Malaysia's sustainable aviation fuel goals face biofuel supply challenges. (Photo: Malaysia Airlines)
The Malaysian government aims to begin producing sustainable aviation fuel (SAF) by 2027, hoping to capitalize on its rich natural resources to expand its bioenergy sector.
However, research institutions suggest that while the country’s palm oil production is primarily export-driven, the potential alternative, used cooking oil (UCO), may not be sufficient to meet demand, highlighting significant pressures on the local biofuel supply.
Domestic SAF resource supply remains uncertain
As the world’s second-largest palm oil producer, Malaysia is well-positioned to develop SAF. According to the 2023 National Energy Transition Roadmap, the country aims for a 47% blend by 2050. Currently, two large refining plants are under construction, with an estimated annual production capacity of 1 million tons.
BMI Research, a division of Fitch Group, notes that Malaysia’s biofuel industry heavily depends on palm oil. However, because international markets require the use of used cooking oil to qualify as SAF—and due to the environmental concerns associated with palm oil—UCO is becoming a key ingredient in the country’s biofuel development.
Researchers believe that the supply and demand for UCO are still balanced at the initial stage, but the challenge will be to efficiently collect UCO from households, businesses, and food processors. Petronas, Malaysia's national oil company, has started setting up collection stations at gas stations, but the effectiveness of this initiative remains to be seen.
To efficiently collect UCO, Malaysia’s Petronas started setting up collection stations at gas stations. (Image: Petronas)
Mislabeling, environmental disputes in export markets
Meanwhile, global demand for UCO has surged as part of the global push for sustainable carbon reduction. Malaysia’s exports to the Netherlands have skyrocketed by 846%, to Spain by 661%, and to the U.S. by 489%.
The report also highlights that China, the largest exporter of UCO, is increasingly focusing on SAF production, which could create greater pressure on global raw material supplies and drive-up costs.
A more concerning issue is the rise in UCO as a sought-after commodity, leading to some unscrupulous parties mislabeling palm oil as UCO. In response, the European Union has implemented stricter regulations requiring greater transparency in raw material reporting to avoid environmental controversies, such as those related to palm oil and deforestation. This has cast a shadow over Malaysia's biofuel development prospects.
Source: Reuters, The Sun, Business Today
