B7 Biodiesel Mandate too Ambitious

KUALA LUMPUR: Malaysian Palm Oil Council chief executive officer Tan Sri Dr Yusof Basiron has described the government’s plan to implement the B7 biodiesel programme (a mix of 7% palm oil and 93% petroleum diesel) as too ambitious to carry out at the moment.

“If prices of palm oil were cheap enough to make using the B7 blend very attractive, then obviously this option would be tried or implemented once we have more blending facilities set up.

“It is somewhat played by ear, to see what transpires in terms of market prices and comparative prices with diesel,” he said during a roundtable discussion at the Palm and Lauric Oil Conference (POC) yesterday.

Yusof, however, supported the B5 programme which should be rolled out nationwide, including in Sabah and Sarawak by July.

“Once we have all the blending facilities implemented throughout the country, the first target is to have the capacity to blend consistently for the whole country at the B5 level.

“There will be pressure for prices to be competitive. But the Malaysian system is such that diesel itself is subsidised, and therefore the government is always calculating the top-up subsidy needed to bring palm diesel to the retail price level.

“So putting the B5 programme into place is not too daunting at the moment,” Yusof said.

He said the programme roll-out had been delayed due to challenges in the palm oil industry, prompting the government not to rush into the programme.

Meanwhile, Godrej International director Dorab Mistry said the will to implement the biodiesel programme is more perceptible in Indonesia compared with Malaysia.

“Having a 10% blend is definitely workable. Malaysia could have implemented this mandate 10 years ago after the last [commodity] price collapse in 2000, but nothing was done about it.

“I have a feeling Indonesia is very serious about the B10 mandate, and I think within 2½ years, it will reach that goal. In terms of implementation, Indonesia is very proactive, and as a result Malaysia will follow,” he said.

Mistry said it is up to biodiesel producer countries like Malaysia and Indonesia to make strategic decisions to increase demand for palm oil and its products, as well as to substitute the importation of mineral oil.

Additionally, once the biodiesel mandates have been implemented in Malaysia and Indonesia, there will be a very significant demand for palm oil as supply has been away from the broader market.

“The biggest change in the palm oil universe that happened in 2013 is that the producers have become the market. Indonesia, the single biggest producer in the world, is well on its way to becoming the single biggest consumer of this commodity, and that to me, is a red flag for the consuming countries of China, India and the European Union,” Mistry said.

Vice-president of the procurement chemicals division at Unilever Biswaranjan Sen said there is a need for an economic argument for consumers to switch to biodiesel.

“As of today, there is virtually no economic incentive for a consumer to prefer biodiesel. Whatever intake we see today seems to be essentially on government mandates.

“Oil companies don’t like it because it complicates their supply chains and consumers don’t necessarily see the benefit of it. If there were to be a situation where there is an incentive for a consumer to choose a fuel with biodiesel blended into it, we would see a more rapid uptake of biodiesel,” he said.

Ultimately, consumers do not want to be inconvenienced or pay more for the sake of sustainability, added Biswaranjan.

This article first appeared in The Edge Financial Daily, on March 05, 2014.

Source : The Edge

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