23/2/06 KUALA LUMPUR (Bernama) -- Malaysia's palm oil output is expected to be lower for the first half of 2006 compared to the same period in 2005, Plantation Industries and Commodities Minister Datuk Peter Chin Fah Kui said Thursday.

The lower production is expected to draw down the stocks level, he said in his opening speech at the Annual Palm & Lauric Oils Conference & Exhibition here.

Hence, he added, the country's supply fundamentals would be influential in pushing up palm oil prices.

At Wednesday's closing, the crude palm oil (CPO) price for spot month March 2006 stood at RM1,460 per tonne.

The Malaysian Palm Oil Board (MPOB) recently reported that CPO production for the first half of 2005 was 7.2 million tonnes while the stocks level as at December 2005 stood at 1.6 million tonnes.

MPOB said for 2005, the CPO production continued to increase for seven successive years, reaching 15 million tonnes compared to 14 million tonnes the previous year.

On biodiesel, Chin said Prime Minister Datuk Seri Abdullah Ahmad Badawi is expected to launch the introduction of B5 (a biofuel blend of five per cent processed palm oil with 95 per cent diesel) in the domestic market.

This, he said, will start under a voluntary programme involving a selected fleet of government vehicles this year.

He added that several companies have also disclosed their intention to build biodiesel plants in Malaysia.

Deputy Plantation Industries and Commodities Minister Datuk Anifah Aman said at a press conference later that 16 companies had applied for licences to build biodiesel plants and this was currently in the evaluation process.

He said these companies comprised some foreign companies as well as foreign companies working together with local companies.

"To date, only three companies have the licences from MPOB to set up palm biodiesel plants using the MPOB patented technology, each with an annual production capacity of 60,000 tonnes," Anifah said.

He said one of the companies is expected to start operating in August this year.

-- BERNAMA