3/7/06 KUALA LUMPUR, Malaysia (AP) -- Malaysia has suspended giving new licenses for biodiesel production projects amid concerns that an excess of projects could deprive the food market of palm oil, widely used in cooking, a report said Monday.
 
Malaysia is the world's biggest producer of crude palm oil, the main ingredient of biodiesel. Spurred by the interest in the fuel, touted as a cheaper substitute for gasoline and diesel, the government has so far approved 32 biodiesel projects with a combined production capacity of about 3 million tons.

But it announced last week that it will stop issuing licenses for new biodiesel manufacturing projects until it completes a study of the palm oil downstream industry, the New Straits Times reported. It didn't say when it expects to complete the study.

The Times quoted Malaysian Palm Oil Council chief executive Yusof Basiron as saying that the freeze on new projects was largely due to a surge in the number of applications for biodiesel production.

The government received 87 applications since last year, raising concerns that it could eat into crude palm oil, or CPO, reserves meant for food and oleochemical industries, he said.

"In any industry, there must be a realistic level. There must be a balance between CPO for food and that for fuel," he added.

CPO has traditionally been used primarily as a cooking oil and in the food industries and as well as in the production of soaps, cosmetics and detergent.

However, rising crude oil prices have sparked keen interest in the past two years in converting palm oil into methyl ester, a diesel substitute. Malaysia's annual CPO production is around 15 million tons.