6/10/2005 KUALA LUMPUR b(Reuters) - Malaysia, the world's top palm oilproducer, will make a palm oil-based fuel a mandatory additive at petrolpumps by 2008, a newspaper said Thursday, part of government efforts tocut its diesel subsidy bill.With crude oil prices expected to remain high, Malaysia is seeking toencourage national use of a biofuel that is made from 95 per cent dieseland 5 per cent processed palm oil.Legislators are expected to pass a law next year to introduce the newproduct, and give motorists a year to try it out before making itmandatory, Plantation Industries and Commodities Minister Peter Chin toldThe Star.The head of the government-run Malaysian Palm Oil Board told Reuters lastmonth that biofuel would be ready at domestic pumps and for export byOctober 2006.Biofuels are taking on new importance worldwide as the cost of petroleumproducts rise and as countries seek to cut emissions to meet the U.N.Kyoto Protocol. Burning the biofuel is considered to be carbon- dioxideneutral and does not require emissions rights.Malaysia, a net exporter of oil and gas, heavily subsidies pump prices ofpetrol and diesel, putting a serious strain on its budget as the cost offossil fuels has surged.The government estimates that it will spend 16 billion ringgit ($4.2billion) on fuel subsidies in 2005, a 34 per cent jump from last year.Malaysia consumes up to 190,000 barrels per day (bpd) of diesel and gasoil. It produces less than 14 million tonnes of palm oil a year, of whichmore than 12 million are exported.Adding 5 per cent biofuel to diesel at pumps will help cut 500,000 tonnesof diesel a year, or about 10,000 bpd, officials have said.