09/08/05 (The Edge Daily) - Malaysia, the world's largest producer ofpalm oil, plans to cut diesel imports by 500,000 tonnes a year with a planto produce bio-diesel using a mix of palm oil and diesel, an industryofficial said on Aug 9.

Under a government policy to be announced on Aug 10, palm oil would makeup 5% of bio-diesel, Deputy Prime Minister Datuk Seri Najib Razak toldreporters at a commodities-week event.

Malaysia wants to encourage national use of a green fuel as climbing oilprices and dwindling supplies of petroleum make it commercially viable toproduce palm diesel.

Biofuels are taking on new importance worldwide as countries seek to cutemissions to meet the UN Kyoto Protocol, since burning the environmentallyfriendly fuel is considered to be carbon dioxide neutral and does notrequire emissions rights.

"Tomorrow night," Najib said, replying to a question about when Malaysia'sbiofuels policy would be announced. The cabinet has been examining theplan since June.

Asked what the composition of palm oil in the blend would be, he added,"It will be 5%." Yusof Basiron, head of the government-run Malaysian PalmOil Board, said the policy is expected to save imports of about half amillion tonnes of diesel each year, or about 10,000 barrels per day.

He did not give an estimate of when the board would be ready to launch thebiofuel commercially, but said, "We have to introduce it to the market; wehave to get the policy accepted; we have to get the law amended to make itmandatory."

Yusof added, "The fuel law -- we are still working it out with thegovernment. There are so many aspects to the policy that have yet to beannounced."

Metal ester or other forms of processed liquid palm oil would most likelybe used in the blended fuel, he said, adding that the mix of 5% palm oilwould save on diesel imports.

"Five percent is good," Yusof said. "It's half a million tonnes ofconsumption that we don't have to import in terms of petroleum diesel. Itwill be replaced by local renewable sources such as palm oil products."

The plan was economically feasible, he added. "At RM1,300 a tonne, palmoil is a lot cheaper. Imported diesel is 1,700 or 1,800 to 2,000 pertonne."

Officials said Prime Minister Datuk Seri Abdullah Ahmad Badawi wasexpected to announce the biofuel policy at a commodities industry awardsfunction on Aug 10 night. - Reuters