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

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

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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Ref:
http://www.thestar.com.my/business/business-news/2016/09/12/all-systems-go-f
or-b10-biodiesel/

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com