16/8/06 (Reuters)  -  PASIR GUDANG, Malaysia - Malaysia, the world's top producer of palm oil, has approved licences for 52 biodiesel plants with a combined capacity of more than 5 million tonnes each year, the prime minister said on Tuesday.
 
Biofuel plants are sprouting at a dizzy rate as nations from Europe to Asia seek ways to cut dependence on soaring crude oil, reduce greenhouse gas emissions and boost agriculture. Oil has rallied 20 percent this year on supply worries.
"Some of these plants have commenced construction and are well on the way to coming onstream soon," Abdullah Ahmad Badawi said at the launch of a biodiesel plant in Malaysia's southern state of Johor.

"My government has carefully controlled the issuance of biofuel manufacturing licences and will be monitoring the situation to avoid a glut in manufacturing capacity as well as to ensure sufficient supply of palm oil both for food and non-food purposes."

Traditionally, palm oil supplies have remained at comfortable levels, with buyers not worrying about stockpiling to make their products that range from sponge cakes to soap. But that has begun to change as demand for biodiesel pushes up palm-oil prices.

Malaysia is due to start selling a blend of 5 percent palm oil and 95 percent diesel at domestic pumps in October.

Malaysian palm oil surged 3 percent in a few hours of trading on one day last month when Malaysia and Indonesia pledged 40 percent of their output to make biodiesel.

Since then, daily volumes have nearly doubled, with open interest on certain days touching 65,000 lots of 25 tonnes each. Spot prices have risen about 15 percent so far this year.

On Tuesday, the benchmark October contract was trading at around 1,642 ringgit a tonne, or $446.

Abdullah said the rising price of palm oil would benefit many poor workers on Malaysian plantations.

"It is not only the biofuel producers who will benefit but also the plantations and the 100,000 oil-palm small-holders in the country," he said. (US$1=3.6815 ringgit)