Malaysia-based palm oil producer Sawipac intends to build an integrated palm oil refinery in Riau province involving an investment of up to 300 million ringgit ($100 million).
Neo Teck Siong, executive director at Sawipac, said the company, situated in Kampar, a regency of Riau province, plans to construct a palm oil refinery that will have a capacity of 60 metric tons per hour.
Sawipac will also build a fertilizer plant and biogas power plant.
The company, which was established in 1996, made a pledge to the local government that it will provide sophisticated palm oil refining facilities. In March 2013, the company signed a memorandum of understanding with the Kampar regency government, which is part of Riau province.
According to the agreement, Sawipac will build a plant that can process up to 500,000 metric tons of fresh fruit bunches into palm oil every year. Siong said the company has secured 40 hectares of land in Kampar, considered suitable for the plant’s location.
The company is now in the process of cleaning up and preparing the land for the construction. Sawipac took a local partner to secure the land.
Siong said construction of the plant will need around 18 months.
He added that once it is operational, the plant would generate up to 200 million ringgit per year.
Although the global economic slowdown is hurting the price of crude palm oil, prospects for the palm oil business in Indonesia remain positive.
Invesors have welcomed the government’s push to encourage local palm oil processing, as it seeks to tap not only the export market, but also Indonesia’s strong domestic consumer demand.
Indonesia is now the largest palm oil exporter in the world, with the biggest plantation areas located on the islands of Sumatra and Kalimantan.
Derom Bangun, chairman of the Indonesia Palm Oil Board, predicted Indonesia may produce up to 28 million tons of CPO this year. The country may export 19 million and consume around 9.2 million tons of the output.
Indonesia’s main buyers of CPO are India, China and the European Union.
At home, the local food industry has the capacity to consume up to 5.7 million tons of CPO.
Unilever Oleokimia Indonesia, a subsidiary of consumer goods maker Unilever Indonesia, is planning to invest Rp 1.1 trillion ($115 million) to build a plant that processes crude palm oil into derivative products in Sei Mangkei, North Sumatra.
Sinar Mas Agro Resources & Technology, a major palm oil producer in Indonesia, through its subsidiary Energi Sejahtera Mas plans to build a CPO processing plant that will produce derivatives such as oleochemicals, margarine and specialty fats in Riau province.
Smart, which is controlled by Sinar Mas Group, a conglomerate founded by Eka Tjipta Wijaja, plans to invest about $245 million in the project.
While palm oil forms a large part of the national economy, environmentalists often criticize the industry for deforestation in Indonesia, which contributes significantly to global carbon emissions.