Smallholder Oil Palm Production Systems in Indonesia: Lessons from the NESP Ophir Project

Introduction
Shell is interested to understand the role smallholders can play to provide sustainable palm oil as feedstock for bio-energy use. Furthermore, Shell also would like to learn how to increase the average palm oil yield per hectare in a sustainable way, thus increasing overall palm oil production without additional land use. Palm oil used for bio-fuels needs to comply with the RSPO principles and criteria for sustainable palm oil production to be eligible for certification at a later stage. The NESP Ophir project is an 8,000 ha oil palm plantation, with 4,800 ha managed by smallholders and 3,200 managed by the nucleus estate. The nucleus estate runs the milling facility and is mainly supplied by the smallholders and its own plantations. In the context of possible future palm oil activities, Shell requested a study on the Ophir smallholder project, part of the Government of Indonesia’s (GOI) Nucleus Estate Smallholder (NES) programme, which provides an opportunity to assess the development of an oil palm smallholder project over a 25 year period since its inception in the early 1980s to the present. We embarked on this study as it was perceived that a review of this successful project would provide a wide range of insights into what determined the success of this smallholder oil palm project. The objectives of this study were as follows: A) Characterisation of Ophir smallholder plantations with respect to: - Smallholder organisations (functions in financial management, extension services for farmers, road maintenance, fertilizer procurement and general management); - Plantation agronomy (crop management, input requirements; including analysis of yield variability); - Environmental impact; and - Local socio-economic impacts (including food consumption pattern / food basket; purchasing power and food availability in the local market) B) Understanding the reasons for success or failure of the smallholder system, considering aspects named above; also understanding of the range of performance within the project. C) Assessment of sustainability of the systems based on the RSPO criteria. Would the OPHIR smallholders be eligible for certification and if not, what would they need to improve? D) How can be the success story transferred to other smallholder systems? What would be the key factors needed for this? How can a nucleus estate use the results to replicate the good results for the smallholders they work with? Oil palm yields are reported in tons ha-1 fresh fruit bunches (FFB). Oil yields are calculated by multiplying the fruit bunch yield by the oil extraction rate (%). Thus a yield of 20 t ha-1 fruit bunches with oil extraction of 22% gives an oil yield of 4.4 t ha-1 .