Identifier
Created
Classification
Origin
07KUALALUMPUR1548
2007-10-19 09:42:00
UNCLASSIFIED
Embassy Kuala Lumpur
Cable title:
MALAYSIA BIOFUELS: INFORMATION ON INDUSTRIAL BIOTECHNOLOGY
how-toVZCZCXRO3988 RR RUEHCHI RUEHDT RUEHHM RUEHNH DE RUEHKL #1548/01 2920942 ZNR UUUUU ZZH R 190942Z OCT 07 FM AMEMBASSY KUALA LUMPUR TO RUEHC/SECSTATE WASHDC 0133 INFO RUCNASE/ASEAN MEMBER COLLECTIVE RUCPDOC/DEPT OF COMMERCE WASHDC RUEHRC/USDA FAS WASHDC
UNCLAS SECTION 01 OF 04 KUALA LUMPUR 001548
SIPDIS
SIPDIS
USITC FOR L.M. SCHLITT
STATE PASS USTR FOR WEISEL AND BELL
E.O. 12958: N/A
TAGS: ECON ETRD EAGR TBIO MY
SUBJECT: MALAYSIA BIOFUELS: INFORMATION ON INDUSTRIAL BIOTECHNOLOGY
FOR USITC
REF: STATE 133131
UNCLAS SECTION 01 OF 04 KUALA LUMPUR 001548
SIPDIS
SIPDIS
USITC FOR L.M. SCHLITT
STATE PASS USTR FOR WEISEL AND BELL
E.O. 12958: N/A
TAGS: ECON ETRD EAGR TBIO MY
SUBJECT: MALAYSIA BIOFUELS: INFORMATION ON INDUSTRIAL BIOTECHNOLOGY
FOR USITC
REF: STATE 133131
1. Summary: The Malaysian government strongly supports the
development of the biofuels industry, using the country's large and
growing palm oil production as feedstock. The recent passage of the
Biofuel Industry Act will facilitate the industry's continued
expansion, though the industry has benefited from years of
incentives already. Retail sales of biofuel in Malaysia have not yet
been introduced since they cannot compete against
government-subsidized petroleum-based fuels. Seven biodiesel plants
currently are in operation in Malaysia with total capacity of
370,000 tons, though the current high prices for feedstock will
likely result in actual biodiesel output of 280,000 tons in 2007.
Capacity should expand to about 700,000 tons in 2008 with the
expected completion of six more plants. End summary.
Policies supporting production and use of biofuels
-------------- --------------
2. Malaysia, with its large and growing palm oil industry, has the
potential to play a major role in the world biofuel market.
Malaysia is currently the world's number two producer and top
exporter of palm oil. Oil palm has the highest oil yield per
hectare of all vegetable oil feedstocks, seven times greater than
that of soybeans and three times that of rapeseed.
3. Processed liquid palm oil (PLPO) can be used directly to power
normal diesel engines or may be blended with petroleum diesel. Palm
oil can also be converted to methyl esters (biodiesel) through a
process called transesterification. This process combines refined
palm oil, methanol, and a catalyst to produce the methyl esters.
These methyl esters have performance characteristics similar to
those of petroleum diesel without the environmental detriment of
sulfur emission.
4. In addition to a plentiful palm oil feedstock, the GOM's biofuel
aspirations are abetted by a palm oil industry eager to begin
biodiesel production, the interest of foreign investors, and also by
the existence of the Malaysian Palm Oil Board (MPOB). Pioneering
palm biodiesel development since 1985, this government agency
continues to develop efficient practices and to create new palm
diesel products such as low pour point palm biodiesel, a palm
biodiesel that is able to flow at lower temperatures (between -210C
and 00C). The MPOB is funded by the industry via a levy imposed on
total crude palm oil production. Around US$23 million was collected
in 2006.
5. The GOM is determined to further develop the palm oil industry by
promoting the production and use of palm biodiesel. The
recently-passed Biofuel Industry Act (BIA) will allow an orderly
development of the biofuel industry. The most important clauses are
Clause 4, which seeks to prescribe the type of biofuel and its
percentage by volume to be blended in any fuel; and Clause 12, which
contains provisions relating to revocation or suspension of a
biofuel plant license. Clause 12 allows the licensing authority to
revoke or suspend any license if the licensee has ceased to carry on
or operate any biofuel activity for which the license is issued.
6. The BIA is in line with MPOB's efforts to market a biofuel blend
consisting of 95% petroleum diesel and 5% palm olein, referred to as
Envo Diesel or B5. B5 can be used to power diesel engines in the
transport sector and also as fuel in the industrial sector for
activities such as firing boilers. (Note: this B5 biofuel differs
from the European Union's B5 biodiesel blend, which contains 95%
petroleum combined with 5% methyl ester.) The GOM is currently
running trials with the MPOB's B5 in government vehicles and private
industrial entities with the intent of making it compulsory for
diesel-consuming passenger vehicles, the transportation sector, and
industries to use B5 in the near future. It is estimated that
500,000 metric tons of palm olein will be required annually to
fulfill the B5 mandate. This figure constitutes only 3 percent of
the palm oil produced in Malaysia in 2006.
Domestic Biofuel Use
--------------
7. In preparation for the B5 standard's implementation, the GOM
initially intended to establish B5 fuel pumps and to increase public
awareness of the new biofuel blend. The GOM was also to encourage
engine and auto manufacturers to extend their warranties to cover
the use of B5. The Minister of Plantation Industries and
Commodities has stated that B5 will initially be sold at a price
equal to the retail price of petroleum diesel, which is currently
subsidized at a rate determined by the GOM. With the current high
prices of feedstock, B5 Envo diesel is unlikely to be commercially
launched in the near future. Sources indicate that the GOM will
only mandate B5 use if palm oil prices decline to lower levels.
KUALA LUMP 00001548 002 OF 004
8. In Malaysia, biodiesel would have to compete with some of the
lowest fuel prices in its region. The GOM sets retail fuel prices
below the market price and compensates retailers through subsidies.
Increasing crude oil prices have put upward pressure on this
subsidy, forcing the GOM to incrementally increase retail petroleum
prices. In February 2006, protests ensued from a US$0.08 per liter
increase in both diesel and petroleum retail prices, and fuel prices
have not increased again since then. There is some speculation that
the government will raise fuel prices in early 2008.
9. Fuel subsidies are paid for through contributions from Petronas,
Malaysia's national petroleum corporation. Despite the fact that
Petronas only accounts for about 30 percent of the retail petroleum
market in Malaysia, its contributions are adequate to fully fund the
fuel subsidies in the entire market.
10. The GOM has eliminated the sales tax on retail petroleum
products to alleviate price pressure and the incidence of the sales
tax borne by the retail customer. The sales tax on diesel of
US$0.05 per liter was eliminated in October 1999. The sales tax on
gasoline of US$0.16 per liter was eliminated in June 2004.
Biofuel Exports
--------------
11. In addition to B5 biofuel produced for domestic use, the GOM is
also greatly encouraging the production of methyl ester, primarily
for export. New energy standards, such as those in the European
Union, are making the export of methyl ester increasingly attractive
to palm oil companies.
Incentive Programs
--------------
12. The GOM is supporting the construction of biodiesel plants
through tax incentives. Because biodiesel is one of the products
that is encouraged under the Promotion of Investments Act of 1986,
biodiesel projects are eligible for Pioneer Status or Investment Tax
Allowance (ITA). A company with Pioneer Status is granted tax
exemption on at least 70 percent of the income derived from
biodiesel production for 5 years, with more revenue being eligible
under certain provisions. ITA, an alternative incentive that the
companies can choose, is an allowance schedule that caters to high
capital investment projects with a long gestation period. Under
ITA, companies are granted an allowance of 60 percent in respect of
qualifying capital expenditure incurred within 5 years of the date
of the first capital expenditure. This allowance can be used to
exempt up to 70 percent of the statutory income derived from
biodiesel production in the assessment year. Any unutilized
allowance can be carried over to following years.
13. Under both the Pioneer Status and ITA incentive schedules, the
tax allowance increases under certain criteria such as the location
of the project in a promoted area. In order to further encourage
the domestic palm oil processing industry, the GOM taxes exports of
crude palm oil but does not levy export duties on processed palm oil
or biodiesel.
Biofuel Production
--------------
14. Ethanol: There are no ethanol production plants currently
operating in Malaysia. The advent of a domestic ethanol industry is
highly unlikely as an appropriate ethanol feedstock is not
abundantly available in Malaysia. Also, ethanol consumption is
unlikely as retail gasoline prices are subsidized.
15. Biodiesel: Experts say that the production of biodiesel,
including oil palm-based biodiesel, did not become a viable fuel
option until crude oil prices surpassed the US$50 a barrel mark last
year. In a November 2005 research report, Deutsche Bank concluded
that as long as crude prices stay above this US$50 mark biodiesel
makes financial sense within the European Union. At a PLPO price of
US$730 per metric ton, the cost of palm biodiesel production is
estimated to be about US$0.77 per liter.
16. Seven biodiesel plants are in operation in Malaysia with total
capacity of 370,000 tons. With the current high prices for
feedstock, post estimates the actual biodiesel output for all of
2007 should be around 280,000 tons. Post expects another six plants
with a combined capacity of about 700,000 MT to be completed by
2008. The companies that are making profits are those that had
secured crude palm oil at lower prices as long as six months ago.
Some companies are also changing their product mix, such as
increasing the production of Vitamin E (a derivative from Crude Palm
Oil) while others are looking to sell glycerin (a by-product) at
KUALA LUMP 00001548 003 OF 004
higher prices as its output is anticipated to increase slower in
tandem with an expected smaller growth in biodiesel production.
17. Biodiesel Projects Approved by the Malaysian
Industrial Development Authority (as of October 2006)
Company; Location' Foreign Participation
1) MPOB Carotino Sdn Bhd; Pasir Gudang, Johor; 25% Singapore
2) Biodiesel Technology Sdn. Bhd.; Kuantan, Pahang; 20% - Australia
3) Global Bioenergy Resources Sdn. Bhd.; Nialai, Negeri Sembilan; No
foreign participation
4) InteBio Tech Corporation S.B.; Sitiawan, Perak; 100% - Australia
5) Vance Bioenergy Sdn. Bhd.; Pasir Gudang, Johor; 90% - Indonesia,
10% - Singapore
6) Pgeo Edible Oils Sdn. Bhd.; Pasir Gudang, Johor; 3.9% - Others
7) Empee Industries Berhad; Kuantan, Pahang; 100% - India
8) SPC Biodiesel Sdn. Bhd.; Lahad Datu, Sabah; 15% - Australia
9) Kulim (M) Berhad; Pasir Gudang, Johor; 6.9% - Others
10) Success Nexus Sdn. Bhd.; Sitiawan, Perak; 30% - USA, 10% -
Italy, 1% - Canada
11) Ganz Biofuels Sdn. Bhd.; Air Keroh, Melaka; No foreign
participation
12) Zoop Sdn. Bhd.; Pulau Indah, Selangor; 10% - Japan
13) Sarawak Plantation Biodiesel Sdn. Bhd.; Miri, Sarawak; No
foreign participation
14) Genting Biofuel Sdn. Bhd.; Pasir Gudang, Johor; 50% - Italy
15) Survival Access Sdn. Bhd.; Manjung, Perak; 6.3% - Others
16) Mission Biofuel Sdn. Bhd.; Kuantan, Pahang; 100% - Australia
17) Zecon Plantation Sdn. Bhd.; Pasir Gudang, Johor; no foreign
participation
18) AM Biofuel Sdn. Bhd.; Pasir Gudang, Johor; no foreign
participation
19) IJM Plantation Sdn. Bhd.; Sandakan, Sabah; 40% - USA
The above table shows the biodiesel projects currently approved by
the Malaysian Industrial Development Authority (MIDA). When all
these plants are operational, it is estimated that Malaysia will be
able to produce more than 1 million metric tons of biodiesel
annually.
18. The MPOB has worked with the Ministry of Plantation Industries &
Commodities as well as Malaysian plantation companies to establish
oil palm plantations overseas in Latin America and West Africa.
This will further increase the supply of palm oil for Malaysian palm
biodiesel companies.
Import Regimes for Biofuels
--------------
19. Malaysia does not levy import tariffs on biofuels. There is no
import tariff on crude palm oil, but there is a 5 percent duty
levied on processed palm oil. There are no duties on two common
biofuel feedstocks: rapeseed oil and sunflower oil. However there
is a 5 percent tariff on soybean oil and its fractions.
20. Key Malaysian Contact on Research and Development of Bio-Fuel:
Dato' Dr. Yuen May CHOO
Malaysian Palm Oil Board
6, Persiaran Institusi
Bandar Baru Bangi
43000 Kajang
Selangor
P.O. Box 10620
50720 Kuala Lumpur
KUALA LUMP 00001548 004 OF 004
Tel: 603-8925 9155/8925 9775
Fax: 603-8925 9446
Homepage: http://mpob.gov.my
E-mail: choo@mpob.gov.my
21. Embassy Contact:
Raymond Hoh
Foreign Agriculture Service
U.S. Department of Agriculture
Tel: (603) 2168-5182
Fax: (603) 2168-5023
Email: Raymond.Hoh@usda.gov
KEITH
SIPDIS
SIPDIS
USITC FOR L.M. SCHLITT
STATE PASS USTR FOR WEISEL AND BELL
E.O. 12958: N/A
TAGS: ECON ETRD EAGR TBIO MY
SUBJECT: MALAYSIA BIOFUELS: INFORMATION ON INDUSTRIAL BIOTECHNOLOGY
FOR USITC
REF: STATE 133131
1. Summary: The Malaysian government strongly supports the
development of the biofuels industry, using the country's large and
growing palm oil production as feedstock. The recent passage of the
Biofuel Industry Act will facilitate the industry's continued
expansion, though the industry has benefited from years of
incentives already. Retail sales of biofuel in Malaysia have not yet
been introduced since they cannot compete against
government-subsidized petroleum-based fuels. Seven biodiesel plants
currently are in operation in Malaysia with total capacity of
370,000 tons, though the current high prices for feedstock will
likely result in actual biodiesel output of 280,000 tons in 2007.
Capacity should expand to about 700,000 tons in 2008 with the
expected completion of six more plants. End summary.
Policies supporting production and use of biofuels
-------------- --------------
2. Malaysia, with its large and growing palm oil industry, has the
potential to play a major role in the world biofuel market.
Malaysia is currently the world's number two producer and top
exporter of palm oil. Oil palm has the highest oil yield per
hectare of all vegetable oil feedstocks, seven times greater than
that of soybeans and three times that of rapeseed.
3. Processed liquid palm oil (PLPO) can be used directly to power
normal diesel engines or may be blended with petroleum diesel. Palm
oil can also be converted to methyl esters (biodiesel) through a
process called transesterification. This process combines refined
palm oil, methanol, and a catalyst to produce the methyl esters.
These methyl esters have performance characteristics similar to
those of petroleum diesel without the environmental detriment of
sulfur emission.
4. In addition to a plentiful palm oil feedstock, the GOM's biofuel
aspirations are abetted by a palm oil industry eager to begin
biodiesel production, the interest of foreign investors, and also by
the existence of the Malaysian Palm Oil Board (MPOB). Pioneering
palm biodiesel development since 1985, this government agency
continues to develop efficient practices and to create new palm
diesel products such as low pour point palm biodiesel, a palm
biodiesel that is able to flow at lower temperatures (between -210C
and 00C). The MPOB is funded by the industry via a levy imposed on
total crude palm oil production. Around US$23 million was collected
in 2006.
5. The GOM is determined to further develop the palm oil industry by
promoting the production and use of palm biodiesel. The
recently-passed Biofuel Industry Act (BIA) will allow an orderly
development of the biofuel industry. The most important clauses are
Clause 4, which seeks to prescribe the type of biofuel and its
percentage by volume to be blended in any fuel; and Clause 12, which
contains provisions relating to revocation or suspension of a
biofuel plant license. Clause 12 allows the licensing authority to
revoke or suspend any license if the licensee has ceased to carry on
or operate any biofuel activity for which the license is issued.
6. The BIA is in line with MPOB's efforts to market a biofuel blend
consisting of 95% petroleum diesel and 5% palm olein, referred to as
Envo Diesel or B5. B5 can be used to power diesel engines in the
transport sector and also as fuel in the industrial sector for
activities such as firing boilers. (Note: this B5 biofuel differs
from the European Union's B5 biodiesel blend, which contains 95%
petroleum combined with 5% methyl ester.) The GOM is currently
running trials with the MPOB's B5 in government vehicles and private
industrial entities with the intent of making it compulsory for
diesel-consuming passenger vehicles, the transportation sector, and
industries to use B5 in the near future. It is estimated that
500,000 metric tons of palm olein will be required annually to
fulfill the B5 mandate. This figure constitutes only 3 percent of
the palm oil produced in Malaysia in 2006.
Domestic Biofuel Use
--------------
7. In preparation for the B5 standard's implementation, the GOM
initially intended to establish B5 fuel pumps and to increase public
awareness of the new biofuel blend. The GOM was also to encourage
engine and auto manufacturers to extend their warranties to cover
the use of B5. The Minister of Plantation Industries and
Commodities has stated that B5 will initially be sold at a price
equal to the retail price of petroleum diesel, which is currently
subsidized at a rate determined by the GOM. With the current high
prices of feedstock, B5 Envo diesel is unlikely to be commercially
launched in the near future. Sources indicate that the GOM will
only mandate B5 use if palm oil prices decline to lower levels.
KUALA LUMP 00001548 002 OF 004
8. In Malaysia, biodiesel would have to compete with some of the
lowest fuel prices in its region. The GOM sets retail fuel prices
below the market price and compensates retailers through subsidies.
Increasing crude oil prices have put upward pressure on this
subsidy, forcing the GOM to incrementally increase retail petroleum
prices. In February 2006, protests ensued from a US$0.08 per liter
increase in both diesel and petroleum retail prices, and fuel prices
have not increased again since then. There is some speculation that
the government will raise fuel prices in early 2008.
9. Fuel subsidies are paid for through contributions from Petronas,
Malaysia's national petroleum corporation. Despite the fact that
Petronas only accounts for about 30 percent of the retail petroleum
market in Malaysia, its contributions are adequate to fully fund the
fuel subsidies in the entire market.
10. The GOM has eliminated the sales tax on retail petroleum
products to alleviate price pressure and the incidence of the sales
tax borne by the retail customer. The sales tax on diesel of
US$0.05 per liter was eliminated in October 1999. The sales tax on
gasoline of US$0.16 per liter was eliminated in June 2004.
Biofuel Exports
--------------
11. In addition to B5 biofuel produced for domestic use, the GOM is
also greatly encouraging the production of methyl ester, primarily
for export. New energy standards, such as those in the European
Union, are making the export of methyl ester increasingly attractive
to palm oil companies.
Incentive Programs
--------------
12. The GOM is supporting the construction of biodiesel plants
through tax incentives. Because biodiesel is one of the products
that is encouraged under the Promotion of Investments Act of 1986,
biodiesel projects are eligible for Pioneer Status or Investment Tax
Allowance (ITA). A company with Pioneer Status is granted tax
exemption on at least 70 percent of the income derived from
biodiesel production for 5 years, with more revenue being eligible
under certain provisions. ITA, an alternative incentive that the
companies can choose, is an allowance schedule that caters to high
capital investment projects with a long gestation period. Under
ITA, companies are granted an allowance of 60 percent in respect of
qualifying capital expenditure incurred within 5 years of the date
of the first capital expenditure. This allowance can be used to
exempt up to 70 percent of the statutory income derived from
biodiesel production in the assessment year. Any unutilized
allowance can be carried over to following years.
13. Under both the Pioneer Status and ITA incentive schedules, the
tax allowance increases under certain criteria such as the location
of the project in a promoted area. In order to further encourage
the domestic palm oil processing industry, the GOM taxes exports of
crude palm oil but does not levy export duties on processed palm oil
or biodiesel.
Biofuel Production
--------------
14. Ethanol: There are no ethanol production plants currently
operating in Malaysia. The advent of a domestic ethanol industry is
highly unlikely as an appropriate ethanol feedstock is not
abundantly available in Malaysia. Also, ethanol consumption is
unlikely as retail gasoline prices are subsidized.
15. Biodiesel: Experts say that the production of biodiesel,
including oil palm-based biodiesel, did not become a viable fuel
option until crude oil prices surpassed the US$50 a barrel mark last
year. In a November 2005 research report, Deutsche Bank concluded
that as long as crude prices stay above this US$50 mark biodiesel
makes financial sense within the European Union. At a PLPO price of
US$730 per metric ton, the cost of palm biodiesel production is
estimated to be about US$0.77 per liter.
16. Seven biodiesel plants are in operation in Malaysia with total
capacity of 370,000 tons. With the current high prices for
feedstock, post estimates the actual biodiesel output for all of
2007 should be around 280,000 tons. Post expects another six plants
with a combined capacity of about 700,000 MT to be completed by
2008. The companies that are making profits are those that had
secured crude palm oil at lower prices as long as six months ago.
Some companies are also changing their product mix, such as
increasing the production of Vitamin E (a derivative from Crude Palm
Oil) while others are looking to sell glycerin (a by-product) at
KUALA LUMP 00001548 003 OF 004
higher prices as its output is anticipated to increase slower in
tandem with an expected smaller growth in biodiesel production.
17. Biodiesel Projects Approved by the Malaysian
Industrial Development Authority (as of October 2006)
Company; Location' Foreign Participation
1) MPOB Carotino Sdn Bhd; Pasir Gudang, Johor; 25% Singapore
2) Biodiesel Technology Sdn. Bhd.; Kuantan, Pahang; 20% - Australia
3) Global Bioenergy Resources Sdn. Bhd.; Nialai, Negeri Sembilan; No
foreign participation
4) InteBio Tech Corporation S.B.; Sitiawan, Perak; 100% - Australia
5) Vance Bioenergy Sdn. Bhd.; Pasir Gudang, Johor; 90% - Indonesia,
10% - Singapore
6) Pgeo Edible Oils Sdn. Bhd.; Pasir Gudang, Johor; 3.9% - Others
7) Empee Industries Berhad; Kuantan, Pahang; 100% - India
8) SPC Biodiesel Sdn. Bhd.; Lahad Datu, Sabah; 15% - Australia
9) Kulim (M) Berhad; Pasir Gudang, Johor; 6.9% - Others
10) Success Nexus Sdn. Bhd.; Sitiawan, Perak; 30% - USA, 10% -
Italy, 1% - Canada
11) Ganz Biofuels Sdn. Bhd.; Air Keroh, Melaka; No foreign
participation
12) Zoop Sdn. Bhd.; Pulau Indah, Selangor; 10% - Japan
13) Sarawak Plantation Biodiesel Sdn. Bhd.; Miri, Sarawak; No
foreign participation
14) Genting Biofuel Sdn. Bhd.; Pasir Gudang, Johor; 50% - Italy
15) Survival Access Sdn. Bhd.; Manjung, Perak; 6.3% - Others
16) Mission Biofuel Sdn. Bhd.; Kuantan, Pahang; 100% - Australia
17) Zecon Plantation Sdn. Bhd.; Pasir Gudang, Johor; no foreign
participation
18) AM Biofuel Sdn. Bhd.; Pasir Gudang, Johor; no foreign
participation
19) IJM Plantation Sdn. Bhd.; Sandakan, Sabah; 40% - USA
The above table shows the biodiesel projects currently approved by
the Malaysian Industrial Development Authority (MIDA). When all
these plants are operational, it is estimated that Malaysia will be
able to produce more than 1 million metric tons of biodiesel
annually.
18. The MPOB has worked with the Ministry of Plantation Industries &
Commodities as well as Malaysian plantation companies to establish
oil palm plantations overseas in Latin America and West Africa.
This will further increase the supply of palm oil for Malaysian palm
biodiesel companies.
Import Regimes for Biofuels
--------------
19. Malaysia does not levy import tariffs on biofuels. There is no
import tariff on crude palm oil, but there is a 5 percent duty
levied on processed palm oil. There are no duties on two common
biofuel feedstocks: rapeseed oil and sunflower oil. However there
is a 5 percent tariff on soybean oil and its fractions.
20. Key Malaysian Contact on Research and Development of Bio-Fuel:
Dato' Dr. Yuen May CHOO
Malaysian Palm Oil Board
6, Persiaran Institusi
Bandar Baru Bangi
43000 Kajang
Selangor
P.O. Box 10620
50720 Kuala Lumpur
KUALA LUMP 00001548 004 OF 004
Tel: 603-8925 9155/8925 9775
Fax: 603-8925 9446
Homepage: http://mpob.gov.my
E-mail: choo@mpob.gov.my
21. Embassy Contact:
Raymond Hoh
Foreign Agriculture Service
U.S. Department of Agriculture
Tel: (603) 2168-5182
Fax: (603) 2168-5023
Email: Raymond.Hoh@usda.gov
KEITH