Indonesia Eyes EU Oleochemical Industrial Investment

Indonesia will be the first country to develop a low-carbon palm oil derivative product, palm mesocarp olein (PMO). Indonesia is also initiating the production of premium palm oil or healthy edible oil.

KOMPAS/NIKSON SINAGA

PT Pelabuhan Indonesia I trialled the operation of the Kuala Tanjung Multipurpose Container Terminal, in Batubara Regency, North Sumatra, by sending 50 containers containing oleochemical products from PT Unilever Oleochemical Indonesia to Jakarta and Surabaya, Tuesday (27/11/2018).

JAKARTA, KOMPAS — Indonesia is eyeing the opportunity for European Union oleochemical industrial investment with its high added value. In order to draw the interest of the European Union, Indonesia will initiate the development of a low-carbon palm oil derivative product, which is palm mesocarp olein or PMO.

Acting chief of the Indonesian Palm Oil Council (DMSI), Sahat Sinaga, said on Tuesday (7/2/2023) the DMSI would encourage the development of the oleochemical industry based on investment from the EU. The EU has a vast potential for oleochemical industrial development such as glycerin, surfactant, soap, cosmetics, perfumes and paints.

The products have high added value. For the industry of chemical compounds like glycerin and surfactant, the price can reach US$1,400 to $2,000 per tonne with a 200 percent added value. The same is true of cosmetics, perfumes and paints, costing around US$ 3,000-4,000 per tonne with a 600 percent added value.

“However, the requirement is that Indonesia has to own a low-carbon palm oil derivative product. For this purpose, the DMSI will initiate PMO production by applying dry-process technology for low carbon. Indonesia will be the first palm oil producer in the world that creates PMO,” Sahat said at a press conference in Jakarta.

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According to Sahat, fresh palm fruit bunch (TBS) processed into palm oil has so far used wet-process technology. By applying dry-process technology, carbon emission during TBS processing into palm oil of the PMO type can be reduced by around 79 percent.

This will go along with efforts to maintain the palm oil industry’s sustainability without causing forest destruction. The program will involve independent palm oil farmers as TBS suppliers so that they share the added value from the oleochemical industrial investment.

“The initial investment value is estimated at $1 billion to $3 billion. For funding, the DMSI has explored cooperation with the United Nations Industrial Development Organization (UNIDO). They are ready for unconditional funding for 10 years,” he said.

Sahat also referred to other steps believed to attract EU investors to make investments or even relocate their oleochemical plants to Indonesia. The Indonesian government needs to relax requirements for the entry of non-new capital goods (BMTB) like machines and special equipment for the development of the downstream palm oil industry.

DOKUMENTASI KEMENTERIAN PERDAGANGAN

Minister of Trade Zulkifli Hasan laid the first stone for the construction of PT Nusantara Green Energy's steamless palm oil mill in Batanghari Regency, Jambi, Tuesday (2/8/2022). The factory with an investment value of Rp 20 billion will produce premium palm oil (PPO).

In the food sector, Indonesia has initiated the development of premium palm oil (PPO) or healthy edible oil. PT Nusantara Green Energy (NGE) has built a palm oil (PMTU) plant in Batanghari, Jambi, without using steam to produce PPO.

“PPO is higher in quality than crude palm oil (CPO). The product will be resistant to oxidation and have higher nutrients such as carotenoid, squalene and vitamin E,” said Sahat, who is also president director of PT NGE.

PPO is higher in quality than crude palm oil (CPO).

The plant is expected to start operating in September 2023, relying on palm oil farmers’ cooperative for TBS supply. With an investment value of Rp 20 billion, the plant can reduce palm oil carbon emission by at least 95 percent from 1.3 tonnes of CO2-Eq (carbon dioxide equivalent) to 0.06 tonnes of CO2-Eq.

If the efforts are fruitful, added Sahat, there would be no reason for the EU to question palm oil and its derivative products from Indonesia. So far, the EU has hampered Indonesian palm oil product exports with its Renewable Energy Direction (RED) II policy and the EU Deforestation Regulation (EUDR).

IEU-CEPA

Meanwhile, on 6-10 February 2023, Indonesia and the EU are negotiating the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU CEPA). It is hoped that the agreement will not merely begin trade and investment cooperation.

The agreement is expected to serve as a bridge for the settlement of several issues between Indonesia and the EU, such as the “dispute” over nickel and the issue of palm oil and its derivative products.

Kaoem Telapak researcher Anang F Sidik said on Wednesday (8/2/2023) without any commitment from both sides for sustainable palm oil estate management, the IEU CEPA would find it difficult to produce a change in the policy on environmental management.

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In the case of Trade and Sustainable Development (TSD), the draft agreement directed at the green Free Trade Agreement (FTA) shows no serious commitment from either parties to environmental and human rights protection.

In fact, the EU issued the EUDR at the end of 2022. The regulation prevents commodities like palm oil, timber, coffee and cacao from entering the EU market if proven to cause deforestation and land degradation.

The rule, according to Anang, forces all producing countries to follow all the principles and criteria laid down by the EU. Many countries, including Indonesia, regard the EU policy as a form of trade impediment. “Therefore, carrying on IEU-CEPA negotiations without considering the aspect of environmental and rights protection as well as EU policies that hamper Indonesia will just erode the position of Indonesia,” he said at a press teleconference of the Coalition of Indonesian Civil Societies for Economic Justice in Jakarta.

This article was translated by Aris Prawira.