Tuesday February 12, 2013
Malaysia's B10 biodiesel programme and its benefits
Commodities Talk- by Hanim Adnan
THE biofuel option is often seen as a safety net project for the palm oil sector, especially when the price of crude palm oil (CPO) is about to hit rock bottom and the palm oil stockpile sits above the critical two million tonne mark.
If the price of CPO falls especially below RM800 per tonne, it is best to go for biofuel or “biodiesel” and if the CPO price recovers, it will be switched back to food-related production.
To those unfamiliar with the biofuel terminology, there are two types of biofuel bioethanol which is produced from carbohydrate-based plants namely sugarcane, corn, beet, wheet and sorgum while biodiesel is made from vegetable oilseeds such as rapeseed, sunflower, soybean and palm oil.
Therefore, given the current dire situation whereby palm oil stocks are at a record high of 2.63 million tonnes and CPO price trading below RM2,500 per tonne, the Government has once again decided to revisit the biofuel option with the launching of the B10 biodiesel programme last week.
This latest move to migrate to B10 from the existing B5 biodiesel (blending of 5% palm methyl ester with 95% fossil fuel diesel) programme was met with heavy criticism by industry observers, especially when the B5 programme still has yet to be fully implemented nationwide.
To some quarters, it is most doubtful that the B10 programme can successfully wipe out one million tonnes out of the high domestic palm oil stockpiles, particularly when the B5 programme is struggling to fulfil its obligation to absorb 500,000 tonnes of palm oil inventory from the domestic market currently.
Some even wanted justification to show that the government-owned vehicles at the various ministries were really using the B5 biodiesel and whether the infrastructure for the blending tanks or storage facility were already well in place for the full implementation of B5 nationwide by the middle of next year.
The B5 biodiesel is now sold only in Kuala Lumpur, Putrajaya, Selangor, Negri Sembilan and Malacca, powering diesel vehicles, especially government-owned ones.
While the B5 or even B10 can be done successfully on a trial basis, some quarters opined that it cannot be organised on a nationwide scale since it is technically not feasible and financially non viable, given the volatility in the CPO price movement.
In addition, the export of palm-based biodiesel, particularly to Europe, continues to be at risk when the Life Cycle Assessment studies showed that palm oil emits more greenhouse gas compared with other types of biofuel.
This is reflective of the significant downtrend in the local biodiesel exports over the past three years. Biodiesel export has fallen drastically to a mere 28,983 tonnes in 2012 compared with 227,457 tonnes recorded in 2009, according to statistics from the Malaysian Palm Oil Board.
On the other hand, biodiesel operators in Malaysia are still hoping to see the implementation of the B10 programme helping restore some vitality to the industry, which has come to a standstill for over three years with almost zero production due to the high cost of palm oil feedstock and uncompetitive export market.
Since the biodiesel hype started in 2006, about 22 biodiesel producer companies both local and international under the Malaysian Biodiesel Association have made investment totalling about RM21bil in Malaysia.
Plantation Industries and Commodities Minister Tan Sri Bernard Dompok has also expressed his optimism on the B5 and B10 biodiesel programmes, saying that the Government has allocated a RM300mil grant, of which RM80mil has been disbursed to oil companies and biodiesel producers to set up the infrastructure ranging from blending facilities and tanks to oil pumps.
So, why not give the B10 biodiesel programme a chance to take off? After all, its full implementation is only about one year and four months away.