by Lim Shie-Lynn

KUALA LUMPUR: The domestic and Southeast Asian biodiesel production could be boosted by more effective policy enforcement and support from governments in the region as the industry is facing a difficult future with costly feedstock and lower crude oil prices, an industry consultant said.

Malaysia and Indonesia recently announced that both countries would cooperate in a biofuel development programme where both would use similar specifications and blending for biodiesel.

Plantation Industries and Commodities Minister Datuk Peter Chin had said the country hoped to sign a memorandum of understanding with Indonesia, which would encourage a palm-based biofuel policy that both countries could use.

While the decision would be positive to the biodiesel sector, Malaysia-based engineering services firm Lurgi Sdn Bhd’s managing director Uwe Zwiefelhofer said: “The problem with biodiesel industry in this region is the lack of a sustainable enforcement of policies to boost the sector.”

Lurgi is mainly involved in building facilities for both biodiesel and oil and gas sectors.

On the quantum of regional consumption of biodiesel, Zwiefelhofer said: “Malaysia has little if no domestic market for biodiesel, while a single biodiesel plant in Malaysia would be enough to satisfy Thailand’s biodiesel demand.”

He also said the demand for biodiesel from Thailand, the Philippines and Taiwan was small although Taiwan had been increasing its efforts to encourage more consumption of biodiesel.

Nevertheless, Zwiefelhofer said demand for biodiesel in the United States and Europe was still an important support for the biodiesel industry here.

Still, a less than an enthusiastic demand for the alternative energy is not the only problem faced by the industry. The strong rally in the prices of crude palm oil (CPO) in recent months has led to most biodiesel facilities discontinuing biodiesel production as its margins have sliced to make the business commercially unviable.

“Two biodiesel facilities in Sabah have not been operating in the past six to nine months due to rising feedstock prices. The slump in oil prices has not helped either,” an investment analyst said.

Oil prices have fallen from a high US$145 per barrel (RM485.75) to trade at US$119.99 on the New York Mercantile Exchange as at 10pm last Friday. Biodiesel prices compete against the cost of petroleum.

Although CPO prices have since eased to the current RM2,700 levels as of last Friday, biodiesel producers have not resumed operations yet. “Right now, biodiesel producers are taking a cautious stance. They want to see whether CPO prices have stabilised at current prices,” the analyst said.

Share The Story :

This entry was posted on Tuesday, August 26th, 2008 at 12:09 pm and is filed under Palm Oil Biofuel News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.