Sinar Mas, Partners Halt $5.5 Billion Biofuels Plan

(Bloomberg) — Indonesian palm oil growers including PT Sinar Mas Agro Resources & Technology are halting or amending plans to make biodiesel after the commodity’s surge to a record made the projects unviable, executives said.

Sinar Mas and China National Offshore Oil Corp. had stopped a $5.5 billion biofuels plan, Director Rafael Concepcion said yesterday. PT Bakrie Sumatera Plantations was “redesigning” a biodiesel project, President Director Ambono Janurianto said.


Palm oil prices have more than doubled in the past year, undermining the economic rationale for adding the vegetable oil to diesel even as governments worldwide mandate greater use of alternative fuels. The increased use of palm oil and other plants including sugar was meant to stretch fossil-fuel supplies.

“The biodiesel market may shrink in 2008 as it is not viable even with subsidies,” Goldman, Sachs & Co. analysts Patrick Tiah and Nikhil Bhandari wrote in a note today. “With high prices, governments may review biofuel policies.”

Bloomberg