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July 18, 2008

Malaysia's Sime Darby to build $103m palm oil refinery
Sime Darby Berhad on Tuesday said it will build a new 330 million ringgit ($103.1 million) refinery in a bid to strengthen its position in the palm oil downstream business in South East Asia, reported national news agency Bernama.

The Board of Directors of Sime Darby recently agreed to construct the North Port refinery complex in Port Klang which is expected to be completed by mid 2010, President & Group Chief Executive Ahmad Zubir Murshid said in a statement.

He said Sime Darby plans to use up all of its 600,000 MT of CPO production in the central region of Peninsular Malaysia for this new plant.

The investment in North Port involves the construction of a 2,000 MT per day refinery plant and includes a kernel crushing plant with storage tank facilities.

This translates into 660,000 MT worth of additional refining capacity for Sime Darby's plantation division in the central region of Peninsular Malaysia.

Ahmad Zubir also said that the decision was made due to the increase in global demand for refined oil palm products and also due to Sime Darby's large CPO supply base in Peninsular Malaysia after the merger.

"The number of refineries in the central region of Peninsular Malaysia is very limited and most of them have small or no exposure in upstream businesses. However, these refinery players have high bargaining power and can squeeze upstream players like Sime Darby," he said.

Sime Darby currently has 600,000 hectares of land bank, where 530,000 hectares are planted and currently at prime age.

Sime Darby produces 2.4 million MT of CPO annually while its total refining capacity in Malaysia is only 0.8 million MT.

In Peninsular Malaysia, Sime Darby's CPO production is more than 1 million MT.

In Malaysia, Sime Darby currently operates refineries in Banting (Golden Jomalina), Pasir Gudang (Kempas Edible Oil) and Bintulu (Austral Edible Oil), with a total annual capacity of over 800,000 MT per annum.

With North Port, Sime Darby's annual total refining capacity will increase to 1.5 million MT in Malaysia.

"North Port will give us scale and the opportunity to use new technologies which will further improve our productivity and efficiency. This expansion plan is only the beginning. Our North Port project is part of a bigger picture that will unfold," he said.

"The strategic move will enable Sime Darby to have the flexibility to sell our oil palm products according to market demand. We also have plans to expand our refining capacity in Indonesia, China, Europe and Africa to match our upstream expansion plans," he said.

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