November 29, 2012 / 11:06 AM / 7 years ago

Refinery growth to boost Indonesia's palm oil output next year

NUSA DUA, Indonesia, Nov 29 (Reuters) - An expansion in the edible oil processing industry in top palm oil producer Indonesia is expected to boost its consumption to about 7.5 million tonnes next year, which may reduce the amount available for export, industry officials said on Thursday.

After years of increasing the acreage devoted to palm oil, Indonesia is now rapidly expanding its downstream and processing industries. Last year, it slashed export duties for refined oil in a bid to boost investment in the sector.

Palm oil consumption this year is expected to rise to 7 million tonnes from the 5 million-6 million tonnes used up in 2011, and is set to increase further in 2013, delegates at the 8th Annual Indonesian Palm Oil Conference told Reuters.

“The increase will mostly be in olein chemical and food,” said Derom Bangun, chairman of the Indonesian Palm Oil Board.

An increase in domestic consumption will benefit palm oil producers who do not sell overseas such as BW Plantation .

Sebastian Sharp, BW Plantation’s head of investor relations, expects Indonesia to soon overtake India as the world’s biggest palm oil consumer. He also forecast the company’s output to rise by up to 25 percent next year from 130,000 tonnes this year.

“Indonesia is the fastest growing consumer and overtook China last year,” said Sharp. “It will eventually overtake India.”

According to industry estimates, Indian palm oil consumption will be about 7.8 million tonnes in 2013, rising from 7.3 million tonnes this year.


Palm oil is used mainly as an ingredient in food such as biscuits and ice cream, or as a biofuel.

Producers are seeking new ways to generate demand after benchmark prices fell by about a quarter this year, but their efforts to drum up sales to their traditional European customers may be hampered by renewed attacks by Western governments on the oil’s green credentials.

Environmental groups have been critical of the expansion in the palm sector, which they blame for deforestation, speeding up climate change and killing wildlife.

The U.S. Environmental Protection Agency recently visited Indonesia to review the environmental aspects of its palm oil industry, while France has proposed an increase in duties on foods using palm oil, which has been dubbed the “Nutella tax”.

Bangun of the Indonesian Palm Oil Board said attempts by European countries to curb the use of palm oil were simply protectionism masked as green and health concerns.

“In France’s case, maybe they also need additional funds for their budget,” he added.

It hasn’t all been bad news from Europe for palm oil. This week, the European Commission said it had approved a scheme that would certify as sustainable transport fuel made from palm oil.

“It is one access to the European biodiesel (market),” said Bangun. “It will give more opportunity for producers to get into this industry, which is very important.”

Editing by Miral Fahmy

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