16/03/2013 (The Star) - Can the national biodiesel programme assist our palm oil industry and would it be the magical solution to the renewable alternative energy problem?

In December 2012, the local palm oil stocks hit a record-high at 2.63 million tonnes and that raised concerns for the industry. Some of the concerns were addressed by way of the Government's latest move to expand its existing B5 biodiesel programme (blending of 5% palm methyl ester with 95% fossil diesel) to B10 biodiesel programme.

Currently several biodiesel blending facilities nationwide are being spruced up for the migration from B5 to B10 programme, which are targeted for operation by mid-2014.

Biodiesel is a type of biofuel that is a blend between fossil diesel and vegetable oilseeds such as rapeseed, sunflower, soybean and palm oil. Another type of biofuel, is bioethanol which is made from carbohydrate-based plants namely sugarcane, corn, beet, wheat and sorgum.

Some time ago, there were a lot of discussions on the merits of biofuel pegged as “a green energy alternative” among the global energy industry players.

But somehow the hype surrounding this alternative energy source seems to be fizzling out.

I was given a chance to attend the Palm and Lauric Oils Conference & Exhibition Price Outlook 2013/2014 (POC 2013) recently. More than 2,000 participants from over 50 nations were there and the two-day event has given me a chance to refresh my thoughts about biofuels.

The mechanics of biodiesel was among the heavily discussed subjects during the conference. It is expected to have a high impact on CPO prices. One of the panelists at the conference, LMC International chairman Dr James Fry says the usage of palm oil in biodiesel will help to pare down the high palm oil inventory level. He adds that with the current low CPO prices, it is very profitable to venture into biodiesel now.

From his statements, I would say that Malaysia is on the right track.

Fry says that since 2007, CPO prices have been closely correlated with the crude oil prices, and CPO was trading at a premium to the Brent crude oil price.

But due to the high CPO stocks, the premium has started to narrow down. Fry says that once the CPO prices trade below the Brent crude price, biodiesel is definitely a profitable business because CPO is cheaper than fuel prices.

As an “environmentalist wannabe”, I am of the view that the biodiesel industry is the way to go for the green energy initiative. But the development should not be at the expense of the people, such as the sacrifice on land and food. If the national biodiesel programme really kicks in, there is a higher chance that more land will be used for plantation and CPO will be seen as a feasible feedstock for biodiesel rather than food.

But Malaysia has made a commitment to maintain 50% of its forest coverage and continues to be a responsible palm oil producing nation.

Malaysia is also developing its biomass industry that has a big potential for us to harnest for the biofuel sector.

With the government policies well in place and new technology advancement, I would say there is a bright future for the domestic green energy industry.