MPOB: Govt defers B20 fuel programme rollout

Launches of the biodiesel in other states are postponed indefinitely, starting with Sarawak


THE government deferred the implementation of the national B20 Biodiesel Programme due to lower crude palm oil (CPO) demand and to focus resources in response to the Covid-19 outbreak.

The green fuel programme was launched in February but has been retailed in stages in Langkawi, Kedah, and Labuan since January.

Malaysian Palm Oil Board (MPOB) DG Dr Ahmad Parveez Ghulam Kadir said the subsequent launches of the biodiesel in other states were postponed indefinitely, starting with Sarawak which was supposed to be instituted this month.

“The B20 Biodiesel Programme in other states has been delayed. (We) were supposed to launch it in Sarawak this month and the following month in Sabah,” he told The Malaysian Reserve.

Ahmad Parveez added that the biodiesel blending depots in the country have been instructed to evaluate the disparity in the current consumption to justify the programme’s continuation.

At present, the government is spending RM35 million to conduct studies and upgrade 35 biodiesel blending terminals for the terminals to have the capacity to handle up to 30% of palm methyl ester blended diesel (B30).

Studies and upgrading works have been conducted since January and are expected to complete in June 2021.

“The other depots are doing their own evaluation on how much volume they require to eventually continue and upgrade to B30 as planned.

“The government is not entirely going to abandon the B20 programme as we are still positive about the programme and we are going to resume it when the time is right,” he said.

Commenting on the prospect of B30 Biodiesel Programme, Ahmad Parveez said the implementation will highly depend on the country’s end-year inventory volume and the magnitude of the Covid-19 aftermath to the palm oil industry.

“It was previously mentioned that Malaysia could roll out the B30 programme by 2025. The timeline (that we have) is still quite plenty.

“The higher usage of palm oil in biodiesel will depend on demand post-Covid-19, palm oil prices and Malaysia’s stocks.

“It is difficult to justify now. However, if the country’s stock is high, the B30 programme may be something that is urgent and important,” he said.

During the launch of the National Automotive Policy in February, former Prime Minister Tun Dr Mahathir Mohamad said the B30 Biodiesel Programme could be implemented by 2025 or earlier for the transportation sector.

CGS-CIMB Securities Sdn Bhd head of research Ivy Ng said the potential loss in CPO demand is expected to be more visible in 2021 should the government decide to halt the B20 Biodiesel Programme.

“We previously estimated that the rollout of B20 in 2020 will add only 64,000 tonnes of biodiesel usage or 0.3% of 2020 CPO output forecast for Malaysia, which is not significant.

“The potential loss in CPO demand will be felt more significantly in 2021 should the government decide not to go ahead with the B20 (programme).

“This is because we have expected that the incremental local palm oil demand from the rollout of B20 will be more impactful at 292,000 tonnes in 2021 and 224,000 tonnes in 2022,” she said in a research note.

However, she added that the current concern of the biodiesel programme is the economic viability of using biodiesel against petroleum diesel while the crude oil is being priced at a low level.

“The CPO is currently trading at a premium of US$195 (RM852.15) per tonne over crude oil price, which makes biodiesel a more expensive option for consumers.

“This will likely cut demand for discretionary biodiesel usage and could prompt governments to reconsider their respective biodiesel mandates,” she said.