The teaming of a petrochemical giant and a Finnish pulp producer set the stage for a remarkable development
June 2008
By Graeme Rodden, Editor, Pulp & Paper magazine, RISI
Who could have known that an investment in forestry by one of the world’s largest petrochemical companies, Royal Dutch Shell, would result less than 20 years later in Botnia’s first investment outside of Finland and Uruguay’s first mega pulp mill.
In 1990, Shell had a “non-traditional” business division and one of its objectives was to explore alternative energy sources such as wind, solar and biomass. It established a number of these joint ventures around the world.
As Shell had no knowledge of forestry, it teamed with what was Kymmene (later to become UPM-Kymmene) and created a joint venture: Compania Forestal Oriental S.A. (FOSA). The company was owned 60% by Shell, 40% by Kymmene.
Oriental does not mean Asian. In fact, the full formal name of the country is the Republica Oriental del Uruguay and it refers to the fact it is on the eastern side of the Uruguay River. At times, the people in this region have called themselves Orientales.
The aim of the joint venture was to plant 35,000 ha with eucalyptus to be used as pulp wood (or as an energy source). Although it was not using eucalyptus as a raw material at the time, Kymmene was interested in exploring its use so this opportunity was a timely venture for the company. The project was written out on a simple piece of paper and started as “an expression of wishes”, according to Forestal Oriental technical director José García De León.
Seeds from South Africa
The San Francisco nursery (about 100 km from Fray Bentos) was built in 1991. That same year, the first seedlings were planted using stock provided by Mondi in South Africa. Mondi seeds were also used in the nursery.
The company started a comprehensive breeding program and commenced buying land, an average of 4,500 ha/yr. By the end of 2007, the company owned nearly 180,000 ha, about 60% of which are plantations. The balance is used for roads and other infrastructure, cattle grazing and reserves (e.g., wetlands and native forests). All of the company’s productive forests are FSC-certified and there is an active program to include the most recently purchased land in the certificate.
The development of forests for eucalyptus followed Uruguay’s forestry promotion acts, passed law in 1968 and 1988. The latter aimed to integrate forestry with traditional agricultural activities while establishing a platform for a new industrial sector.
García De León explains that Uruguay’s land is comprehensively mapped by soil type. Landowners can access a soil map from the Internet that states the soil type and expected productivity of the land. The country’s forestry acts hold certain tax incentives/exemptions for certain soil types. “So, when you are buying land, you have to ensure it has the appropriate soil,” he adds. What this means is that a farmer cannot buy land that is deemed to be high-quality and then plant what the government says is a low-quality crop. For example, forestry soils are considered low-quality compared with standard soil. They are sandy and have lower fertility. That’s why the country’s plantations are in certain regions. Most of the plantations are on what were previously low production grasslands.
Meanwhile, the work in the nursery went well. By 1994-95, FOSA had started collecting cuttings for clones and the number, their potential productivity and deployment has increased steadily since that date. By 1996, it had become self-sufficient in Eucalyptus Grandis seeds. The company must still buy seeds for the other eucalyptus species it plants, Dunnii. These come mostly from Australia. The Dunnii is more suitable for lower elevations (although the country as a whole is relatively flat).
The Finns take over
In the early part of the new century, Shell decided to leave the forestry business. In 2003, in preparation for the pulp mill decision that was soon to come, the Finns assumed 100% ownership of FOSA (UPM 38.38%; Botnia 60%, and Finnfund 1.62%). That same year, FOSA became a shareholder in Tile Forestal, Uruguay’s largest wood exporter. In 2006, the companies were merged to become Forestal Oriental.
Its main objective is to supply the pulp mill on a sustainable basis with 60-70% of its pulp wood needs (totaling some 3.5 million m3/yr). The rest comes from third party growers (through its Fomento program) and, at least in the short-term, stumpage purchases from third parties.
In 2007, the San Francisco nursery produced 26 million plants: 19 million seedlings and 7 million rooted cuttings.
The production cycle in the nursery is about four months although in the high season (late spring/summer, i.e., October-February) it can be as short as 12 weeks. There are two main planting seasons: spring and autumn.
The nursery has 38 greenhouses for growing seedlings, 12 greenhouses for rooting and three for “mother” plants. There is another 1 ha area for hardening, where the young trees are sent prior to planting.
The cuttings (clones) are planted in a mixture of composted pine bark and vermiculite. The bark is purchased from area sawmills and composted at the nursery. The seedlings are planted in the pine bark alone.
For breeding, strict records are kept of the pollen (“father” tree) to know where each tree came from.
Production in the nursery is the result of a careful planning process. Management knows ahead of time what needs to be planted and where they can produce what is needed. A lot of work is also done in the greenhouses to ensure uniformity of the seedlings/cuttings to be planted.
Cloning is still a work in progress for Forestal Oriental. It allows the company to pick the best trees and the aim is to have a forest with constant uniformity. García De León says the plan is to have 10 clones in production at any given time and replace two of them with new clones annually. This would maintain genetic diversity in the plantations. Currently, it has seven clones and is replacing one of them. These are all currently Grandis-based clones. Dunnii clones are expected to be ready by 2010. García De León stresses that under the forest management plan, the company does not want to have any more than 5% of its plantable land given over to any one given clone.
Although Grandis and Dunnii are the two eucalyptus species being planted, Forestal Oriental is moving into intra-specific hybrids. It is doing work now with grandis/globulus.
Matchmaking is important
García De León explains that Forestal Oriental will study the planting sites carefully to match the right species with the climate and soil quality. “Although the country may look homogenous, it’s not,” he adds. “We classify the sites, map them and identify the main limiting factors.”
For example, if there is a risk of frost, Dunnii will be planted as it is hardier than grandis.
In discussing maturation, García De León says there are different regions. For example, close to the nursery in the Rio Uruguay area (Paysandu), Forestal Oriental is producing pulp wood, which means trees can be harvested after eight to 10 years. In the Tacuarembo region, further east, the plantation there has a thinning and pruning regime. This extends the rotation age to about 16 years as the mature trees are used for solid wood products. The thinnings are used for pulp.
The mature wood is sold to local sawmills. For example, Weyerhaeuser as well as a Chilean group each have plywood mills in the region. Sawlogs are also sold to Viet Nam and shipped in containers.
The yield target is 40 m3/ha/yr. The potential of the clones now being used is 35-36 m3/ha/yr. Considering that the yield was only 21-22 m3/ha/yr when the operation forest started in the early 1990s, the company has done well. García De León notes that these figures refer to solid, utilizable wood, no bark or branches. Pulp yield is in the 51-52% range.
The bark and branches are left on the ground when the trees are harvested. The mortality rate at planting is very low, according to García De León. “Normal survival rate is 95% and we do not replace failures,” he adds. “Because of the fast growth, you cannot do it. We only replant if we have an area with big losses and then, we replant the entire area.”
“Just for the fun of it”
Among the seedlings’ enemies are ants and hares. These large rabbits will prune an entire row of seedlings “just for the fun of it”, says García De León, “but they don’t eat the tree”.
Other than ants, there is a type of budworm that can be destructive. Crickets tend to go for the young seedlings. However, Forestal Oriental does not spray against this. “We live with it,” García De León says.
Harvesting is mainly mechanized and goes on year-round. Forestal Oriental uses a mixture of its own employees and contractors for harvesting.
A good operator can cut 18-22 m3/operating hour. A harvester does the cutting, debarking and delimbing. A forwarder brings the cut logs to roadside where they are picked up for delivery to the pulp mill or sawmills.
Once harvested, the land is left for a while but is then replanted at the earliest opportunity. There is a site treatment for ants and competitive vegetation. If there has not been enough rain, as the soil is very sandy, planters will plant the seedlings in a moisture retaining gel. After about 1.5 years, the trees are already mature enough that they won’t be bothered by competitive vegetation.
Serving the community
To help the local economy, Forestal Oriental established the Fomento cooperative program with private landowners. The aim is to develop small, medium and large third party growers (mainly farmers looking to diversify) to supply up to 20% of the pulp mill’s wood needs. Forestal Oriental provides technical assistance (planting, harvesting, forest certification) as well as the seedlings. Financing is also available.
“We have a contract with them for the whole technological package,” explains García De León, “including the first option to purchase the wood.”
A minimum price for the wood is set. If prices increase, the owner can increase the price based on the market. If the market slows, the owner is still guaranteed the minimum. “We provide the assistance they want,” García De León adds. “If they want nothing, we provide nothing.”
Although the long-term goal is to have private landowners provide 20% of the wood, they now provide about 40%. This will drop as Botnia has access to more of its own maturing plantations.
Sweet stuff
Other programs that Forestal Oriental has initiated include beekeeping and grazing. The beekeeping takes advantage of the great honey producing potential of the eucalyptus. Currently, some 350,000 kg of honey is produced annually involving more than 40 producers with 14,000 beehives using Forestal Oriental land. The beehives are kept during the flowering season: February-May. García De León notes that the region just had a very dry summer that was not good for honey production from grassland so the beekeepers were eager for the eucalyptus to flower so they could recover.
Forestal Oriental also allows livestock herders to use the land. This is the biggest and entirely compatible business outside of the actual tree growing. The grazing helps reduce the amount of combustible material left on the ground, thus reducing the risk of fire. Almost 150 producers owning more than 36,000 head of cattle, 1,300 sheep and 400 horses take advantage of this program.
Finally, Forestal Oriental also has a mushroom collection program. Local citizens are invited to enter the land and collect as many mushrooms as they can at no cost. “It took us some years to establish the program,” García De León adds, “because some species are poisonous and we had to run courses to train those interested how to identify which mushrooms were safe to eat.”
As noted, Forestal Oriental has about 180,000 ha of land, but only 60% is used for plantations. The company has a comprehensive environmental management system in place. There are more than 3,500 ha of land, protected (mainly and voluntarily by the company) either for species habitat or for the eco-system. “There is a lot of research being done to identify the species present: animals, birds and plants,” García De León says. University researchers, Forestal Oriental’s own people as well as contract scientists are conducting the research.
The reserved lands host thousands of visitors, mostly students, annually on guided educational tours. Other aspects of the companies’ social programs are delivered through the Botnia Foundation, funded by both Botnia and Forestal Oriental, but with an independent board that vet, approve and monitor the delivery of a wide range of projects to help communities “affected, but not direct beneficiaries” of the companies’ operations.
Forest Oriental also conducts many research projects, either on its own or in collaboration with educational institutions. For example, research on cloning is all done in-house. However, Forestal Oriental is working with the University of Pretoria (South Africa) on disease monitoring. It is working with North Carolina State University (US) on biotechnology development. And, it is working with the national university of Uruguay on various projects: eucalyptus nutrition, hydrology and nutrient recycling.
Some studies of water balance in eucalyptus plantations were and are being done with the purpose of double checking: hydrology cycle and water use balance, water run off and water table variations according to different lithologies (depths), seasons and areas (soils and topography). The data will support and help to improve the multiple use of resources strategy that is currently in place.
In 2000, a modeling of the water balance showed that there was no effect on water balance across FOSA plantation areas. More recently, another study done jointly with the CSIR of South Africa includes a pair cachement and bore hole system to measure water run off and water table variability (if any) after planting in the water cachements under FOSA management.
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