Friday, June 1, 2012

PTT buying up palm oil farms

PTT Plc, Thailand's energy flagship, has been busy acquiring land in Myanmar and Cambodia for palm oil plantations as part of plans to amass 200,000 hectares (1.25 million rai) of plantation area within four years at a cost of US$1 billion.

In addition to Indonesia, the world's largest palm oil exporter where PTT started planting palm five years ago, Myanmar and Cambodia have been listed as strategic locations for PTT's growing palm oil business.

Southern Myanmar, in particular, has similar weather patterns to Borneo but with less rain, said Nipit Isarankura, former president of PTT Green Energy (Thailand) Co (PTTGE).
Wholly owned by the Thai oil and gas conglomerate, PTTGE is responsible for palm oil and related businesses in Indonesia. PTT has invested $400 million in Indonesia for plantation and two palm oil factories.

''We have concluded talks and are about to sign a memorandum of understanding for developing a palm oil plantation in Tanintharyi, in southern Myanmar near Dawei, with an area in excess of 100,000 hectares. In Cambodia, a potential location is an inland plot behind Koh Kong,'' he added.

Meanwhile, PTT has become less aggressive in expanding palm oil operations in Indonesia, given the slow investment procedure and unstable environment for doing business in the island country. To date, only 20% of PTT's expected 200,000 hectares have been planted. Its original plantation target was 500,000 hectares.

''In Indonesia, for example, it takes up to two years for a new law announced by the central government to take effect with the local government. Generally, it is not easy to do business there, and we've found it tough to get as much land as we want for our palm oil business,'' said Mr Nipit, who is also chairman of the Thai-Indonesia Business Council under the Federation of Thai Industries.

Indonesia is undergoing a reform of investment regulations that would adjust foreign ownership requirements in palm oil and other sectors. The current foreign ownership ceiling of 95% in palm oil projects will be reduced, while the 50% limit in other businesses will be raised.

Under the original plan, PTT would be able to produce 20,000 barrels a day of palm oil from a 200,000-hectare plantation, all to serve demand in the Indonesian market.

Both Indonesia and Myanmar have large domestic consumption of palm oil, he noted.
Meanwhile, PTTGE is in the process of receiving certification from the UN Framework Convention on Climate Change to sell carbon credits from waste at its Indonesia palm oil factory in order to produce electricity.