20/9/06KUALA LUMPUR, Malaysia (AP) -- Malaysia is looking to biodiesel to help boost demand for its palm oil, a top industry official said, amid intense competition with rival Indonesia to sell the commodity to India, a major edible oil consumer.

Production capacity for Malaysia's biodiesel -- a blend of diesel and palm oil touted as a cheaper substitute for gasoline -- is estimated to reach 5 million metric tons (5.51 million U.S. tons) by the end of 2007, said Yusof Basiron, chief executive of the Malaysian Palm Oil Council.

Biodiesel, "which is gaining ground in terms of demand, is a long-term solution to address palm oil's market share sustainability," Yusof said in a speech prepared for a conference on edible oils to be held in India this weekend.

The biodiesel production capacity estimate for 2007 is equivalent to about one-third of annual crude palm oil production in Malaysia, the world's biggest producer of the commodity.

The emergence of palm oil as an alternative energy source comes while Malaysian palm oil has been losing its market share in India -- one of the world's biggest edible oil importers -- to Indonesia's palm oil in recent years.

Malaysia exports mainly refined palm oil and has high tariffs on exports of crude palm oil. Indonesia sells palm oil mainly in its crude form.

A recent increase in India's palm oil refining capacity has led to a shift in its import preferences from refined oils to crude oils, hurting Malaysia's market share, Yusof said.

Crude palm oil has traditionally been used as a cooking oil and in the food industries and as well as in the production of soaps, cosmetics and detergent. However, rising crude oil prices have sparked keen international interest in alternative fuels such as biodiesel.