Sunday Times (Perth)(Perth, Australia)

October 2, 2005 Sunday

$90m fuel deal

ORTLAN BENNETT

Timor link to region's biggest biodiesel refinery

EXCLUSIVE

ENGINEERING firm MPI Group will build the biggest biodiesel refinery in the Asia-Pacific region in a deal with East Timor that will create up to 20,000 jobs there.

And it looks like another biodiesel technology opportunity that WA could miss out on.

Under the 20-year exclusive deal, East Timorese farmers will supply feedstock to a $13 million oil-extraction plant -- the largest in the region -- to be built by MPI in Cairabela.

The $80 million, 250 million litre-a-year biodiesel refinery is planned for Darwin, but MPI is also looking at sites in Asia.

East Timorese farmers have been contracted to grow jatropha curcas trees, closely related to the castor tree, to supply the vegetable oil plant in Cairabela.

The raw oil will be exported to the refinery in Darwin or Asia, or sold on the open market.

The deal was signed between East Timorese company Daba Loqui Energy, which will contract farmers and help run the oil-extraction plant, and MPI's development arm, Enviroenergy Developments Australia.

East Timorese President

Xanana Gusmao witnessed the signing in the capital, Dili.

The initial deal was struck in July, but was announced by MPI and EDA this week. The companies are based in Gordon, New South Wales.

"Within eight to 10 years, East Timor will become the largest regional biodiesel oil producer in the Asia-Pacific region," said EDA director Ed Krsevan .

He said EDA planned to list on the ASX next year on the back of the project.

MPI managing director Jim Ferretti said the oil contract with East Timor was for 100 million litres of raw vegetable oil, which would increase to 250 million litres.

"We're taking a different approach to everyone else," Mr Ferretti said. "It's called a feedstock strategy.

"We're building up the raw material first because that's where all bioenergy projects come unstuck -- in the supply of materials.

"The plantations have started physically, and it will take three years for them to be under full production, so effectively there will be about 25 per cent (oil-extraction) capacity in 18 months, and then 50 per cent in the second year and 100 per cent in the third year.

"The biodiesel production will effectively be about 12 months behind that."

Mr Ferretti said the biggest advantage the project had over others was the use of jatropha curcas feedstock.

The plant was introduced from the West Indies by the Portuguese 400 years ago as a source of lantern oil.

With no predators, it can be farmed organically. Its oil is low in glycerides and inedible, which means it is not subject to the price fluctuations of edible oils used for biodiesel on the commodities market.

"They looked at palm oil, coconut oil, various grades of rape seed and canola," Mr Ferretti said.

"All of those vegetable oils track the edible oils commodity price . . . which has no relation to the crude oil market.

"(Jatropha curcas) is an inedible oil, so you can contract people to grow it for you and they have no other market.

"It's chemical properties make it an excellent biodiesel feedstock."

Both the WA and Northern Territory governments have classified jatropha curcas as a weed, and it cannot be grown here. Queensland has approved its use.

Of the 150 strains of jatropha curcas, the East Timor strain is not self-propagating, so technically is not a weed.

The biodiesel plant design is in the advanced stages, but the Darwin site is not guaranteed.

"The design, technology, due diligence and planning are fairly advanced, but at the moment the client is re-assessing its relocation strategy," Mr Ferretti said.

MPI is building another 40 million litre-a-year biodiesel plant in NSW. It expects turnover of $25 million this year and $35 million next year.