates a win-win situation through its tolling activities, which enables small PME players to process and run their plants at higher production rate.
According to Wira, there is currently about two million tonnes of palm oil stocks in the country.
“Hence, the overall high PME production and tolling exercise by these third parties to meet both local mandate and export markets will help reduce the current excess palm oil stockpile situation,” he added.
According to Wira, FGVB is also one of the first in the world to use “proprietary second-generation technology” that utilises second generation feed stock to produce biodiesel.
“This technology incorporates processing of a by-product of palm oil known as Palm Fatty Acid Distillates (PFAD), that is accepted by the European Union and the United States.
“In terms of financial cost, it is about 15 per cent to 20 per cent lower compared with the conventional processing of CPO.
“Hence, this will enable us to become a low-cost producer of PME as FGVB realises the economics of the new technology,” added Wira.
From a macro perspective, Wira pointed out that the country’s B7 biodiesel platform could also contribute to the country’s economy by reducing dependence on imported petroleum diesel and less outflow of foreign currency, while benefiting from the lower priced PME versus unsubsidised petroleum diesel for the most part of 2014.
