Tan Sri Bernard Dompok (right) and Datuk Lee Yeow Chor at the briefing.
KUALA LUMPUR: Petroliam Nasional Bhd (Petronas), Shell, BHP, ExxonMobil and Chevron have been allocated with a start-up fund worth RM1mil each by the Malaysian Palm Oil Board (MPOB) to set up infrastructure for B5 biodiesel blending facilities.
Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said the initial incentive given to the five petroleum companies reflected the Government’s intention to fully implement the mandatory B5 biodiesel programme by the middle of next year.
B5 is the blending of 5% biodiesel with 95% fossil fuel diesel. The much delayed B5 programme was initially slotted for launch in January this year.
“We are on target for the B5 biodiesel implementation by June 2011,” Dompok told a briefing after opening the 3rd International Palm Oil Trade and Seminar (POTS) organised by MPOB yesterday.
He said the five petroleum companies would need to install pipes, tanks and automation system to blend B5 biodiesel at the designated depots, starting with central region – Port Klang and Putrajaya (Selangor) – as well as Dengkil (Negri Sembilan) and Tangga Batu (Malacca).
On the B5 pricing, Dompok said: “Between now till the implementation (mid-2011), we will have a lot of time to figure out the various solutions to issues that will distort the B5 programme in the local market.”
Given the high raw material (palm methyl ester) cost, the B5 biodiesel is said to be more pricey than the currently heavily subsidised diesel fuel.
The B5 biodiesel programme will see some 500,000 tonnes of local palm oil stock being taken up. The current palm oil stock was about 1.7 million tonnes, said Dompok.
Earlier, when asked whether Malaysia’s crude palm oil (CPO) production would be able to meet its target of 17.8 million tonnes this year, Dompok said: “Right now, we are not far off from this target.
“Despite talk of an El Nino early this year, it didn’t really came. I think the next three months will be crucial as all our harvests will start to come in.”
On whether CPO price will likely hit RM3,000 per tonne this year, Malaysian Palm Oil Council chairman Datuk Lee Yeow Chor said the council’s focus was more on global market expansion and no so much price-centric.
“We are more concern with the healthy growth in the global consumption for palm oil and want to diversify our export markets,” he added.
Lee said there should not be any misinformation on the sustainability of palm oil that could distort its market expansion efforts.
Dompok, meanwhile, said the Government was aware of the pressures of diminishing suitable land for oil palm cultivation in Malaysia.
“We are actively looking at ways to improve productivity,” he said, adding that between 2009 and 2010, some RM100mil was allocated to assist smallholders in replanting activities.
Replanting is widely seen as a way to enhance productivity and also to achieve Malaysia’s long-term target to achieve national average of 35 tonnes of fresh fruit bunches and oil extraction rate of 25% by 2020.
Refined palm oil or crude palm oil are the right solutions in today market to stay competitive as the cost of rapeseed oil, soyabean oil or palm oil feedstock accounts for around 80–95% of the operating cost of the biodiesel process and in the same rank for co-firing unit. A substantial increase in the production capacity and number of biodiesel manufacturers would create greater competition for the supply of vegetable oil feedstock, leading to upward pressure on prices.
In terms of production volume, palm oil is the world's second most produced vegetable oil after soybean oil. Palm oil exports come predominantly from Malaysia and Indonesia and these two countries can be expected to maintain their dominant position in exports of oils and fats, accounting for 45% of total trade.
Even without biodiesel, demand for palm oil would still be driven by the food segment. In Europe , there is less rapeseed for food purposes as more rapeseed are being used as feedstock for biofuel. Palm oil can come in to fill in the gap left by rapeseed in the food segment.
Crude and refined palm oil have not only economics advantage for fuel for CHP / co-firing industry but also have the better power properties than rapeseed and soya
Palm oil itself can be used in plants as an ignition fuel, replacing fossil-derived heavy fuel oil. In this way, the CO2 emissions that would have been created by the fuel oil (approximately 3 tonnes of CO2 per tonne of heavy fuel oil) are avoided.
23/03/2009 (Business Times, Malaysia) - 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.
25/05/2009 (Bernama), Kuala Lumpur - There is no plan to reduce the current biodiesel mandate of five percent despite the high feedstock cost, Deputy Minister of Plantation Industries and Commodities, Datuk Hamzah Zainudin said today.
He said the government encouraged the use of biodiesel in the country, although it was not as yet mandatory.
"We would like to encourage its use because we are a party to the Kyoto Protocol. If the policy is to move in the direction of biodiesel usage, we need to follow.
"It is not mandatory yet because the price of raw materials is very high at present," he added.
He was speaking at a media conference at the Palm International Nutra-Cosmeceutical Conference (PINC) 2009 here today.
The Kyoto Protocol is a protocol of the United Nations Framework Convention on Climate Change (UNFCCC or FCCC), an international environmental treaty.
It is a treaty intended to achieve the stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent anthropogenic interference with the climate system.
Last October, Malaysia implemented the mandate of a five percent palm-fuel blend with fossil diesel, gradually starting with government vehicles this year before extending it to the industrial and transportation sectors in 2010.
Asked as to the projection of crude palm oil prices this year, Hamzah said:"We hope that this year, the average price could be about RM2,500-RM2,800 per tonne."
Meanwhile in his speech, Hamzah said the palm oil industry is now an important pillar of the country's economy.
He said the sector had contributed significantly towards providing a continuous flow of foreign earnings through the export of palm oil and value-added products to the global market.
"In 2008, palm oil contributed RM65.2 billion or US$18.1 billion in export earnings, which marks another significant year of contribution from the palm oil industry," he said.
He said besides contributing to the nation's economic development, the contribution of Malaysian palm oil to the world's oils and fats market was also very significant.
He noted that the palm oil production of 17.73 million tonnes by Malaysia in 2008, accounted for a 11.1 share of the global production of 160 million tonnes of oils and fats.
According to Hamzah, Malaysian palm oil commanded a 26 percent share of the export trade in oils and fats as well as a 46 percent share of global palm oil trade while being consumed in more than 150 countries worldwide.
"All these were carried out utilising only 4.5 million hectares of land or less than 1.9 percent of the global area under oilseeds covering 233 million hectares," he said.
He added Malaysia is now focusing on increasing productivity through among others, in the upstream sector, which includes increasing oil yields from the current average of four tonnes per hectare annually to eight tonnes per hectare by using genome sequencing.
"By this approach, we hope to continue to be a major supplier of global palm oil needs, without having to open new areas," he said.
