Kuala Lumpur - The Cabinet Committee on the Competitiveness of the Palm Oil Industry has called a halt on new manufacturing licences for biodiesel production, effective immediately.

 

This decision may be a result of political concern regarding the scale of the plants envisioned in the pending applications.  It is common for new biodiesel plants to have a 'nameplate' capacity of 250,000 tons annually (British Biofuels' Seal Sands plant opened yesterday by Tony Blair is an example).  Profitability in biodiesel plants is commensurate with scale, so the trend is towards very large facilities. 

 

There is also pressure from citizens concerned about the cost of palm oil for domestic cooking purposes.  Although there is no evidence yet that CPO prices have increased due to demand from the biodiesel industry, the fear is that the 30 applications awaiting approval will result in demand exceeding supply with a consequential impact on prices.  

 

The Plantation Enterprises and Commodities Ministry said the issue of licences would stop pending the completion of a review of those industries which use palm oil, including biodiesel factories.  It is not yet clear how long this review might take.

 

No further applications will be accepted as of today. It seems likely that applications already submitted but not yet approved will also be affected by this move. 

 

Editorial comment: The majority of palm oil produced in Malaysia is exported, the consuming countries using it for food, oleochemicals (chemical products derived from palm oil) and increasingly, biodiesel production.

 

Those companies seeking to use palm oil as biodiesel feedstock often prefer to site their plant near to the source of supply, with the added benefits of advantageous labour and land costs.

 

This has resulted in a rush to open new plants in Malaysia, the most recent being Mission Biotechnologies Kuantan plant. (see article: Malaysia: Mission Biotechnologies invests $27m in biodiesel plant: http://www.biofuelreview.com/content/view/54/2/).

 

However, placing a moratorium on license applications with no prior notice could have the following effects:

• Foreign direct investment into Malaysian biofuel infrastructure could be affected, with companies looking elsewhere to invest.  The obvious alternatives are Singapore, Thailand and Indonesia, the latter two are themselves palm oil producers and all are close enough to import Malaysian palm oil, if necessary.

• Malaysia’s reputation as an open economy could be affected if the large domestic palm oil producers such as Guthrie and Golden Hope (themselves moving into biodiesel production: see Malaysia: Kumpulan Guthrie considers 60,000 ton/yr biodiesel plant: http://www.biofuelreview.com/content/view/124/2/) are seen to benefit from the reduction in competition.  A cynic might see this decision as the result of lobbying by entrenched domestic producers.

• Biofuel production technologies are becoming increasingly advanced, with the new cellulosic ethanol processes using biotechnology. The estimated 70-million ton annual production of palm oil waste (trunks, leaves and pomace) in Malaysia is potential feedstock for a huge new ethanol export industry, one which does not compete with food crops, is highly value-added, but which may be still-born if foreign biotech companies cannot be sure their investment is safe for the long-term. See previous article Genencor, Novozymes give insight into their cellulosic ethanol technology: http://www.biofuelreview.com/content/view/169/2/.

David Smith, Singapore