Singapore's next biodiesel plant is already yesterday's news

So while I don't normally give a lot of thought to my daily chore of flicking through the ST, I have lately developed a nagging irritation. My irritation with the ST increases in size with every day that passes while the paper doesn't tell the people of Singapore that the biofuels dream here is in danger of disappearing in a puff of sulfur-free smoke.

Singapore picked up on the biofuels wave about two years ago, when palm oil seemed to be in cheap superabundance, all around. That was before the price of palm oil doubled, of course.

Building biodiesel plants in Singapore seemed a sure-fire way to repeat the "refining and trading hub" model of the 1970s and 1980s, which catapulted Singapore into the world's top three oil hubs.

So the government unrolled the red carpet (and the tax incentives) to any company willing to build a biodiesel plant on Jurong Island, the beating heart of its oil and petrochemicals industry. The ST played its part, dutifully reporting every deal to bring biodiesel to Singapore, and each ground-breaking ceremony.

But building a biodiesel industry in Singapore is fraught with problems. Every inch of territory is devoted to living, manufacturing, trading, a little bit of military and -- where possible -- reservoirs to prevent a water supply crisis. There is absolutely no space for the massive, sprawling palm plantations required to support a biodiesel industry.

So all the companies building plants here will depend on imports from Malaysia and Indonesia, countries that are hardly Singapore's best friends in the world, despite lying immediately to its north and south. And it turns out that Malaysia and Indonesia had plans for their palm oil, after all -- including infant biodiesel industries of their own.

It turns out that there is virtually no palm oil available for Singapore. And as Natural Fuels cuts a red ribbon at the first world-scale biodiesel plant in Singapore this month, it has already announced that it will produce, er, refined glycerin.

Natural Fuel is in big trouble, and it has openly told its shareholders that only a crisis plan to produce glycerin will keep it in business for the forseeable future."There's no reason to degenerate our cash through the biodiesel machine," its CEO, Earl McConchie, told shareholders at an AGM.

Translated, "degenerate our cash" means "lose money", of course.

The crisis at Natural Fuel, and indeed all the biodiesel producers in southeast Asia, means last week's announcement that Finland's Neste Oil will build an even bigger, far more expensive biodiesel plant based on palm oil is extraordinary, to say the least.

Does Neste have a secret formula for beating the terrible economics that have taken Natural Fuel and others to the brink of financial catastrophe in Singapore? Does it even know what is going on here?

As one biodiesel trader asked me after the announcement was made: "Have they not checked out market recently?"

The energy reporting community in Singapore assumes that Neste must have some idea of what it is walking into. But if the folks calling the shots in Keilaranta don't know, they could be excused if they have been relying on Singapore's local media for their information.

This Saturday the Straits Times reported breathlessly on Neste's plans on Page Three of its Prime News section, in an article entitled "World's biggest biodiesel plant to be build in S'pore", a headline that would no doubt have gladdened the hearts of proud Singaporeans from Tuas to Changi.

On Page One of its Money Section on the same day, the ST reports, quite without irony, that record palm oil prices are heating up plantation stocks on the local stock exchange.

People like me, whose day job includes reading the ST, have generally made peace with the fact that the ST might fail to draw obvious conclusions, like the conclusion that record high palm oil prices could create a challenge for the world's new biggest palm oil-based biodiesel plant.

But to draw the completely opposite conclusion, as reported by the newspaper this weekend, seems almost cruel: "Palm oil emerging as viable source of bio-diesel amid high oil prices," the newspaper told its readers.

And what of Natural Fuel, the operator of the plant that in 2006 laid a spectacular claim to being the biggest in the world, under construction right here in sunny Singapore? The plant starts test runs this month and will shut down its biodiesel trains almost right away to wait for better times, McConchie told his shareholders last week.

Not that you would know that if you read our local broadsheet. Tomorrow's biodiesel factory is already yesterday's news.