Malaysia will require a higher biodiesel content in diesel fuel from the second half of 2019, raising the minimum biodiesel content to 10%, from the current 7%.
The higher blending mandate will require more palm oil as feedstock to produce the biodiesel blend.
“The price gap between Brent oil and crude palm oil is narrowing, thus making higher blending of biodiesel …more viable to be implemented in due course,” said Shamsul Iskandar Mohd Akin, Malaysia’s deputy minister of primary industries.
The ministry would announce the implementation of the programme by the end of this year, subject to cabinet approval, he said.
Implementation of a higher biodiesel blend in diesel fuel in Malaysia has been delayed at least twice already, due to low crude oil prices, making the price of petroleum diesel more attractive than palm oil biodiesel.
Benchmark palm oil’s premium over gas oil has narrowed over the past year, turning into a discount in April, and has since widened. The price of palm oil, which is used in Malaysia to produce biodiesel, has declined by nearly 12% since the beginning of the year.
Malaysia is the world’s second-largest producer of palm oil, after Indonesia.