Home > Uncategorized > B5 biodiesel mandate delayed, again

B5 biodiesel mandate delayed, again

PUTRAJAYA: Malaysia, the largest palm oil producer after Indonesia, delayed the nationwide implementation of its biodiesel mandate to the end of the year, said Datuk Seri Douglas Uggah Embas, Plantation Industries and Commodities Minister.

The B5 programme will be completed by December instead of an original target of July, doubling average monthly consumption, Uggah said in an e-mailed response to Bloomberg questions. 

The delay was because construction of 15 blending facilities in the states of Sabah and Sarawak and the federal territory of Labuan in East Malaysia were taking longer than expected, he said.

Palm, the world’s most consumed cooking oil, has declined 16 per cent in 2014 and slumped to the lowest level in a year in Kuala Lumpur today as the US government predicts record global inventories of soybeans, used to make an alternative oil. 

Prices have also been pressured by the failure of Indonesia and Malaysia to boost use in biofuels, according to Dorab Mistry, director at Godrej International Ltd, on June 26.

“We are monitoring the progress of the construction of the blending facilities and exploring ways to accelerate completion,” Uggah said. 

Full implementation of the B5 programme is expected to consume 500,000 tonnes of methyl ester annually. The country is set to produce 19.5 million tonnes of palm this year, he added.

Futures declined as much as 0.7 per cent to RM2,239 (US$700) a tonne today on the Bursa Malaysia Derivatives, the lowest level since August 12. News of the delay added to the bearish outlook for palm oil, said Chandran Sinnasamy, Kuala Lumpur-based head of trading at LT International Futures Sdn Bhd.

B5, which involves blending five per cent of palm methyl ester with 95 per cent of diesel petroleum, was completed in March in Peninsular Malaysia, Uggah said. Monthly usage will average 41,667 tonnes upon full implementation compared with 20,833 tonnes now, Uggah said. 

This will increase to 58,333 tonnes with the start of the B7 programme in the first quarter of 2015, he said, adding the Malaysian Palm Oil Board (MPOB) is in discussions with engine manufacturers and automobile associations to get warranties for B7.

Indonesia in September 2013 also boosted the amount of biodiesel blended with fuel to 10 per cent from 7.5 per cent and power plants had to blend 20 per cent from January 2014.

The country’s use of palm biodiesel in the first five months was roughly the same as in the same period a year earlier and full-year consumption will not increase, Mistry said at a conference in Mumbai in June. Domestic consumption of biodiesel is not as good as expected, Fadhil Hasan, executive director of the Palm Oil Association, told reporters on July 21.

Indonesia and Malaysia, collectively produce 86 per cent of world supply. –Bloomberg

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