26/1/06 LUMUT(Bernama) -- Malaysia, already a major producer of palm oil, now aims to the world's biggest producer of biodiesel, says Deputy Prime Minister Datuk Seri Najib Tun Razak.

"All efforts will be carried out by the government to promote the development of biodiesel in the country to reach the target of becoming the world's biggest producer of biodiesel," he told reporters Thursday.

Earlier, he officiated the ground breaking ceremony for the construction of Lereno Sdn Bhd's biodiesel plant at the Lumut Industrial Area in Kampung Acheh. Present at the ceremony were Perak Menteri Besar Datuk Seri Tajol Rosli Ghazali and the company's executive director Sabiamad Abdul Ahad.

Najib said it would be a mistake if Malaysia, as a major palm oil producer, did not tap the huge potential in the biodiesel market particularly in meeting the demand in Europe and the United States.

"We're sure the demand for biodiesel will increase significantly worldwide because the price of petroleum fuel will continue to rise whilst its production is limited," he said.

Najib said biodiesel demand would also increase due to the European countries' commitment towards the Kyoto Protocol that calls for the reduction of air pollution.

"They're very sensitive over the environment and don't want to use fuel that can contribute to pollution. Biodiesel is the alternative and we're aware of the huge potential," he said.

"We, as a big palm oil producer, logically can become the largest biodiesel producer and this effort will be coordinated by the government with the collaboration of all parties," he said.

Earlier in his speech, the deputy prime minister said the demand for biodiesel had continued to increase when the world's price of crude oil escalated over the past year.

Market analysts had also predicted that the crude oil price would continue to rise and remain high and this could prompt users to shift to alternative energy sources, he said.

Presently, European countries were keenly promoting the use of biodiesel extracted from vegetable oils to cut down the emission of greenhouse gases from the burning of petroleum fuel, he said.

Najib said the biodiesel production in Europe could only meet one sixth of the demand and therefore, it had a huge market potential.

He said the rural community working in the oil palm plantations could also benefit from the increase in the price of palm oil with greater demand for more diversified palm products.

"The government will continue to encourage its agencies like Felda and Felcra to intensify efforts to redevelop existing plantations and encourage them to produce more profitable products like biodiesel," he said.

Najib also thanked Australian and Italian investors who contributed 30 per cent equity for the setting up of the biodiesel plant that was said to be the first commercial biodiesel plant in Southeast Asia.

Lereno Sdn Bhd's biodiesel plant, involving a RM90 million investment, will produce 60,000 tonnes of biodiesel annually when it comes on stream next year.

-- BERNAMA