Malaysia to promote biodiesel by using B5 blend

29 August 2007 15:46  [Source: ICIS news]

KUALA LUMPUR (ICIS news)--The Malaysian government will go ahead with the implementation of its National Biofuels Policy at a time of an improving outlook for local biodiesel producers, a senior government official said late on Wednesday.

Nurmala Abdul Rahim, deputy secretary-general of the Plantation Industries and Commodities Ministry, said that the Malaysian government intends to start using B5 - a blend of 5% biodiesel with 95% regular diesel - for its own vehicles, although she declined to provide any specific timeline for the project.

She was speaking at the International Palm Oil Conference held in Kuala Lumpur from 26-30 August.

The purpose of the policy was to reduce the Malaysian dependence on fossil fuels, as well as to keep palm oil prices stable, she said.

Other planned initiatives include the introduction of B5 to fuel pumps around the country as well as incentivising the start-up of new biodiesel plants in Malaysia through the use of investment tax allowances, she added.

The announcement coincided with good news for biodiesel producers, which have been squeezed by low margins and surging feedstock crude palm oil (CPO) prices over the past few months.

Although the Malaysian government had already issued 92 licenses for biodiesel plants, only four of them were up and running as high feedstock values continue to raise questions about the viability of biodiesel production.

Despite the Malaysian Palm Oil Board (MPOB) setting aside 6 million tonnes out of the 15.9 million tonnes of CPO produced last year for biodiesel production, only 138,600 tonnes were actually consumed by biodiesel plants in 2006.

LMC International industry analyst Dr James Fry said that palm oil prices had risen far too quickly for biodiesel makers to adapt without mandatory government regulations.

“Most governments encourage the use of biodiesel through tax incentives,” he said, adding that when biodiesel demand pushed feedstock vegetable oil prices above fossil fuels, it would no longer be profitable to continue production.

By: Jeremiah Chan
+65 6780 4359

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