Out of the frying pan . . .
Business Times - 27 Jul 2006

. . . and into the biodiesel plant. With oil prices moving faster than you can say 'inflation', Kom Mam Sun's alternative fuel processing project has turned out to be a successful enterprise. MELISSA LWEE finds out more

EVER since Kom Mam Sun gave up his stable job as an insolvency practitioner three years ago to go into the biodiesel business, his life has been anything but a bed of roses.

Mr Kom started Biofuel Research (Biofuel) in 2003 with two friends, to produce and sell biodiesel made from used cooking oil. Biodiesel is processed fuel derived from biological sources, in this case waste vegetable oils, and can be used as an alternative fuel to crude oil.

But what started out as a three-man collaboration eventually dwindled to a one-man show, for soon after their endeavour began, his two friends dropped out leaving Mr Kom to struggle along on his own.

'It's difficult to be an entrepreneur in Singapore, especially when you cannot see the light at the end of the tunnel,' said Mr Kom. 'After all, why would anyone give up a cushy job and fiddle around with waste cooking oil?'

But he did not give up.

Without any knowledge of biodiesel, the business administration graduate went for a short course in the US where he gleaned the basics of biodiesel production. That was not enough to set up a plant. On his return to Singapore, he furthered his biodiesel 'studies' by trawling the Internet for information.

Even though biodiesel production is not a difficult technology to learn, what it does take is a lot of time and energy. With sheer hard work, persistence and a process of trial and error, Mr Kom perfected the art of biodiesel production.

'Anyone can make their own biodiesel, even in their own backyard, but selling biodiesel for commercial use takes years of research and testing.

'It's not just fiddling with glass beakers. Setting up a plant takes a different skill altogether,' he said.

But even after coming up with a winning product, the problems did not end there.

When the 32-year-old first started selling biodiesel in 2004, clients were not interested in his product because diesel fuel was still cheap (about S$0.50 a litre). This is despite the fact that biodiesel is more environmentally friendly than diesel fuel.

'Nobody would ever pay a premium for biodiesel in Singapore. It is only when you offer biodiesel at a price lower than diesel fuel would customers come knocking on your door because they want to cut costs,' he said.

Thus, the turning point was when crude oil prices started to escalate (diesel fuel is currently priced at about S$0.93 a litre) and there was greater global demand for alternative energy sources.

And because Mr Kom stuck it through while his friends gave up, he is now the one having the last laugh. After three years of struggle, and thanks to the inflation of oil prices, Mr Kom finally fulfilled his aim when the biodiesel plant in Singapore opened last month at Tuas. The plant cost the company about $600,000. He managed to do this with help from his older brother who gave up his job as a systems analyst at a European bank last year to join Biofuel.

Together, they roped in an independent investor who put in $300,000 which Spring Singapore matched dollar for dollar under the Spring Startup Enterprise Development Scheme (Spring Seeds).

Under this scheme, start-ups can seek equity funding from Spring Singapore, which will match funds raised by a third party investor, up to $300,000. Seeds was launched by the Economic Development Board in 2001 to address the financing needs of start-ups in Singapore.

With the new plant, Biofuel can produce up to 1,500 tonnes of biodiesel each month which the company sells mainly to small and medium-sized logistics and construction companies at S$0.87 a litre.

And while business has been good even though the plant only opened last month, the company has had to stop taking orders, due to a limited supply of waste cooking oil. In fact, supply is so short that there is only enough waste cooking oil for Biofuel to produce 400 out of the possible 1,500 tonnes of biodiesel each month.

As such, Biofuel has looked to spread its wings elsewhere. Parties around the region have expressed interest in getting Biofuel to help set up biodiesel plants in their countries.

These parties, who hail from the UK, Myanmar, Indonesia, India, China and Thailand, are all willing to fork out about US$1.2 million for a fully operational biodiesel plant.

Said Mr Kom: 'This is a niche market where there are very few players at the moment. Their only other option would be to look to Germany for help but the Germans would charge them about US$20 million for one plant. At US$1.2 million, Biofuel is charging them much less for the setting up of a fully operational plant.'

Also getting in on the act is Sesdaq-listed MAE Engineering, which is looking to set up a $150-200 million biodiesel plant on Jurong Island.

Being a pioneer in the industry, Mr Kom also holds courses for those interested in learning how to make biodiesel and dispenses business information on biodiesel industry development. Participants range from diesel sellers and palm oil equipment makers to graduate students from various universities.

'For people like the diesel sellers, it's important for them to know how biodiesel is made so that they have a better understanding of the biodiesel industry.

'Others, like the research students, are just interested in knowing more about biodiesel especially because biodiesel is a new growth industry.'

But for those thinking of following in his footsteps, Mr Kom advises them to think again. That's because the supply of waste cooking oil in Singapore is simply not enough to feed more than one biodiesel plant. Luckily for Biofuel, they got in first, he said with a smile.