Many more companies are expected to follow suit into the venture that is estimated to contribute an additional RM15 billion Gross National Income (GNI) to Sabah's economy by 2020.
The Biomass Joint Venture (JV) cluster project is a concept by the Agensi Inovasi Malaysia (AIM) aimed at aggregating sufficient volumes of biomass for a portfolio of downstream processing activities by having oil palm companies coming together to supply biomass.
Deputy Chief Minister cum Minister of Industrial Development, Datuk Raymond Tan Shu Kiah said the agreement signing reflected the seriousness of the Federal Government in its transformation programmes.
In his speech delivered by Asst Minister Datuk Bolkiah Ismail, Tan said it also highlighted the important role that Sabah is expected to play in this national effort to make Malaysia a developed nation.
"This is a big deal as this is the first time since a number of years ago when I heard about the phrase biomass potential that something concrete is taking place.
This is a crucial first step towards the materialisation of a biomass industry that can make significant contribution to economic growth in Sabah, creating jobs, and new wealth through development of small and medium industries.
"I hope other oil palm companies will participate in this joint venture so that we can take our industry to an unprecedented level as there are still many mills have the potential in this or similar biomass cluster," he said.
He said Malaysia must strive to maintain its lead in the competition, pointing out that neighbouring Indonesia has three palm oil industrial clusters, which also promote pellet manufacturing.
Meanwhile, Chief Executive Officer (CEO) of POIC Sdn Bhd, Datuk Dr Pang Teck Wai said 10 palm oil mills here have committed to supply oil palm biomass to the joint venture company.
The joint-venture company would then decide on the best use for the biomass such as producing solid or liquid biofuels in the form of pellets or ethanol.
Biomass pellets have worldwide market. In Asia, the demand to the tune of 10 million tonnes a year by 2020 is driven by Japan and South Korea as they attempt to fulfil a renewable energy mandate.
"Oil palm mills are the source of empty fruit bunches (EFB), which is the main ingredient in pellets and the AIM has identified about 70 of 120-plus mills in Sabah to be potential partners in biomass JV cluster.
"It hopes to aggregate some 1.5 million dry tonnes per JV cluster to realize the objective of making Sabah the Malaysian centre for second generation biofuel as envisaged in the national Economic Transformation Programme (ETP)," he said.
The companies involved in the signing ceremony were Teck Guan Group, Bell Group, Genting Berhad, Kelas Wira Sdn Bhd, and Golden Elate Sdn Bhd.
Also present were the CEO of AIM, Mark Rozario, the executive vice president of strategic Impact projects in AIM, Bas Melssen, and the representatives of the five companies.