PT Medco Energy International Tbk, a leading Indonesian oil and gas firm, said on Tuesday it plans to develop vast plantations for food crops and biofuel feedstocks in Papua to meet higher demand in future.
Hilmi Panigoro, Medco Energy's chair, told a biofuel conference that the group is looking at 1 million hectares of land on Indonesia's easternmost island, half of it for feedstocks and the rest for food crops.
Indonesia needs to expand biofuel capacity because of the threat of higher prices for fossil-based, petroleum fuel, a trend which makes the development of biofuel projects more attractive.
"The oil price drop now is only temporary. We still think that in two to three years' time, oil will still go back to three digits," he said.
The biofuel industry has beens struggling to survive as its feedstocks have become more expensive after the price of crude oil fell more than 70 percent earlier this year.
However, now the oil price has bounced back and is on track to post a near 50 percent increase in the second quarter, the highest quarterly percentage gain since 1990, on hopes for an improving economic outlook.
Medco currently produces ethanol at its Medco Ethanol Lampung unit in the southern Sumatran province of Lampung. The raw material is sourced from 13,000 hectares of cassava, of which about 70 percent is owned by local farmers.
The unit can produce 60 million litres of ethanol a year and is ready to process ethanol into biofuel but is still waiting for a fair price formula, which has been agreed by the industry and the government, but is yet to be implemented.
However, Panigoro said that Medco would prefer to have its own large-scale feedstocks plantations so that it can manage the operating costs and boost productivity.
"We should not leave management of feedstock to farmers," he said.
He said Medco has developed a 200-hectare plantation as a pilot project in Papua, where it is trying to grow rice, jatropha, soybean and other crops.
http://sg.news.yahoo.com/rtrs/20090630/tbs-medco-biofuel-7318940.html
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