Market looking up for Malaysia

Market looking up for Malaysia
26 October 2010

Malaysia is well placed to become a global leader in biodiesel production. Ambitious plans were announced in 2008 but in the last couple of years the market has virtually ground to a halt. 

The government has so far approved 56 licenses for biodiesel production, which would create an annual production capacity of 6.8 million tonnes. However about 60% of the approved capacity has still to be built.

This is mainly due to mandate delays, high feedstock prices and existing diesel subsidies which distort the price of biodiesel.

Malaysia Palm Oil Board (MPOB) figures show that the production of biodiesel, a mixture of diesel and 5% processed palm oil, dropped 99% from 12,640 tonnes in March to just 137 tonnes in July.

But now things seem to be changing. Malaysia's Plantations and Commodities Minister Bernard Dompok has just announced that the government is looking at cutting the subsidy for diesel, which currently costs 1.75 ringgit (€0.4) per litre, to encourage the use of the biofuel. These cuts would begin next year. 

The government has also started making concrete plans regarding the long awaited B5 blend. 

The plan was originally due to take effect in 2007 but will now not come into force until June 2011.

To help prepare for this the government has given five petroleum companies a total of 5 million ringgit to help build the necessary infrastructure. 

Petronas, Shell, Chevron, Exxon and BHP will each receive 1 million ringgit. 

The five petroleum companies need to install pipes, tanks and automation systems 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).

Despite this, the industry is not over the worst of it yet. The next challenge the market faces is how to meet the EU's strict sustainability criteria for biofuels, which state that biofuels must reduce greenhouse gas emissions by 35%.

Malaysian-produced palm oil-based biodiesel which is found not to meet this criteria will not receive the incentives and subsidies necessary to make the fuels cost competitive with fossil fuels. Malaysia has now threatened to file a formal complaint with the World Trade Organisation over this issue.

As an ongoing concern sustainability standards forms one of the key focuses at the upcoming Bioenergy International Asia expo & conference, being held in Kuala Lumpur on 10-11th November.

Vincent Piket, Ambassador and head of the delegation of the European Union to Malaysia, will speak on how Malaysia can open up trade opportunities to Europe.

This will be followed by presentations from two different sustainability certification bodies. These will look at what the criteria entails, the challenges faced by the industry and the Commission's communication requirements.

The conference programme also includes presentations from successful producers across Asia such as Alpha Biofuels, Pacific Bio-Fields Holdings, Indo Biofuels Energy and Inbicon to name a few.

Other key themes at the event include how to secure plant finance and investment, new feedstock possibilities, managing price risk exposure and a global overview of the biofuels market across Asia.

This conference is unique in that it is twinned with Tank Storage Asia expo & conference, a consecutive two day conference exploring the bulk liquid storage market in Asia. Conference delegates can attend both events for the same price, and ensures it will be of interest to oil companies, traders and terminal operators, as well as biofuel producers, regulatory and technology suppliers.

Full details of the event can be found at www.biofuelsinternationalexpo.com/asia and www.tankstorageevents.com/tsasia
The conference delegate fee is only RM2,900 or RM 1,500 for one day. There is also a 10% discount for the second delegate from the same company registered and 25% for each subsequent registration 
Since the market is still growing with many fledgling companies there is a 50% discount for certified biofuels, biomass and biopower producers.