Oil palm, coal, oil and gas - balancing energy needs and climate change

Updated On: Apr 17, 2007

After a controversial research fingering Indonesia as the third largest greenhouse gas emitter in the world, if the country’s peatland destruction is taken into account, another report from European-based NGOs claimed that oil palm plantations on peat soil produce excessive carbon dioxide and contribute to global warming.

The report tried to influence the United Nations and the European Union to ban the purchase of palm oil sourced from plantations on peat soil.

Malaysia, as the biggest oil palm producer, through its state Agriculture Department is trying to counter the allegation by arguing that their research has shown that peat soil produces three times less than the normal emission of gas from other soils. Malaysia will also host the national soil science conference next week, which would provide a good platform for the correct information on peat soil to be passed to participants, who will include those from Britain, the Netherlands and Japan.

Amidst the booming of biofuel development in Southeast Asian countries such as Malaysia and Indonesia, the NGO report might affect the market demand, especially European market. If it happens, it would have a negative impact on Malaysia, particularly Sarawak which had about a million hectares of oil palm plantations on peatsoil.

In another development, Indonesia is thinking of reviving the use of coal for energy in responding to the oil price hike and its own depleting oil reserves.  Indonesia is now accelerating the development of coal power plants with total capacity of 10,000 MW scattered in the country’s provinces. Indonesia’s abundant coal resources are also attracting India. One of its important players in coal mining business, Bumi Resources has just sold its stake to give India’s Tata Power a 30% stake in two big Indonesian coal mines, Kaltim Prima Coal (KPC) and Arutmin. To meet India’s growing energy demand, high-quality Indonesian coal will generate cost savings, improve efficiency and give it protection from fluctuating global coal prices. Tata executives said  4 million tons of Indonesian coal is capable of producing the same amount of power it would take 6 million tons of Indian coal to generate.

China, on the other hand, is planning to shut 29 coal-fired power plants by 2010 in a renewed bid to reduce environmentally damaging carbon emission located in its financial hub, Shanghai. These small coal-fired power plants, totalling 2.11 million kilowatts in installed capacity, are big energy guzzlers and serious polluters. The energy consumption of small coal power plants is 15 percent higher than average. The Chinese economy has been moving at ultra-fast rates of growth for years, at once increasing the wealth of its 1.3 billion people but also causing nearly irreparable damage to its land and water. To counter the trend Beijing has set goals for renewable energy to account for 16 per cent of its overall energy production by 2020, up from about 7.5 per cent now and it also wants to increase its energy efficiency by 20 per cent over the next four years. However, the Chinese companies are now expanding to build coal power plants abroad, including Indonesia.

Following Premier Wen Jiabao’s visit to JapanChina and Japan have agreed to work more closely to develop energy resources and tackle climate change. Chinese companies have sought deals with Japanese energy-related firms for long- term projects. Broad business deals were signed for the possible joint development of oil and gas projects, including in the East China SeaChina is also hoping to cooperate with Japan, which ranks highest in the world in terms of fuel efficiency, on energy conservation. The leaders of both countries have pledged to work together to reduce greenhouse gas emissions.

While Sino-Japan seemed to have come to some sort of agreement on their longstanding dispute over the exploration of marine gas fields in the East China Sea, China is now at loggerheads with Vietnam over the latter’s joint gas exploration activities with British Petroleum (BP) at disputed areas around the Spratly Islands.  China accused Vietnam of encroaching on its territory and Foreign Ministry spokesman Qin Gang in a briefing told the media that  'The Nansha Islands and adjacent waters have been an indisputable part of Chinese territory since ancient times,'  The isolated Spratlys, believed to contain large oil and gas deposits, are also claimed by Taiwan, Brunei, Malaysia and the Philippines. Vietnamese Foreign Ministry spokesman Le Dung had earlier defended the US$2 billion (S$3 billion) project by BP and Vietnam National Oil and Gas Group to exploit and pipe gas from offshore fields to southern Vietnam.

Elsewhere, the oil-rich country Brunei has also started diversifying its energy sources by building a US$400 million (S$607 million) methanol production plant, calling it a landmark step towards economic diversification for the tiny nation that relies heavily on oil and gas. “It will be the first petrochemical plant in Brunei, and for the first time our gas will be used to manufacture other products”, Brunei’s Energy Minister Awang Yahya said.  (17 April 2007)


NGOs trying to get ban on palm oil, The Star, April 14, 2007

The pitfalls of Indonesian coal, Asia Times, April 13, 2007

Shanghai to shut down 29 coal power plants by 2010, AFP/Straits Times, April 13, 2007

China, Japan move closer to energy cooperation, Straits Times, April 13, 2007

China hits out at Viet Spratlys project, AFP/ Straits Times, April 13, 2007

Brunei to build methanol plant, AP/Straits Times, April 14, 2007