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Southeast Asia's palm oil production drives biodiesel development in the region. (Photo: iStock)
Malaysia's biodiesel development has encountered significant challenges, with officials pointing to the need for infrastructure upgrades to increase the palm oil blending ratio in biodiesel.
To achieve this, an additional investment of 643 million ringgit (about 145 million USD) is required. However, both the government and businesses are not yet prepared to make these investments. The issue is also believed to be linked to fluctuations in palm oil production and prices.
Infrastructure, investment challenges for B20 expansion
Currently, the B20 biodiesel, which blends 20% palm oil with 80% regular diesel, is only used in select areas.
Minister of the Ministry of Plantation Industries and Commodities (KPK), Johari Abdul Ghani, stated in parliament on Feb. 24 that to expand the B20 program, substantial funding to improve infrastructure is needed. The industry generally hopes for government funding, but the government has no plans to provide it at this time.
Malaysia introduced National Biodiesel Programme and began requiring the transportation sector to use B10 biodiesel, a blend of 10% palm oil and 90% regular diesel, in 2019. The same year, the B7 blend was implemented in the manufacturing sector. However, the B20 program remains in the pilot phase, used only in limited areas such as Labuan, Langkawi, and parts of Sarawak in East Malaysia.
Johari did not specify why the government has yet to implement the B20 program nationwide, only stating that discussions with the private sector are ongoing.
Minister of the Ministry of Plantation Industries and Commodities Johari Abdul Ghani stated that expanding the B20 program requires substantial funding to improve infrastructure. (Image: Johari's social media)
Rising palm oil prices impacting biodiesel development
Malaysia is the world's second-largest producer of palm oil after Indonesia. As Indonesia advances its biodiesel efforts by implementing B40 this year, global palm oil supplies have tightened, pushing prices higher than other oils. Palm oil production, which is vulnerable to weather conditions and labor shortages, makes price fluctuations more unpredictable.
The Malaysian Biodiesel Association (MBS) had previously urged the government to expand the B20 program, but progress has been slow. MBS President U.R. Unnithan believes that the government’s intention to control prices and fuel subsidies to ease pressure on the national budget may negatively impact domestic demand and hinder the industry's growth.
The rise in palm oil prices has affected not only Malaysia but also Thailand, which, at the end of last year, reduced the palm oil content in its biodiesel blend from 7% to 5%, hoping to ease the financial burden on consumers and businesses.
Source: The Edge, Reuters(1), (2), The Investor
