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China invests in $5.5B biofuels project in Borneo, New Guinea

China invests in $5.5B biofuels project in Borneo, New Guinea

China invests in $5.5B biofuels project in Borneo, New Guinea
Rhett A. Butler,
January 18, 2007

China has agreed to invest in a $5.5 billion biofuels project on the islands of New Guinea and Borneo. The plan promises to be controversial among environmentalists who say that it will destroy some of the world’s most biodiverse — and threatened –ecosystems on the planet.

According to The Wall Street Journal, one million hectares (2.5 million acres) have been reserved for the eight-year plan, which would convert tropical forest for oil palm, sugar, and cassava plantations. China National Offshore Oil Corp (CNOOC), Indonesia’s Sinar Mas Group, and Hong Kong Energy (Holdings) Ltd. are funding the project.

Oil palm plantations in and around Tanjung Puting National Park in Kalimantan, Indonesian Borneo, satellite image courtesy of Google Earth. At $400 per metric ton, or about $54 per barrel, palm oil is competitive with conventional oil. In the future, palm oil prices are expected to fall further as more oil palm comes under cultivation. With cheap land, abundant labor, and ideal climate, investors and developers are eyeing tropical Africa as the next major producer of palm oil.

The development will occur in two remote provinces in Indonesia: Kalimantan, on the island of Borneo, and Papua, on the island of New Guinea. Both provinces have significant forest cover, though rainforest in Kalimantan has steadily declined over the past twenty years due to logging and agricultural expansion. Mounting deforestation has brought pressure from conservation groups, especially WWF, for the Indonesian government to take steps to better protect forests in the region. Last year the three countries that control Borneo — Malaysia, Indonesia, and Brunei — to agree to protect some 84,000 square miles (220,000 square kilometers) of mountainous rainforest in the center of the island. WWF says that more than 450 previously unknown species have been discovered in Borneo since 1994.

The new announcement was met with criticism by Palm Oil Watch, an environmental lobby group that monitors biofuel development in Indonesia.

“We are also worried about the impact these vast monoculture plantations will have on the environment, particularly as the Chinese don’t have much experience in the sector,” The Financial Times quoted Achmad Surambo of Palm Oil Watch (Sawit Watch) as saying.

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