London-based analyst Ambrian, which specialises in resources, alternative energy and "soft commodities", recently released an advisory recommending investment in palm oil producers, noting that Indonesian palm oil prices have risen 5.6% throughout calendar 2006, as the region attempts to establish a transport fuel sector based on the Brazilian model.

Indonesia is heavily reliant on foreign imports of transport fuel products, and announced last week it would seek up to $US22 billion over the next five years to develop alternative energy, particularly ethanol and biodiesel, requiring up to 14.8 million acres of land to be turned over to palm oil plantations.

Malaysia, already the world's largest producer of palm oil, is already taking regulatory measures to ensure a balance between the use of its palm oil products between edible and energy applications – a production balance that remains theoretical in the more economically developed biofuels producing regions.

Mission Biofuels company secretary Peter Williams, also the company's financial director, said that the lack of available land in Malaysia has already been recognised by the Malaysian Government, which has been concerned by the amount of land being turned over to palm oil production.

"They've recognised that there's a finite quantity of palm oil, and recently advised that there would be no granting of new licences to produce biodiesel," Williams said.

Mission Biofuels had previously secured the rights to build a further 200,000 tonnes per annum biodiesel production module at its existing site, which remains unaffected by the recent decision.

Malaysia's edible oil industry has said the number of biodiesel licences already granted by the Malaysian Government could ultimately result in up to 3 million tonnes of biodiesel a year from 32 manufacturing licences.

In the near term, the country's output by the end of 2007 is expected to be 500,000tpa – a mere 150,000t above Australia's 2010 target, set by Prime Minister John Howard.

If Malaysian authorities are correct, and its palm oil industry projects have already reached the point where careful management is required in order to sustain its edible oil industry, in addition to domestic and export biodiesel production, then it seems likely that Indonesia will be the next to benefit in the palm oil boom.

"The palm oil price has risen 5.6% this year already and we expect that trend to continue, driven by increased demand for the oil from China and India for its food and cosmetic uses and from the biofuels industry for its biodiesel potential," said Ambrian's alternative energy expert, Richard Lucas.

"In order to satisfy this demand more land needs to be brought into production as soon as possible to avoid an unsustainable hike in the price of palm oil which would benefit no one in the long term."

Mission Biofuels is confident it will be able to weather rising palm oil prices into the future, and its feedstock agreement with Cargill obliges the commodity trader to have up to 250,000t of palm oil available to them each year, a much larger amount than the Kuantan plant will require during the initial stages of operation.

"In our IPO we used the figure of 1600 ringgits per tonne of palm oil in our forecast profits – and I understand it's currently around 1400 ringgits, which is around $A518," said Williams.

"If it went up by 5.6 percent, that'd make it around 1478 ringgits per tonne – which is still more than 100 ringgits below our conservative profit expectations," he said.

Williams said that the other important factor in Mission's business plan is the sale price of its biodiesel product, destined for the European transport fuel market.

Mission already has a five-year uptake agreement with Austrian-based commodities broker Godiva, for a minimum of 50,000tpa of biodiesel.

"Our IPO suggested pricing based on oil at $US40 a barrel, and it's currently at about $US76 a barrel – that $US40 figure was one of the key ingredients in determining what our sales revenue was going to be at the other end," Williams said.

"If you look at our business plan, you'll see we're effectively sourcing our feedstock in one of the lowest priced areas, Malaysia, and selling our end product into the area with the highest revenue pricing – there's a big gap in between where we can absorb any price increase in palm oil… assuming that we stay with palm oil as a feedstock."

Williams said the turnkey biodiesel refinery Mission has ordered from US contractor Crown Iron Works has already proven its ability to switch between feedstocks without further engineering, at larger scales than Kuantan's 100,000tpa nameplate capacity.

Williams said the plant could be in operation ahead of the date scheduled in its prospectus, as the two main contractors, Crown Iron Works and Hexagon (responsible for balance of plant) signed 60-week contracts in May, putting the project two months ahead of schedule.

"We're hopeful we'll be ready before October, but we're confident we'll be ready by the date on the IPO – it depends on how the contractors are going and whether there's any hiccups along the way," Williams said.