Malaysia to expand palm oil biodiesel blending to strengthen energy security
07/05/2026 (Bio Energy Times) - Malaysia is moving ahead with a major expansion of its palm oil-based biodiesel programme as it looks to strengthen energy security, reduce dependence on fossil fuels and support domestic palm oil prices.
The decision comes at a time when global crude oil prices remain high and geopolitical tensions, particularly in the Middle East, continue to create uncertainty in energy markets. By increasing the use of palm-based biodiesel, Malaysia aims to reduce its reliance on imported fuels while also contributing to its target of achieving net-zero carbon emissions by 2050.
Under the plan, the country will roll out B15 biodiesel nationwide from June, raising the palm oil content in diesel from 12 per cent to 15 per cent. The government has also outlined a phased roadmap to further increase the blend to B20 and possibly B50 within the next two to three years.
At present, a B10 blend is mandatory across the transport sector, while B20 has already been introduced in selected regions such as Labuan, Langkawi and parts of Sarawak. Malaysia’s move follows similar steps by Indonesia, which has implemented a mandatory B40 blend and is exploring the possibility of B50, Chemanalyst reported.
The push towards higher biodiesel blending is closely linked to rising crude oil prices, which make palm oil a more attractive alternative fuel. Ongoing geopolitical tensions have added to price volatility and supply concerns, prompting Malaysia to accelerate its transition towards domestic energy sources.
The expansion is expected to significantly increase demand for palm oil within the country. Annual consumption of palm-based biodiesel is projected to rise by more than 300,000 metric tonnes. The shift from B10 to B12 alone is estimated to add about 130,000 tonnes per year, while the move to B15 could further increase demand by around 204,000 tonnes annually.
Higher domestic usage is likely to support crude palm oil prices, providing benefits to farmers and rural communities. Despite the increase in local consumption, exports are expected to remain stable due to Malaysia’s strong production capacity.
However, the plan faces several challenges. Expanding B20 across the country will require significant investment in infrastructure, estimated at RM 643 million, and both government and private players have shown caution in committing large funds. Other concerns include fluctuating feedstock prices, delays in policy implementation, vehicle compatibility with higher biodiesel blends, and environmental issues linked to palm oil production.
Despite these hurdles, the Malaysian government considers biodiesel a key part of its strategy to secure long-term energy needs while supporting the palm oil sector and advancing environmental goals.