INTERVIEW: Malaysia's B20 mandate could boost biodiesel output by 79%: trade body head

The Malaysian Biodiesel Association, or MBA, has projected a surge in the country's biodiesel production to 2.5 million mt once thegovernment's B20 mandate is completely fulfilled, the association's President U R Unnithan said in an interview with S&P Global Commodity Insights at an industry event March 5.

According to the trade body, biodiesel production in the country stood at 1.4 million mt in 2023, up from 1.2 million mt in 2022. The export of the commodity in 2023 was pegged at 300,000 mt.

The B20 mandate in Malaysia was first introduced in January 2020. The mandate requires the production of biofuel with a 20% palm oil component for the transport sector. The mandate was delayed due to movement restrictions imposed to contain the COVID-19 pandemic. The program is not fully implemented across the country yet.

"Within association, we have a capacity of 2.6 million mt. Currently out of the plants that are being used we are just at 55% of our capacity utilization. If we move to B20, our capacity utilization will move to almost 100%," said Unnithan.

Currently for road transport, Malaysia is using a 10% mix of biodiesel or B10 and 7% or B7 for industrial use. At present, B20 is operational in some parts of Malaysia, such as Sarawak, Langkawi. However, it has not been rolled out as the supply chains need to be upgraded, according to MBA.

"There is a certain distribution of biodiesel depots across the country that needs to be upgraded in order to reach a nation-wide blending rate of 20% for road transport," said MBA President Unnithan.

When Malaysia planned its move from B5 and B10 to B20, the idea was to prepare the entire supply chain for B30, so in a shot the country will be ready for both. But because of COVID, there was a capital crunch overall and the government was also going through changes in the past three years, the roll out slowed down, Unnithan said.

The trade body head also said that they had good discussions with the government, and they are in favor of raising the use of palm oil-based biodiesel and are hopeful that a B30 mandate is announced by 2025.

Biodiesel production (in mt)

Source: MBA, MPOB

In the past couple of years, MBA has made repeated calls to the government, automakers, and the industrial sector to adopt higher blends of palm-oil based biodiesel such as B30 for the transport sector and B10 for industrial sectors. According to the 12th Malaysia plan, B30 blending mandate is to be implemented in transport sector by 2025 while industry sector has to gradually move to this target too.

Malaysia is the world's second largest producer of palm oil and supplier of the commodity. The country primarily uses palm oil as feedstock for making it's biodiesel sector. The feedstocks were processed into palm methyl ester and blend with petroleum diesel.

Platts, part of S&P Global Commodity Insights, assessed Biodiesel FOB Southeast Asia at $1,032/mt March 6, up $14% since start of the year.