BEIJING, July 24 (Bernama) -- China's third largest oil company, China National Offshore Oil Corp (CNOOC) has inked a memorandum of understanding (MoU) with a Malaysian firm to develop palm oil-based biodiesel in a shift towards renewable energy sources.

The pact was signed between its subsidiary, CNOOC Oil Base Group Ltd, with Bio Sweet Sdn Bhd which specialises in biotech and palm diesel research and development, here Monday.

Under the MoU, CNOOC will build a plant in Hainan Island in 12 months with a capacity of 120,000 tonnes. It will also set up a joint venture called CNOOC (Malaysia) Biofuel Sdn Bhd with a view of a listing in Malaysia eventually, Bio Sweet Sdn Bhd managing director A.K. Liew said.

Bio Sweet Sdn Bhd is based in Technology Park Malaysia in Kuala Lumpur.

Liew said more plants could be built in Shanghai and Guangzhou.

The agreement was inked by Liew and Xu Yugao, chief financial officer of CNOOC Oil Base Group Ltd, and witnessed by Malaysia's Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui.

Chin also met CNOOC President Fu Chengyu before the signing ceremony at corporation's new headquarters.

Chin has suggested that CNOOC consider building production facilities in Malaysia which can currently produce 60,000 tonnes of oil palm-based biodiesel that meets European standards.

Malaysia has also developed a winter version of the fuel for use in cold weather.

Chin said the Malaysian government has decided to set aside 6 million tonnes of its existing 15 million tonnes annual output for the biodiesel industry which has gained greater momentum in the wake of rising crude petroleum prices.

Malaysia, the world's largest palm oil producer, has embarked on developing Envo Diesel, biofuel of five percent processed palm oil and 95 percent petroleum diesel to be introduced next year for government vehicles.

-- BERNAMA