Malaysia is expected to consume 500,000 tonnes of palm oil, or 3 per cent, of national crude palm oil (CPO) production, when it fully implements blended biodiesel programme by early 2010, Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said.
Also called the B5 programme, use of blended biodiesel has started with government agencies and will be extended to the industrial and mass transport sectors later.
In a recent interview with the World Refining Association, ahead of the Asian Biofuels Roundtable which will take place in Kuala Lumpur from today to Wednesday, Chin said the government is also working with Petronas to enable some retail stations to supply B5 to the agencies.
Malaysia started the B5 programme on February 1 2009 with Dewan Bandaraya Kuala Lumpur and the Armed Forces, in the central region.
"Discussions with the biodiesel producers and petroleum companies are ongoing on areas critical to the implementation, namely logistics and financing mechanism," Chin said.
He said challenges facing the biofuel industry this year include exports of subsidised US biodiesel to EU which distort prices and trade, the EU energy directive, and the global economic slowdown.
Last year, Malaysia exported 182,108 tonnes of palm methyl ester (PME), or palm diesel, valued at RM610.7 million. In January this year, it exported 12,731 tonnes of PME valued at RM30.19 million.
On the impact of the global economic crisis, Chin said the sharp drop in CPO prices, coupled with the global financial crisis, could slow the development of the biofuel industry in terms of stalling new investments.
"The Malaysian biodiesel industry has both the production capacity to a tune of 1.67 million tonnes and feedstock available to meet market demand both in the domestic and world market."
To reduce the current oversupply of palm oil and help support palm oil prices, Malaysia has also launched the RM200 million Oil Palm Replanting Incentive Scheme to reduce the nation's high palm oil stock to ensure the stability of palm oil prices.
The scheme is aimed at felling 200,000ha of oil palm trees aged 25 years and above, which will reduce palm oil supply by 700,000 tonnes annually in the short term. It has to date approved 63,000ha under the scheme, which closes at the end of June.
Chin said the quantum of CPO duty free exports has been increased to three million tonnes this year to cater to markets which prefer CPO while encouraging offtakes would also reduce stocks in the short term.
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