KUALA LUMPUR: Malaysia is expected to raise the current B7 biodiesel mandate at fuel stations to B10 and introduce the B7 blend to the industrial sector, effective 1st December 2016.
The biodiesel B10 is a blend of 10 per cent palm methyl ester (PME) and 90 per cent regular diesel while B7 is of a lower blend of 7 per cent PME.
Malaysian Biodiesel Association (MBA) president U.R Unnithan told Business Times today that members had been informed by the government that the B10 implementation date is December 1, 2016.
"We welcome this announcement. Our members are ready and committed to meet the government's biodiesel mandate in terms of quality, quantity and good service," he said.
"Apart from the B7 mandate going up to B10 on December 1, the industrial sector, which all this while is using only regular diesel will, starting December 1, use B7," he said.
Petrol stations selling Euro 5 grade diesel are exempted from the B10 mandate but will be required to retail the B7 blend.
Unnithan noted the raising of biodiesel mandate from the current B7 to B10 would require 709,000 tonnes of palm oil to be converted into PME. This would bring down the nation's palm oil stocks and therefore support palm oil prices in the international market.
At press time, the third month benchmark crude palm oil futures on Bursa Malaysia Derivatives Market traded RM9 higher to RM2,767 per tonne.
On a macro-level, Unnithan estimated that every RM100 increase per tonne in palm oil prices, it can translate to additional RM2 billion value adding to Malaysia's economy.
Over the last five years, the government via the Ministry of Plantation Industries & Commodities and its agency Malaysian Palm Oil Board (MPOB), had been taking a slow-and-steady approach in rolling out the B5 and then B7 blends.
The government has been and continues to be in regular consultation with Malaysia Automotive Institute, Ministry of International Trade and Industry, the Malaysian Automotive Association and Japanese Automotive Manufacturers Association (JAMA) on engine warranty issue.
The pricing of biodiesel at the fuel stations is determined via an Automatic Pricing Mechanism that calculates the monthly movement of world petroleum, palm oil and ringgit fluctuation against the US dollar.
Unnithan said MBA members have been supplying palm biodiesel to the national biodiesel mandate in the transport sector, which started in June 2011 with the B5 programme. The blending percentage was then raised to B7 in November 2014.
Established in 2008, the MBA has a membership of 17 companies in the Peninsular, Sabah and Sarawak.
Collectively, MBA members, which include listed plantation counters such as Genting Plantations Bhd, Felda Global Ventures Holding Bhd, Sime Darby Bhd, Kuala Lumpur Kepong Bhd and Sarawak Oil Palms Bhd are capable of producing 2.4 million tonnes of palm biodiesel per year.
MBA members sell PME to oil companies like Petronas, Shell, BHPetrol, Caltex and Petron to be blended and retailed to consumers across 3,000-odd fuel stations nationwide.
Separately, RHB Research deputy director Hoe Lee Leng said, "Calls to raise the biodiesel mandate B10 has, so far this year, been delayed twice.
"If it takes place from December 1, 2016, it would be positive on plantation counters listed on Bursa Malaysia," she told Business Times in a telephone interview today.
Hoe calculated that the raising of biodiesel mandate in Malaysia would translate to an additional usage of 250,000 tonnes of palm oil per year.
She noted that, the current price gap between petroleum and palm oil in the international market is around US$29 per barrel. "It has widened from just US$20 per barrel, seven weeks ago."