27/9/2005 (Agence France-Presse) KUALA LUMPUR - Malaysia said Monday itwill build three plants to produce biodiesel from palm oil, as part ofefforts to reduce its dependency on petroleum as oil prices continue tosoar on the world market.

"Palm biodiesel is set to become a viable alternative to petroleumdiesel," Plantation Industries and Commodities Minister Peter Chin Fah Kuitold an international palm oil congress in Kuala Lumpur.

The Malaysian Palm Oil Board (MPOB) will "commence soon the constructionof up to three biodiesel plants, each with annual capacity of 60,000tonnes of biodiesel," he said.

The biodiesel plants, to be constructed at a cost of 60 million ringgit(16 million dollars), would also help stabilise palm oil prices byabsorbing 500,000 tonnes of the commodity each year, he said.

Each of the plants, one of which will be located in southern Johor stateand two in the west coast shipping centre of Port Klang, will behalf-owned by MPOB with the remaining stake held by private partners, Chinsaid.

"MPOB will put in about 20 million (ringgit) for each of these plants,"MPOB director-general Yusof Basiron told reporters, adding that threepartners had been selected from 10 companies which submitted bids, butdeclined to name them.

Construction of the plants will be completed in a years' time, he added.

The plants will produce five percent processed palm oil blended with 95percent petroleum diesel for diesel engine vehicles and static engines forindustrial and power generation.

Strong demand for biodiesel from European nations as well as Colombia,India, South Korea and Turkey was fuelling the growth of the new industry,Chin said.

He brushed aside suggestions there would be a lack of demand for palmbiodiesel once world oil prices fell, saying the project would remainviable even if crude oil prices eased back to 43 dollars a barrel.

Chin also hit out at accusations from environmental group Friends of theEarth that demand for palm oil was driving the endangered orangutanstowards extinction in Indonesia and Malaysia by destroying their habitat.

"Talk factual. Don't just make wild accusations. If they say 500orangutans are killed, then produce to us who are the people who are doingit," he said.

"Like all the obstacles that we had to face in the past, we are preparedto answer any such criticisms or unfair labelling of the palm oilindustry," he said.

Malaysian crude palm oil production soared to nearly 14 million tonneslast year, accounting for half the world's production.

It exported 12.5 million tonnes of the oil last year, worth some 8.0billion dollars, accounting for 58 percent of global palm oil exports and27 percent of the global oils and fats trade.