All systems go for B10 biodiesel; shoring up CPO prices, reducing stock seen

Category: News Published: Monday, 12 September 2016 Written by Administrator
KUALA LUMPUR: After hitting several speed bumps on the road to realisation, the country’s stalled B10 biodiesel mandate for the transport sector is poised to take-off in the final quarter of this year, say industry observers.

Initially slated for implementation in June, the higher B10 blend which combines 10% palm methyl ester with 90% fossil fuel diesel is a migration from the current B7 programme for nationwide coverage.

Industry observers opine that the B10 programme may prove to be a game changer if fully implemented.

The mandate could lead to a positive oulook in crude palm oil (CPO) prices as it is expected to increase palm oil usage in Malaysia by about 750,000 tonnes annually and pare down the country’s present high palm oil stock.

With several automobile manufacturers’ acceptance that the B10 biodiesel is fit and safe for use in their vehicles, the biggest hurdle has been overcome.

Malaysian Biodiesel Association president U.R. Unnithan told StarBiz that the national biodiesel mandate is a “very important tool” to create new demand for CPO that would reduce palm oil stock and help to shore up CPO prices.

Given the current downtrend in CPO prices, Unnithan noted that the national biodiesel mandate could cushion the negative impact of loss of revenue from crude palm oil. “A higher CPO price has a significant impact on the economy as just an RM100 per tonne increase in CPO would amount to RM2bil in revenue for the industry.

 “A higher CPO price could also support thousands of smallholders who are dependent on this commodity for their livelihood. “And a vibrant biodiesel industry will spur the growth of auxiliary industries and create more employment domestically,” he said.

The leverage of the biodiesel mandate for Malaysia could also result in much higher export and foreign exchange earnings, as 90% of local palm oil products are exported. Another important aspect of the biodiesel mandate is the immense contribution to Malaysia’s climate change target of reducing carbon intensity by 45% by 2030 from 2005 levels.

Tried and tested

“The Government has given more than ample time for all stakeholders – biodiesel producers, petroleum companies including Petronas, Shell, Chevron, Petron and BHP, and palm oil suppliers – involved to clarify any issues they have,” said Unnithan, who does not expect further delays in the B10 implementation.

Even though there were some stakeholders still seeking clarification on the use of B10 for selected vehicles, “these matters are being dealt with through individual and multi-stakeholder consultation processes,” he said. He noted that some technical issues voiced out by petroleum and auto companies prior to B10 implementation were being ironed out and have been well clarified.

Furthermore, the Malaysian Palm Oil Board (MPOB) has also carried out all the testing involved with palm biodiesel, drawing on the experiences of countries such as Colombia and Indonesia which have successfully implemented B10 and beyond.

Unnithan said the Malaysian Biodiesel Association looked forward to working closely with all stakeholders – namely petroleum companies, automobile associations, automotive makers, palm oil suppliers, the Plantation Industries and Commodities Ministry, MPOB, Malaysian Palm Oil Council (MPOC) and all other relevant government agencies in the execution of the B10 and B7 programmes in the transport and industrial sectors.

This includes extending the association’s co-operation and expertise to MPOC and MPOB to address all the techno-commercial details in the implementation of the B10 and B7 programmes.

 “In fact, the Malaysian Biodiesel Association has also held several demonstrations on the long-term use of B50 and B100 biodiesel on some vehicles without any issues, hence we don’t see any technical issues at all for B10,” he said. On subsidy for the fuel, Unnithan said:

“To our knowledge, there is no subsidy element to support the biodiesel industry as the fuel subsidy has been lifted since November 2014 and the retail price now follows the Automatic Pricing Mechanism formula based on market pricing.

“The biodiesel at 7% or 10% is only a part of this formula pricing and it keeps fluctuating with the price of CPO. Recently, the ministry-in-charge, the Plantation Industries and Commodities Ministry, announced that all these matters will be resolved and B10 implementation will start in the fourth quarter,” he said.

Supply chain

The Malaysian Biodiesel Association has a membership of 21 biodiesel based companies with operations in the country, which have collectively invested about RM2.2bil since 2006. To date, there are 17 active member companies which use CPO as their main feedstock to produce biodiesel, with a combined installed capacity of 2.05 million tonnes per annum.

Unnithan said the members have been supplying palm biodiesel to the national biodiesel mandate in the transport sector, which commenced in June 2011 with the B5 programme. The blending percentage was subsequently increased to B7 in November 2014. Apart from domestic consumption, local palm biodiesel has been exported since 2006 to the European Union, Asia and the United States, said Unnithan.

The palm biodiesel produced by the members conforms to international standards such as the EN 14214 (European standard) and ASTM D6751 (US standard) and its own local standards i.e. the MS 2008: 2008. Unnithan noted that the B10 implementation will put Malaysia on par with other national biodiesel mandates that were presently implemented particularly in countries with a strong agricultural economy.

Such countries that have progressively embarked on higher biodiesel blends include Indonesia (B20), the United States (up to B10 in some states), Colombia (B10), Argentina (B10), Brazil (B8) and France (BB).

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