VZCZCXYZ0006
RR RUEHWEB

DE RUEHTG #0045/01 0141913
ZNR UUUUU ZZH
R 141913Z JAN 08
FM AMEMBASSY TEGUCIGALPA
TO RUEHC/SECSTATE WASHDC 7534
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHJA/AMEMBASSY JAKARTA 0012
RUEHKL/AMEMBASSY KUALA LUMPUR 0004
RUEHRC/DEPT OF AGRICULTURE USD WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS TEGUCIGALPA 000045 
 
SIPDIS 
 
SIPDIS 
 
WHA/EPSC FOR FAITH CORNEILLE, EEB/ESC FOR MATT MCMANUS, 
EEB/CBA 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EIND EINV SENV HO
SUBJECT: BIODIESEL, ENERGY & CARBON CREDITS FROM HONDURAN 
AFRICAN PALM TREES 
 
¶1.  Summary:  Most of the building blocks are now in place 
for Honduras to begin substantial production of biodiesel 
from African Palm trees.  In 2005 a Honduran company 
succeeded in producing biodiesel to fuel 240 company vehicles 
and six Tegucigalpa public busses.  Another company was the 
first African Palm biogas project in the world to be 
certified for carbon credits.  Cultivation of African Palm 
along the Honduran North Coast has more than doubled since 
the 1990's to more than 90,000 hectares.  The Congress last 
month passed a law that grants favorable tax treatment to 
biofuels; implementing regulations are expected by March. 
However, with the price of palm oil for human consumption 
currently above that of biodiesel, future production is 
uncertain.  End summary. 
 
----------------------------------------- 
Production of Biodiesel from African Palm 
----------------------------------------- 
 
¶2.  Dinant Corp's 2005 experiment with using biodiesel (B100) 
to fuel company vehicles and six city busses was successful. 
No modifications were required for relatively newer company 
vehicles; however they did need to change the filters after 
introducing biodiesel because of its cleaning effect.  The 
city busses required an initial maintenance process because 
of their age.  Nonetheless, Dinant's Omar Riera noted to 
EconOff that a very old bus, literally taken from a junkyard, 
soon sported an engine that was shining on the inside.  Based 
on lessons learned from the initial biodiesel project, Dinant 
has almost finished constructing a new facility that will be 
capable of producing 36,000 gallons of biodiesel (B100) per 
day.  This plant will be kept in a state of readiness until 
such time as Dinant determines it is more profitable to 
produce biodiesel than palm oil for human consumption. 
 
---------------------------- 
Current Uses of African Palm 
---------------------------- 
 
¶3.  African Palm is or can be used to produce both biodiesel 
and renewable energy, as well as palm oil for human 
consumption and various byproducts.  Though not every company 
does so, it is possible to use every part of the African Palm 
product.  Palm oil can be used for human consumption as an 
input to margarine, potato chips, banana chips and various 
other snacks.  Oil from the palm nut is used in perfumes. 
Leftover fiber from the nut is sold as animal feed; leftover 
fiber from the palm fruit is sold as fertilizer or burned to 
produce energy.  Even the tree itself is cut down after its 
25-30 year productive life and allowed to decompose in place, 
providing nutrients for the next generation of trees. 
 
--------------------------------------------- -- 
A Source for Multiple Forms of Renewable Energy 
--------------------------------------------- -- 
 
¶4.  The traditional way to produce energy from African Palm 
is to burn the leftover fiber (dry waste) from the fruit to 
create steam.  This steam can either power the processing 
plant directly, be passed through a turbine to create 
electricity, or both.  Any excess electricity can be sold to 
the grid.  More recently the medium sized palm coop Eecopalsa 
has begun using African palm to produce biogas.  As the palm 
oil extraction equipment is washed each day, effluent is 
diverted to a large holding pond covered with a tent.  The 
holding pond has bacteria that cause the organic matter in 
the water to decompose, creating methane.  The methane is 
trapped by the tent and burned to create 2.2 megawatts of 
electricity, which is sold to the grid. 
 
¶5.  During a tour of the plant, Eecopalsa Director Raul 
Zelaya explained to EconOff that the biogas project became 
profitable only after qualifying for carbon credits 
(certified emissions reductions under the Kyoto Protocol), 
which are currently being purchased by a European firm. 
Eecopalsa has the distinction of being the first African Palm 
biogas project in the world to be certified for carbon 
credits.  Dinant is hot on Eecopalsa's heels; construction of 
effluent containment ponds was underway during EconOff's tour 
of Dinant's plant. 
 
--------------------- 
What the Future Holds 
 
--------------------- 
 
¶6.  Palm cultivation in Honduras has more than doubled from 
40,000 hectares in the 1990s to more than 90,000 hectares 
today.  This growth is due to record prices for palm oil as 
well as private financing and technical assistance for 
landowners, typically ranchers, who enter the African Palm 
industry.  The biggest change, however, may be yet to come. 
In 2005 the GOH struck a deal with Malaysia to import 1 
million Malaysian Palm seeds.  This makes Honduras the only 
country outside Malaysia and Indonesia to receive Malaysian 
Palm seeds.  The seeds arrived in 2006 and will eventually 
account for 28,000 hectares; 7,000 hectares have already been 
planted.  At least initially, the GOH has decided to give the 
seeds only to small farmers, which means the 600 members of 
Eecopalsa qualify but Dinant does not.  Mayalsian Palm 
reportedly has many advantages over African Palm.  The trees 
mature in 2-3 years as opposed to 4-5.  They are shorter, 
which means the fruit is easier to harvest.  Most important, 
the ratio of fruit to nut is greater, which means a greater 
yield of palm oil and/or biodiesel per hectare. 
 
------- 
Comment 
------- 
 
¶6.  A recent study by Dinant suggests Honduras has 540,000 
hectares suitable for palm cultivation.  If the land were 
used to produce biodiesel instead of palm oil, 300,000 
hectares could satisfy all of Honduras's current demand for 
diesel fuel (B100).  Only 60,000 hectares would be required 
for a mix of 20 percent biodiesel and 80 percent petrodiesel 
(B20).  Whether this happens will depend mostly on the 
relative prices of palm oil and diesel, and partly on GOH 
policies, including biofuels regulations and fuel subsidies 
that artificially lower the price of diesel fuel at the pump. 
 The potential for exporting palm-based biodiesel to the 
United States is limited because of its poor comportment in 
cold temperatures.  Furthermore, Moises Starkman, an advisor 
to President Zelaya and longtime biofuels supporter, 
explained to EconOff that the whole purpose of the new 
biofuels law is to encourage domestic production and 
consumption, with any exports to the US market coming only 
after the industries had established themselves in Honduras. 
Lastly, the expansion of palm cultivation may come at a cost. 
 As ranchers convert pasture land to palm, there is a concern 
that ranchers and farmers will have an incentive to create 
new pasture lands out of forests and other protected spaces. 
End comment. 
WILLIARD