The Edge Daily - Jun 07 7:50 AM - Malaysia, the world's largest producerof palm oil, is putting the final touches to a plan to spur national useof a green fuel made by blending palm oil with the diesel sold at pumps.

The plan for the nation's first commercial biofuel will be presented tocabinet for discussion on June 15, Commodities Minister Datuk Peter Chinsaid. Cabinet approval is the first step in taking a biofuel bill toparlimaent and making it law.

"Maybe by next week, I will be able to table it at the cabinet," Chin toldReuters . "We still have to get it through the hurdle of the cabinet tosee whether the legislation needs to be amended before it goes toparliament."

Climbing oil prices and dwindling supplies of petroleum make itcommercially viable to produce palm diesel, which Malaysia plans to blendwith petroleum diesel in the ratio of two to five%, Chin has said earlier.

Biofuels have taken on new importance worldwide as countries look to cuttheir emissions to adhere to the UN Kyoto Protocol. Burning theenvironmentally friendly fuel is considered carbon dioxide neutral anddoes not require emissions rights.

The Malaysian Palm Oil Board and Golden Hope Plantations Bhd have joinedhands to set up an US$11 million (RM41.8 million) plant to produce upto5,000 tonnes of palm fuel for export every month, which is expected to becomplete by the end of next year.

Japan has expressed interest in Malaysia's green fuel, and officials say aGerman rail company that tried out the fuel was satisfied with the resultsand wants to buy it regularly.

EU measures to reduce dependence on fossil fuel oil imports and cutgreenhouse gas emissions have boosted interest in biofuels in Europe. TheEU wants member states to use vehicle fuel with two percent biofuel by2005 and 5.75% by 2010.

On June 7, Chin did not say what the proportions of Malaysia's green fuelmix would be. But he said it would be a blend of methyl ester -- the rawproduct input for biodiesel -- and conventional diesel.

"Suffice it to say, we can never have enough palm oil to produce all thediesel required in our country," he added.

Malaysia consumes up to 190,000 barrels per day of diesel and gas oil,while it produces less than 14 million tonnes of palm oil, more than 12million tonnes of which are exported.

Biofuels are expensive, and growing the crops to make them in quantitiessufficient to satisfy global energy demand would require unfeasibly largetracts of farmland, some experts say.

The palm crop's high year-round yield gives it an edge over rapeseed andsoybean, the other crops from which biofuels are most commonly made. It isalso cheaper.

Elsewhere, ethanol fuel is produced from sugarcane, maize and othergrains.

Chin visited the United States in March to woo American firms to helpproduce and market Malaysian biodiesel for the automotive industry.

"Our private sector will be collaborating with the Americans on this," hesaid, elaborating on that plan. "The Americans have the technology as welland they want to work with us."

But some green groups say the environmental benefits of biofuels depend onwhere they are made, and countries should produce their own biofuels,since importing green energy could negate the environmental gain. --Reuters