PETALING JAYA, June 23 (Bernama) -- The Malaysian Palm Oil Board (MPOB) isdrafting an act on biofuel to help develop the country's biofuel industry,its director-general Tan Sri Dr Yusof Basiron said Wednesday.

"Once completed, we will forward it to the government for consideration,"he said.

He said the framework for the act was expected to be completed by thisyear.

"We are trying to study the existing laws in other countries, taking thebest and incorporating the good ideas for our own bio-fuel industry," hetold Bernama after presenting a paper on Crude Palm Oil As a Source ofBiofuel: Its Impact on Price Stabilisation and Environment, hereWednesday.

Yusof was one of the speakers at the course on Refineries' Crude Palm OilPurchasing, Hedging, Contractual & its Operational Aspects organised bythe Palm Oil Refiners Association of Malaysia.

When asked on among the things that would be included in the draft, Yusofsaid it was too early to list out.

However, he said regulations in the existing law of the European Union hasstipulated a minimum level of 2.0 percent of fossil fuels to be replacedby bio-fuels or renewable fuel to be blended with petroleum diesel.

This minimum target quantities have been laid down in the EU commissionaction plan, by which the proportion would be increased annually by 0.75percent to reach 5.75 percent (about 17.5 million tonnes in the year2010).

Yusof said this would be a good point to follow.

Earlier in his presentation, Yusof said research findings in MPOB haveindicated that 5.0 percent refined, bleached and deodorised (RBD) palm oilin petroleum diesel can be used as diesel substitute.

The national petroleum diesel consumption is about 10 million tonnes.

He said if 5.0 percent RBD palm oil was blended into the petroleum dieselstock, this will remove 0.5 million tonnes from the national palm oilstock.

This amount of (0.5 million tonnes) is 50 percent of the national stocklevel of 1.0 million tonnes; and therefore, definitely help in palm oilprice recovery.

In this respect, Yusof said it was essential to have a biofuel policy topromote biofuel utilisation.

"Assuming national palm oil production is 12 million tonnes and if theprice of palm oil increases by RM100 per tonne as a result of theaforementioned mechanism, it will generate RM1.2 billion revenue to thenational economy," he said.

Yusof said the government would then enjoy an increased revenue fromcorporate tax.

In addition, the need to import an equivalent amount of petroleum will bereduced, and subsequently, conserve foreign exchange for the country.

Since subsidy is given to petroleum diesel, Yusof said the governmentcould assist the viability of the palm diesel project by giving the samesubsidy to palm diesel.

He said the setting up of palm diesel plant would also bring theaforementioned benefits to price stabilisation of palm oil.

"During times when the palm oil price is really low, the facility can beused as a means of stocking palm oil for later reselling at a profit tomarket or conversion into palm diesel knowing that we are guaranteed ofprofitability through palm diesel production," he said.

"When the price of oil palm gets higher, the palm diesel produced can betargeted for the olechemical market and not so much as diesel fuel toensure the project remain profitable," he said.

In addition, the palm diesel project could also develop new industries forthe country by making Malaysia a major supplier of natural carotene(pro-vitamin A) and vitamin E sources for the world market.

-- BERNAMA