2011-06-03

The government of Malaysia has launched a palm oil biodiesel blending mandate that will require all diesel sold in the country to have a five per cent minimum biodiesel content.  The Malaysian Minister for Plantation Industries & Primary Commodities at the federal capital of Putra Jaya officially declared the mandate this week.  The price of B5 biodiesel blends at the pump is expected to be similar to the retail price of normal diesel, which is about MR1.80 ($1.59) per litre. The production of palm oil in Malaysia has attracted negative attention this year, with environmental campaigners claiming palm oil production leads to deforestation.  The mandate has already come into force in the capital, where retail stations are already selling five per cent blends in compliance with the new law.

The law is expected to come into full force towards the end of the year and is estimated to lead to the production of 200,000 tons of biodiesel demand each year.  Once the law is fully implemented on a national scale demand for biodiesel is expected to rise to 500,000 tons each year.  It will be introduced in a staggered and sequential basis starting with Malacca next month before moving out to Negeri Sembilan, Kuala Lumpur and Selangor.  The government of Malaysia has also allocated MR43.1m ($14.3m) to finance the development of in-line blending facilities at six petrol depots in the central region of the country.

Cooperating petrol companies include Shell, Esso, Chevron, Petronas and Boustead Petroleum Marketing. The government has fixed the supply price of biodiesel to these oil companies, linking it to the monthly average palm oil price.  The new blending mandate has been much awaited by bioenergy companies such as global integrated biodiesel producer and jatropha plantation company NewEnergy.  ‘Mission has the largest biodiesel capacity in Malaysia and is well-poised to supply the B5 requirements,’ said Nathan Mahalingam, group CEO of Mission NewEnergy.  ‘We are finalising documentation and logistics with industry participants and anticipate that we will be commencing supplies in July 2011.’