October 12, 2010 / 10:08 AM / 7 years ago

Wilmar says no major impact from moratorium

SINGAPORE/KUALA LUMPUR (Reuters) - Wilmar International (WLIL.SI), the world’s No.1 palm oil firm, expects Indonesia’s proposed two-year ban on clearing forests to have a limited impact on its operations as land available for oil palm estates is ample.

Singapore-listed Wilmar’s stand run counter to many palm oil and mining firms who fear the moratorium -- part of a $1 billion deal with Norway aimed at fighting deforestation and carbon emissions -- will curb expansion and future earnings.

Wilmar’s Head of Corporate Social Responsibility Jeremy Goon said oil palm concessions only cover 3.2 percent of Indonesia’s land mass but contribute 70 percent of total agriculture activity in the Southeast Asian country.

“We understand there is sufficient non-forest degraded lands in Indonesia to accommodate and support the growth of the plantation businesses,” Goon told the Reuters Climate and Alternative Energy Summit.

Under the deal with Norway, the moratorium would apply from the start of next year but exactly which areas of forest will be covered remains unclear, unsettling investors.

Senior Indonesia officials have raised the idea of land swaps to help palm oil firms expand on land already degraded but the question of who pays for this remains unsettled.

Goon said Wilmar would abide by any regulations that governed land swaps if such rules were drafted.

Indonesia is under international pressure to slow deforestation and the destruction of peatlands, which release vast amounts of planet-warming greenhouse gases when cleared or burned.

Wilmar also faces an uphill task in ensuring its palm oil supply comes from third-party estates that have not illegally cut down forests or drained peatlands to expand, Goon said.

“NOT THE PALM OIL POLICE”

Less than half of the palm oil the firm trades comes from its own subsidiaries, Goon said.

But unlike companies such as Malaysian-listed planter IOI Corp (IOIB.KL), which recently excluded an Indonesian supplier over concerns of deforestation, Goon said Wilmar usually engages with errant planters to help them become more eco-friendly.

“First of all, we are not the palm oil police,” Goon said.

“If the Roundtable on Sustainable Palm Oil either suspends or terminates a member that would prompt us to review our relationship with the company,” he said, referring to industry-driven body tasked with certifying planters.

Goon, an RSPO board member, said Wilmar planned to expand its investments in cutting carbon emissions and would spend between $12 million and $15 million in 2010/11 on projects around East Asia.

A total of 18 projects were at various stages of development.

The company already had six projects registered under a U.N.-backed clean energy scheme that rewards investors with tradeable carbon offsets and focused on capturing methane, a powerful greenhouse gas, by treating palm oil mill waste water.

He said projects developed or planned also included burning palm biomass and rice husk waste in boilers to generate power, cutting fuel bills and reducing emissions.

“There are quite a few in process now and we will be rolling out a number for the next 5 to 10 years,” he added.

He also said the industry was far different than it was a decade ago, with clear rules and standards under the RSPO and other bodies.

Green groups have targeted palm oil and logging firms for cutting down large areas of forest, destroying pristine rainforests brimming with plant and animal species.

But he said firms under the RSPO must complete detailed assessments of any pockets of forest with a high conservation value in plantation concessions. Social impact assessments were also crucial before development of any lands.

“The lands that are normally awarded by governments to palm oil companies are usually degraded, logged-over secondary forest. They usually only give pristine rainforest with commercially viable timber to logging companies and that’s just the way it is,” he said.

Editing by Ed Lane

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