Palm Oil Internet Seminar

2016 Market Direction - Twists and Turns of Palm Oil Prices:
Biodiesel Policies and Its Impact on Palm Oil Prices
By: Ir. Samsudeen Ganny

Ir.Samsudeen Ganny was born on 13th January1959. Graduated from Agriculture University Malaysia (UPM) in Agricultural Engineering (1984) and he is a Professional Engineer and member of Institute Engineers Malaysia and Board of Engineers Malaysia. He is a Black Belt trained at Motorola University (USA) and also a Facilitator trained in Juran Institute (USA).He started his career in Felda as Oil Mill Engineer and moved on to join a Japanese Multinational Company, KAO- Fatty Chemical Malaysia (FCM) as Plant Engineer and rose to rank of Senior Plant Engineer. He left the company to join Golden Hope Plantations Berhad as Engineering Manager and later became the Chief Engineer for the downstream Industries Division. He was the General Manager in AJ Oleo Industries Sdn Bhd. His last position was as the Chief Operating Officer in an Australian listed multinational company involved in Malaysia & Indonesia oil palm industry and jatropha plantation in India. He has experiences and competencies in handling both local and international operations and projects including the businesses. In FCM he was the pioneer engineer send to Japan to be trained and was involved on the designing, assisting the Japanese engineers in the project management of the construction and the commissioning of the fatty alcohol & glycerine plant in Prai, Malaysia. After the commissioning of the plant he was appointed as the Sr. Plant Engineer responsible for the high pressure and hydrogenation fatty alcohol plant. He was send to KAO plant in the Philippines to train new technicians for the plant in Prai, Malaysia. He was the trainer on teaching new recruits on the process and operations of the plant before they are assigned to the plant operation. After a stint of seven years he left the MNC to take up a more challenging role as an Engineering Manager in a public listed company, Golden Hope Plantations Berhad (1991-2007). His first assignment was the successful refurbishment of the Vietnam refinery, the first overseas venture of the company. Then he was assigned as the Engineering Manager in the Medium Density Fibreboard plant, first venture of the company in the rubber wood downstream and was responsible for the whole project management from designing, selection of equipment, construction and commissioning of the plant. Then after the successful commissioning he was responsible to set up the plant Maintenance System. During this period he has the opportunity to work with foreign engineers & consultants and travelled to different countries to learn new technologies and system for local operations. (Competency in the operational management of chemical processes, budget & cost controls, qualitative & quantitative risk analysis, human resource management, and procurement) As the Chief Engineer for the Group’s downstream Industries Division he was responsible for various different projects spanning from Parquet(rubber wood) plant upgrading, Furniture (rubber wood) plant upgrading, shortening plant & bleaching plant(edible oil refinery) upgrading, bulking terminals & refinery ( South Port, Port Klang) new project, fruit juice plant relocation from Kulai, Johor to Sitiawan, Perak. Bata’s PVC boots plant relocation from United Kingdom to Prai, Malaysia. He also carried out technical due diligence of a soft oil refinery in Morocco for the Group joint venture with an Saudi Arabia based company. He was made the Lead Engineer for the business and technical due diligence of Cognis plants located in Dusseldorf & Loxsted, Germany, Cincinnati, USA, and Toronto, Canada with International consultants like M/s Lloyds, M/s Arthur d Little in the acquisition of the ‘carve out’ business of Cognis for Golden Hope Plantations Berhad pursuit in the oleochemical businesses. His last project with Group is heading the technical and assisting the business development in the feasibility study and project management of the tripartite joint venture between Golden Hope Plantations Berhad, Cognis and Lonkey (China) for the construction of the Methylester Sulphonates (MeS) in Guangzhou, China. (Head the technical dud diligence resulting in acquisition of International business in oleochemicals and secondly the commercialization of the research & innovation by MPOB, MeS business) He left Golden Hope Plantations Berhad to assume a senior position in AJ Oleo Industries as General Manager (2007-2010) and responsible to establish the biodiesel and downstream businesses and set up the biodiesel/methylester and pharmaceutical glycerine plant in southern part of Johor for the company. As the General Manager he is fully responsible for the whole project until completion including the developing the businesses including the markets for the company. After the successful completion of the project and due to global economic condition for biodiesel business was not attractive he formulated a turnaround strategy with feasibility study for the company. He initiated talks with Methylester Sulphonates (MeS) producers to collaborate with AJ Oleo Industries and prepare the diversification strategy for the company to move forward. As the General Manager he is also responsible for the milling operation of the palm oil. He lead the first biogas plant, a renewable energy project with obtaining SREP( small renewable energy programme) license in the country for the Group from designing the system to successful completion of the plant to export to the National Grid. His responsibilities include the negotiation with TNB for the Small Renewable Energy Programme (SREP) agreement and licensing application from the Energy Commission. The plant was successfully commissioned with export to grid and the excess biogas as boiler fuel. (Establishing of new business from A to Z ) He was invited to join an Australian (ASX) and USA (NASDAQ) listed company Mission New Energy Limited (MNEL) involved in both oil palm industry and jatropha plantation in India as the Chief Operating Officer. His assignments were to review the operating policy of their plants Mission Biotechnologies Sdn Bhd & Mission Biofuels Sdn Bhd. in Kuantan & jatropha plantation in India, establish & implementation of risk managements compliance to ASX & NASDAQ regulators, identify core competencies, and map out the opportunities to the Group. The achievements were firstly the securing supply contract with Shell International Trading & Marketing & Rotterdam). Secondly ,changed the plants operation to be more cost effective and high productivity. Third, prepared the blue print for the both edible & non-edible integrated complex joint venture with PTPN 3, Indonesia (PT Perkebunan Nusantara) where MNEL is the majority. The JV Company is called PTSON, Medan (PT Sinergi Oleo Nusantara) and was appointed as the Director, Operation. Fourth, define new value construction for the business where the Company is exploring into waste-to-energy initiatives for oilpalm industry. Established a JV with technology provider and interested party for generation of energy (electricity & steam) higher than conventional technology in the market with possible market leadership however the political environment there did not allow the project to proceed beyond the feasibility study. The last assignment prior to completion of the contract were to sell the businesses of the two operations in Malaysia which was concluded successfully with the sale to Felda Global Ventures ( FGV). (Experience with a MNC in International Business, from feasibility study to commercialization) Ir. Samsudeen Ganny is not only experienced in business, marketing and plant operations including engineering/technical he possess professional qualifications from Institute of Engineers Malaysia as Professional Engineer, a Black Belt (Motorola University, USA) and trained facilitator (Juran Institute, USA) in establishing the Total Quality Management System (TQMS) for organizations. He has facilitated cost savings projects in Golden Hope Plantations Berhad in achieving millions of Ringgits in savings. He is also instrumental in the outsourcing of the maintenance works to ABB in Golden Hope’s refinery. He also worked with certifying bodies like SGS,Control Union, Kosher and AGQM ( Germany) on proposals for the biodiesel International Sustainability Carbon Certificate for the biodiesel. ( Experience working with international accreditation bodies) His main achievement was to work with the consultant (former DG, DOE) to obtain the approval for a Contravention License for the biodiesel plant in respect to “not constructing” a waste treatment and the waste is blended with palm oil effluent to generate biogas and reduction in discharge parameters. The EXCO Member in the Malaysian Biodiesel Association diligently working with the Ministries like Palm Industries & commodities, Finance and Trade & industry and petroleum companies in the B5 mandate implementation nationwide. He was appointed as the Director, Operation for the JV with the Indonesian plantation company for the preparation of the master plan for the downstream operation. The expert knowledge in Human Capital Development is sought after for the India operation involved in jatropha plantation. The other achievement that he train and educate scores of young budding engineers and graduates who are either doing the practical training or trainee engineers in the organizations. He has established good rapport with institution of higher learning like Universiti Putra Malaysia (UPM) and Universiti Kebangsaan Malaysia (UKM), Malaysian Palm Oil Board (MPOB) and Rubber Development Baord (LGM) in research and development. He has presented papers both in Malaysia and Indonesia seminars and conference including articles for the Malaysia Palm Oil Council ( MPOC). Ir. Samsudeen Ganny was involved in the formulation of new policy and strategy for the palm oil industry working with PEMANDU (Performance Management and Delivery Unit, Prime Minister Department) and the Ministry of Palm Industries and Commodities (MPIC). This areas involved are the oleochemicals and renewable energy sectors of the palm oil industry. He has a good working relationship with MPIC, MPOB, PORAM ( Palm Oil Refining Association Malaysia), MBA ( Malaysia Biodiesel Association), SIRIM, and MPOC. (Development of new policy, strategies, talents and presented papers) The special qualification mentioned as Professional Engineer was obtained upon a two years study on the conversion of the palm waste into energy whereby the design and implementation of the project was submitted to the Institute of Engineers Malaysia. The Black Belt or Six Sigma qualification obtained from University Motorola on one year project for operational efficiency in the palm oil refinery. As for the Juran Institute, USA special qualification was for attending the training to implement the Total Quality Management in the organization then. Last but not least in the formulation of policy and strategy for the downstream sectors of the palm oil industry. Presently provides advisory and consultancy services to the oil palm industry sector and professional services in the engineering and technical fields.
Malaysia biofuel policy released in March 2006 entails that the use of environment- friendly, sustainable and alternative source of energy in order to reduce dependency on depleting fossil fuels. That to enhance prosperity and well being of all stakeholders in the agriculture and commodity based industries through stable and remunerative prices. The five strategic thrusts that the biofuel are for transport, industries, technologies, export and cleaner environment sectors. Although the initial plan was to initiate B5 (blend of 5% of biodiesel in 95% fossil diesel) in 2008, it only began in 2011 and full implementation as not achieved until the end of 2014.

In the Eleventh Malaysia Plan, (2016 -2020) biofuel initiative includes a goal to have mandate by year 2020. It envisaged a need to reduce stocks and maintain price lead to the acceleration of B5 mandate to B7 and ultimately to B10 in less than 24 months. As the decisions are politically motivated to reduce end stocks and maintain the price of CPO. The Government of Malaysia was under pressure to further increase the CPO quantity blended for biodiesel and which led to the B7 mandate in 2015. It was then expected to begin a B10 mandate in October 2015, however most manufacturers of cars using diesel have expressed reservations and issued press statements claiming the higher blend could damage engines and that may affect warranty coverage.

Furthermore the constant drop in crude oil price for the past few months, the government needed to pay increased subsidies to biodiesel producers with the government budget deficit, the increase will need to be absorbed by the consumers. The subsidy is an issue as the economic growth forecast is weak and currencies are under pressure. The export has shrunk to Europe and no headways to US market will have major impact to the industry. Whether the B10 programme which to consume 1.2 Million tonnes of CPO a year expected to increase its contribution to the economic growth. With TPPA challenges are certain from import and competition from foreign companies set up their own biodiesel plants.

The biodiesel industry is certain to face the challenges and how it will overcome it will be discussed from the author’s perspective below.

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Questions & Answers (1) :
Cai Neng Bin
8 years ago
Dear Mr Samsundeen, can you explain more what do you mean by \"RBD plus RM515\"? Does it mean the subsidy cost RBD market price plus RM515, which sound a lot? Thank you.
Samsudeen Ganny:
Dear Mr.Cai Neng Beng In brief RBD is an acronym for refined, bleached and deodorised palm oil. In palm oil refining the crude palm oil is refined (R) that is the gums are removed by chemical process, physical bleaching (B) is to remove the colour & precipitated gums and deodorised (D) as the terms refers is to remove the odour. The RBD palm oil then will undergo fractionation to produce the olein & stearin. Biodiesel is produced by a chemical process where the RBD or olein is converted to palm methyl ester or biodiesel. The subsidy given to producers of biodiesel is the conversion cost from RBD plus RM 515. Cost of RBD plus RM 515. During the process of refining and biodiesel process there are by-products like palm fatty distillates (PFAD) and crude glycerine are generated respectively and these are saleable by products which a discount to be given in the subsidy. That\'s why Indonesia termed our subsidy is generous whereas in their case the producers are subsidised based on gas oil ( fossil fuel) plus. There are some biodiesel producers have a refining unit as in this case the raw material used is RBD but it is not deodorised but just deacidified (D) where the cost is lower than a RBD ( deodorised). Some producers who do not have the refining unit need to procure the RBD or olein in the open market. Other than the raw material that is the palm oil the major component in the conversion in methanol which is procured from petroleum companies and the prices is linked to the crude oil price. As in the present time the crude price per barrel is low, so the methanol price is low too therefore the subsidised cost (plus) for biodiesel production is to be low too. Hope my answer to your question is clear.
8 years ago
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