Malaysia’s palm oil market is highly competitive, capital intensive and concentrated, with large players such as Sime Darby and Felda Iffco dominating the market. Most of the larger companies across Malaysia and Indonesia are integrated across the upstream, midstream and downstream segments. Although Indonesia is the largest producer of palm oil worldwide, Malaysia is the largest exporter.

Palm oil is viewed by Terravana as a future-proof product, in high demand as populations – particularly in emerging markets – experience exponential growth. Consumers do not choose palm oil for the flavour, but because it is cost effective, production efficient and highly stable. It can be used in a wide variety of products along the value chain, as well as being a source of bio-fuel.

The Malaysian government provides management expertise to run organized smallholdings across the country. Agencies such as Felda, Felcra and Risda allow land allocated for plantation to be distributed to the landless poor, while the Palm Oil Registration and Licensing Authority encourages coordination between palm oil cultivators and private equities. Furthermore, the government has responded to concerns about deforestation by upholding a pledge made in 1992 to retain a minimum of half of the uncultivated land in the country as forest cover.

Terravana plans to construct five mills over the course of the next two years, to be fully operational by 2018. The first three stages of the project are underway.

The largest is on a 75,000-hectare area of land in Lahad Datu, Sabah, approximately 35 kilometres from the nearest refinery, which was acquired as a fully operational, 90tph mill ready for takeover. A 12,000-hectare site, approximately 84 kilometres from a refinery, is under construction in Bintulu, Sarawak. As well as having the necessary construction permissions, this site already had environmental compliance completed and logistics contracts negotiated. Construction is also underway at a 20,000-hectare site in Pitas, just over 22 kilometres from a refinery, marking our second and final site on Sabah.

In 2017, the Bintulu and Pitas sites will be completed by the end of Q2. The remaining two locations: a 33,000-hectare area in Sri Aman and an 18,000-hectare area in Miri, both in Sarawak and both approximately 160 kilometres from a refinery, will begin construction at the start of 2017, finishing a year later in Q1 2018.

We have entered a contract with 250 smallholders and a cooperative to process their FFBs into CPO. We will protect the quality of the FFB throughout the process, particularly during transportation between the plantations and the mills. This transportation plan will address inconsistencies in the current supply chain, such as minimizing truck delay and contingency planning for breakdowns; utilizing suitable roads; employing plantation managers to assist smallholders to efficiently manage their produce; and looking after our smallholders through higher incomes and control over quality and pricing. Our CPO Mills segment is our second largest. We will be investing $98 million into the five mills.

Terravana will also provide management and advisory services to manage blocks efficiently to increase yield and earnings. By 2018, the cumulative capacity of all the palms mills will stand at ~300 tonne per hour serving a catchment area of 170k hectares, comprising of ~10 estates and ~20k smallholdings.


Palm oil, known as red palm oil in its crude form due to its high beta carotene levels, is present in approximately 50% of products on supermarket shelves. As well as simple frying oil – it accounts for 35% of the global vegetable oils market – palm oil can be found in skincare and cosmetics products, food items and pharmaceuticals, making it one of the 10 major oils traded in the global edible oils and fats market.

As a tropical oil, ideal growing conditions are between 10 degrees north and south of the equator. Palm oil trees, which can grow up to 20 metres tall, start to bear fresh fruit bunches (FFBs) after three years, and each individual piece of fruit contains 50% oil. Up to 10 tonnes of FFBs can be harvested per hectare, producing around 4 tonnes of crude palm oil (CPO); this process requires 10x less land than other oil-bearing crops, such as soya, and is an entirely GM-free process.

Although palm oil may have been use 5,000 years ago, as several kilograms of the oil in its semi-solid state were discovered in an Egyptian tomb dating from 3,000 BC, written records by European travellers show palm oil was used as a local food source in West Africa in the 15th Century. By the early 19th Century, palm oil was in such high demand that exports from West Africa could not keep up and plantations were established in Central Africa and South East Asia, but it was not until 1910 that palm oil was introduced into Malaysia by Britons William Sime and Henry Darby; Sime Darby is now one of the leading palm oil producers in the world.

In 1966, Malaysia overtook Nigeria as the leading CPO producer worldwide, a position it held until 2005, when it was pushed into second place by neighbouring Indonesia. Together, the two countries account for 87% of the world’s palm oil production, at 33 million and 20 million tonnes respectively. Lagging behind are countries such as Thailand, Colombia and Nigeria, which each produce around one million tonnes annually. Overall, CPO production has increased tenfold since 1980, and is expected to rise by a further 50% by 2050.

China, India and Pakistan were the largest single consumers of palm oil in 2014, importing around 55% of total production. Global market demand was $61 billion in 2014, and is forecast to hit $88 billion by 2022. Although the sector has been beset by falling prices in recent years, the higher revenues in 2016 mean the year as a whole should represent an overall upward trend. And despite declining prices, CPO production in Malaysia is expected to witness the highest growth between 2015 and 2022, of 7.5%.

Of the 17 million hectares of palm oil plantations across the equatorial region, Malaysia’s growing area accounts for almost 5.5 million of the total, across Peninsular Malaysia, Sabah and Sarawak. Although the former produces around half of the country’s entire CPO output, the region of Sarawak is undergoing the most growth, experiencing an increase of 8.8% of growing areas in 2014 – or an extra 100,000 hectares of plantation.

After harvesting, the FFBs are transported to a palm oil to extract the oil from the orange flesh of the fruit. The palm kernel also produces oil and is sent to a kernel crushing mill. Following the initial milling stage, the oil goes through a refining process to remove impurities and create various palm oil products for different end uses. Residual pulp is compacted together to form a kind of cake used in the animal feed industry, called palm kernel expeller.