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B10 biofuel programme to help reduce inventory
author : The Star Online Date :22 October 2012

Saturday October 13, 2012

THE revival of the country’s once stagnant biodiesel industry is expected to stay intact with the latest measure to implement the B10 biofuel programme that will see the current high domestic palm oil stocks being channelled as feedstock to biodiesel producers as part of the Government’s effort to stabilise the current downtrend in CPO prices.

According to Malaysian Biodiesel Association (MBA) deputy president U.R. Unnithan, a majority of biodiesel producers are excited with the prospect after standing still for three years with almost zero production due to the high cost of production and uncompetitive export market.

MBA represents 22 biodiesel producer companies – both local and international – which have made a total investment of about RM21bil since the biodiesel hype in 2006.

The total installed capacity of the biodiesel players in Malaysia is pegged at about 2.7 million tonnes annually.

Unnithan tells StarBizWeek that biodiesel producers in Malaysia are currently supplying to support the Government’s mandatory B5 biodiesel programme, which kick-started in the middle of last year.

In Malaysia, B5 biofuel is a blend of 5% palm methyl ester (PME) and 95% diesel.

Plantation Industries and Commodities Minister Tan Sri Bernard Dompok is also reported as saying that Malaysia is ready to have a nationwide implementation of the B5 biodiesel by year-end.

It is said that some RM43.1mil has been set aside to fund the in-line blending facilities at six petroleum depots while another RM200mil is earmarked to build similar facilities nationwide.

On June 1 last year, the national roll-out of the B5 programme started with the central region, covering Putrajaya, Malacca, Negri Sembilan, Kuala Lumpur and Selangor. The programme in the central region utilises 112,000 tonnes of CPO annually.

Unnithan says the Government is hoping that about 500,000 tonnes of palm oil will be taken out of its stock once the B5 programme goes fully nationwide.

“The latest measure on the migration from B5 to B10 programme is indeed a boon to biodiesel players.

“I expect about one million tonnes of palm oil will be used and this will definitely reduce the country’s huge palm oil inventory,” he adds.

The Plantation Industry and Commodities Ministry (MPIC) is currently in consultation with the relevant parties to implement the B10 programme (blending of 10% palm oil biodiesel with petroleum diesel) for the unsubsidised sector.

MPIC says the measure will increase the consumption of CPO by another 300,000 tonnes a year.

Meanwhile, on the global front, there have been growing biodiesel mandates among several nations.

This include Argentina from B5 (in 2010) to B7 currently and B10 by 2015 while Colombio is looking at the B20 programme by 2015 from B10 currently.

In Asia-Pacific, Fiji is looking at voluntary B5, the Philippines with B2, Thailand with B3 and South Korea with mandates from B2 to B2.5.

It is interesting to highlight that despite being a leader in palm-based biodiesel back in 2006, Malaysia is now losing out to latecomers like Indonesia, Thailand and Colombia, which in turn are competitive players.

Malaysia’s biodiesel exports were dismal at 50,000 tonnes in 2011 versus 86,000 tonnes in 2010, which is a far cry compared with Indonesia’s exports at 1.37 million tonnes.

Out of 48 million tonnes of global CPO production last year, the four major palm biodiesel countries produced about 45 million tonnes, whereby 8% of their production were converted to PME.

Argentina is another major biodiesel player which exported 1.6 million tonnes of soy-based biodiesel or soy methyl ester (SME).

While Indonesia and Argentina have successfully exported 62% and 73% of their total biodiesel production last year, Malaysia exported less than half of its total PME production of 170,000 tonnes in 2011.

Interestingly, Malaysia’s total PME production last year only represented 6% capacity utilisation against the total installed capacity of 2.6 million tonnes from over 20 biodiesel plants nationwide.

According to Unnithan, Malaysia will also need to address its biodiesel non-competitiveness issue in the export market.

He says the differential palm oil duty issue between Indonesia and Malaysia is not only affecting the local biodiesel industry but also the entire local palm oil downstream sector.

Export-wise, the local palm biodiesel is also actually facing duty differential disadvantages when compared with Indonesia and Argentina, and that has seriously affected local PME exports.

For example, Indonesia has been incentivising its biodiesel sector through a lower differential duty structure on its CPO feedstock.

Argentina, meanwhile, has its duty structure modified whereby soy oil export duty at 32% is higher than its biodiesel export duty at 14.1% to encourage local blending.

Source: The Star Online


« Back to News
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