7/2/07 KUALA LUMPUR, Malaysia (AP) -- Malaysia, the world's largest producer of palm oil, has opened a plant to turn waste from palm oil trees into energy, a news report said Wednesday.

The newly opened processing plant at a palm oil plantation in remote Sabah state would burn empty palm husks known as "fruit bunches" to generate energy, The Star daily reported.

The $11.42 million plant -- commissioned by the Federal Land Development Authority -- is the first of its kind in Malaysia, and began trial operations in October last year, the report said.

The Star quoted Deputy Prime Minister Najib Razak as saying the plant had saved up to 75 percent in the cost of electricity generation compared to diesel-fired plants, but that the future of such plants was dependent on keeping costs at par or below conventional methods.

"This is something new, and we need to engage in more research and development to make such power generation plants really efficient," Najib reportedly said.

The power plant can generate some 7.5 megawatts of electricity by burning about 30 fruit bunches an hour. The electricity produced has been used by palm oil processing factories and households in the plantation.

Malaysia is the largest palm oil producer in the world and has been keen in recent years -- since global crude oil prices began to rise -- to develop and use biofuel, a mix of palm oil or palm oil waste and diesel, instead of gasoline.

The Malaysian Palm Oil Board has said the fruit's oil on its own or in diesel mixtures has been used to power private vehicles since 1984. Some palm oil factories in rural plantations have used the waste from processing edible oil to run their tractors or other equipment.

A Malaysian company also announced last year that it was building the world's first plant to commercially produce ethanol from local nipah palm trees, with the product aimed mainly for export to countries looking for alternatives to gasoline.

The plant is located at the Sahabat plantation in the interior of the Malaysian Sabah state on Borneo Island.