FOCUS: Malaysia, Indonesia lack biodiesel push

12 December 2006 05:26  [Source: ICIS news]

By Anu Agarwal

 

SINGAPORE (ICIS news)--A lack of policy framework and subsidies on biodiesel in Malaysia and Indonesia have prevented widespread use of the fuel in the local markets, producers and traders said on Tuesday.

 

The countries did not have clear legislation mandating the use of biodiesel, sources from the two countries said, adding that there was also a lack of incentives for producers to sell in the domestic markets.

 

The price gap between bids from local oil companies and export markets in the US and Europe remained high and as such failed to attract buyers in the local market, they added.

 

In Indonesia, petrodiesel prices were subsidised by the government and oil companies want to buy biodiesel for blending at lower prices but biodiesel producers could not offer at this level as they did not receive any subsidy, one producer said.

 

Biodiesel spot prices from producers in the two countries were at $700-730/tonne free on board (FOB). The cargoes were mostly heading for Europe where subsidies of €0.23-0.45/litre ($0.29-0.56/litre) applied, a Malaysian biodiesel maker said.

 

The Philippines is, so far, the only southeast Asian country that could mandate the use of biofuels.

 

Its legislature was likely to pass a Biofuels Act in January 2007 which is expected to propose an initial blend of 1% biodiesel with mineral diesel and 5% bioethanol with petrol. This could increase to 2% and 10% respectively within the next two years.

 

Asian biodiesel producers also faced other challenges such as rising feedstock costs and difficulties in selling byproduct crude glycerine due to limited refining capacity.

 

Most of the biodiesel produced in the region were also made from crude palm oil which limits the use of the fuel at low temperatures.

 

However, most producers remained hopeful that increasing legislation in Asia for renewable fuels in the future and improved technologies will lead to a sustainable industry.

 

($1=€0.8)

By: Anu Agarwal
+65 6780 4359

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