The Hindu Business Line : Malaysia's biofuel policy may prove positive for palm oil

THE Malaysian Government is drafting a national biofuel policy to encourage production and domestic consumption of palm oil based bioofuel as an environment-friendly alternative source of energy as well as export destinations such as Europe.

Said to be in the process of receiving finishing touches, the policy will support palm oil prices that have been showing wide variation over the last four years despite rising production of the oil within Malaysia. In particular, export realisation on oil shipped out in bulk has been fluctuating as a result of severe price volatility in the international vegetable oil market.

Palm oil (30 million tonnes [mt]) accounts for about 35 per cent of global vegetable oil production (110 mt) and close to 60 per cent of world trade of (40 mt) in vegetable oils.

Disturbed by highly unsteady export prices as also total export earning, the Malaysian palm oil sector is keen to ensure stable prices and improved value realisation. Non-food uses of palm oil are, therefore, receiving increasingly more focused attention from policymakers, scientists and the industry.

"For supporting our palm oil sector, we have identified `3 bios' namely, biogas, biomass and bio-diesel," Dr Chan Kook Weng, Senior Research Fellow at the Malaysian Palm Oil Board (MPOB), told Business Line in an exclusive meeting.

While the current annual value of palm oil and products in Malaysia is estimated at Ringgit Malaysia (MR) 30 billion, MPOB believes the sector has the potential to reach a turnover of over RM 70 billion if all the advantages offered by oil palm crop are fully exploited.

All the promotional agencies of the Malaysian oil palm sector are upbeat about the prospects of using palm oil for bio-diesel. The strong government move to encourage use of up to 5 per cent (initially) palm oil in automobile fuel has everyone's support.

The industry estimates that up to five lakh tonnes of crude palm oil will be used up annually for bio-fuel purposes, a development that would act as a stabilising factor for the palm oil market, asserted Dr Chan adding that any quantity in excess of one million tonnes in stocks will be diverted for bio-diesel.

Global vegetable oil traders closely monitor Malaysia's crude palm oil stocks. Usually, inventory in excess of one million tonnes leads to a softening of world vegetable oil prices, which in turn hurts palm oil's export realisation.

It may be recalled, even four years ago when the palm oil market was in some crisis following a prolonged bear phase with prices reaching alarmingly low levels (700 Malaysian ringgit (MYR) a tonne), there was a lot of talk about diverting crude palm oil for burning. Nothing came of it as prices recovered early 2003 and have remained producer friendly since then.

Queried on the seriousness of intention this time to divert crude palm oil for burning as fuel, several industry representatives confirmed that the Government as also the industry were serious about the issue and, therefore, a national policy would be unveiled soon.

Studies have estimated that from biomass, the palm oil sector can potentially obtain a value of up to MYR 20 billion. While every part of the oil palm tree can be used, current exploitation is negligible. About 90 per cent of biomass - remains of tree such as trunk, leaves, fibre and so on - is not used, rued Dr Chan.

Technologies to convert waste into value-added products such as animal feed, paper and furniture are already available. Fibre and shell can be used to generate electricity and steam.

Similarly, the oleochemicals sector can contribute another MYR 15-20 billion annually, according to scientists. After successfully using palm oil for making bio-diesel, efforts are on to use palm oil for aviation fuel. "We need greater research and development work to exploit this potential," Dr Chan said.

The MPOB scientist also mentioned that experiments are going on in the direction of pyrolisis — a process whereby various parts of the oil palm tree is heated at something like 800 degrees Celsius. Complete oxidation takes place and the product disintegrates. This process, according to Dr Chan, can result in some very startling findings about the beneficial properties of parts of the oil palm tree.

Talking about carbon credit and emission trading, the MPOB expert expressed optimism about Malaysia's ability to capitalise on carbon emission trading and said such trading is here to stay. Tapping carbon credits as funds through potential clean development mechanism projects is the way forward, he asserted.

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