They invested RM22 billion in the hope of hitting a ‘gold mine’. And now they have almost zero production.

That’s the fate of the Malaysian biodiesel industry players, which have an installed capacity of 2.6 million tonnes. Read The Star report here.

And now, guess what, they are asking the government for subsidies. How do you like that? Didn’t they factor in the various risks? I still remember a business weekly gushing about the prospects of the biofuel industry and the big moves planned by the various players.

And what about the environmental impact of biofuels? Environmental groups argue that deforestation produces far more emissions than biofuels remove. See Wikipedia here.

This is what Global Subsidies Initiative says:

The Malaysian Federal Government consequently developed ambitious biofuel policies in 2005 to expand the market for palm oil, improve energy security, create a new export industry and replace petroleum imports with a cheap indigenous fuel to satisfy domestic needs.

Yet, in just a few years, Malaysia has seen its vision of sustainable development through biofuel production fade. The very efforts of governments worldwide to encourage the production and use of biofuels have undermined the economic viability of the industry as a whole. In 2007, millions of tonnes of vegetable oils, tallow, grains and sugar cane were converted worldwide to produce approximately 70 million litres of biofuels. A sizeable portion of this production occurred in OECD countries, heavily supported by government incentives that are estimated to have totalled over US$ 15 billion that year alone. The result, over the past two years, has been an unprecedented surge in demand for agricultural commodities causing dramatic rises in prices, including that of palm oil. Today, high feedstock prices put biofuels largely beyond the reach of any but the wealthiest nations that can afford to maintain subsidies.

The GSI concludes:

In light of the limited economic, social and environmental benefits of promoting biodiesel in Malaysia, the GSI report recommends that the government refrain from intervening in the market for biofuels, through such measures as offering direct price support or imposing mandatory blending. Rather, the biofuel industry should be allowed to function in response to market signals—consistent with environmental and social standards—so that the industry establishes itself on a sustainable rather than a government-dependent basis. The government has correctly surmised that biodiesel can only, at most, complement other energy sources. It cannot significantly augment the nation’s energy supplies.

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27 COMMENTS

  1. Dear Anil,

    There is one irony. Very big irony.

    Malaysian palm oil is being used as bio-fuel in Europe, and them Europeans are not spending billions in the process !

    What is happening is this – The Europeans are buying CPKO (Crude Palm Kernel Oil) in bulk, like tens of thousands of metric tons, and then ship it to Europe.

    Then they mix the CPKO with diesel, with the ratio of 1 part of CPKO with 49 part of diesel. Then they sell the mixed diesel as “eco-diesel”.

    This is happening, Anil, in Europe.

  2. We’re back to square one again.

    As long they take no risks, they won’t think twice or further and deeper.

    As these amounts pile up, so do debts. How would we buy food stock if we spent all our credits?

    The higher usage of diesel as in the case Germany banks on available capital and technology plus what they don’t have – land for cultivation of biofuel crops.

    Malaysia has plenty of land and no cost on capital for the cronies. Idris Jalla is right – don’t kill the cronies. We need them to instill some kind of sanity!

  3. Wahid, I fully agree with you. They fooled around Malaysia and this is how we ended up as losers and they ended up as millionaires and live in palaces. How many mega projects have fizzled out you tell me. The ones who benefited are the contrators and I dont have to tell who they are.

  4. When this whole idea came about, I saw so many projects and a bunch of execs from top companies walking around with huge swagger. It was so hard to be polite to them and not laugh in their face back then.

  5. This 22B RM is scam for tax payers money. The bio diesel thing is a scam to take govt grants.How can they base a business case with assumption that crude oil will be USD 100 per barrel. Secondly the ester yield from existing palm oil fruits is not high enough to make the business case sustainable. For god sake, the existing oil palm is designed to provide cooking oil and not fuel.

  6. The main problem with UMNO is the inability of the UMNO leadership to prevail over Perkasa with an alternative story to tell Malays, UMNO people and ultimately the Malaysian rakyat.

    The inability is telling on the quality of our leadership. Let me be more direct- our leadership is stupid, scared or doesn’t know what’s happening. Therefore it cannot give answers to the message Perkasa is bringing.

  7. For those with carburetor engine, better watch out. The Ron 95 tends to block the sensitive fuel spray passage in the carburetor creating timing problem and fuel/air mixture inconsistency. That’s what happened to my vehicle after less than one month usage of Ron 95. The timing jerks and you can feel the loss of power going uphill. I even heard of a Kancil completely immobilised (cannot start) after filing up with Ron 95 at the petrol station. That poor Ah Pek had to get a mechanic to tow away his car.

  8. All just talking. Natural gas fuel they can’t supply, they want to supply biofuel. Dreamlah! With Bolehland mentality everything they can do but achieve nothing.

  9. tunglang & kee, u r both correct. ron 95 burns more than ron 97 thus not worth a single cent to use it. the operator at a local petrol station even said it’s a lousy petrol. definitely being duped by the gomen saying it’s best lah what lah …

  10. Name me 1 mega project that’s profitable vs number of ‘projects’ that had been squandered! Instead of finding out “how” to rectify, it’s better to asked “Who’s responsible” follow by “what’s needed to changed because whatever reported to the public, 85% more of these ‘useless’ projects are lock behind the “Power Curtains”. I don’t belief our nation have that kind of money to sustain anymore unless your children are prepare to pay for it.

  11. Bakun Dam has been labelled as a ‘monument of corruption’, its output far exceeds energy needs in Sarawak, with industrial users still unconfirmed as yet.

  12. Watched a Singapore Channel 8 program last week where one entrepreneal guy set up a company that collects used cooking oils from hotels/hawker centres/HDB household and turned the used oil into bio-diesel.

    The program also showed one construction site of a green building uses the supplied bio-diesel to run the generators.

    Why need RM22 billion?

  13. A Star article pointed out that Asean and other countries were making good progress in biodiesel with the key assistance of subsidies. These countries do not even have petroleum wealth like us.

  14. Dear Anil,

    I think the RM22 billion figure said to be for the production of bio-diesel is totally unrealistic and may include cost of maintaining and producing Palm oil for local consumption and export….

  15. The “Gravy wagon” has lost its way? No?
    The hyenas have worked on the carcass, no meat left, so sayonara to another 22billion gone with the wind!

  16. Maybe the excuse is there was no KPI then to measure success/failure.

    We wait to see if NKRA with its KPI will be successful or not.

  17. Information & technology are both available for Govt. to move forward. Unfortunately the NEP mindset makes them slow in implementation.

    Read the star today and research how PENNY WONG has move forward on environmental issues. That is how she merit herself as Australian citizen & Finance Minister now.

    Penny Wong & team have done marvelous in keeping both environment & economy moving forward.

    Najib carbon pledged is just another bull…

  18. biofuel is certainly not the way anymore. it is good for localized limited use only.

    Now in Europe, USA, Japan and even India alot of attention is on liquid hydrogen.it looks like liquid hydrogen is the way things are developing today. Maybe in 20 years fossil fuels will be a thing of the past.

    Clean diesel cars are certainly the way to go too. They dont smell like the old diesel, and the cars consume much less energy. diesel cars a re good for long distance driving etc for trucks and all that.

    I myself am a strong proponent of Lpg too although i am gunning for a liquid hydrogen fuel car myself.

    thats not to say unleaded petrol does not have its supporters. problem with hydrocarbons is they’re running out.

  19. Many people knew it was an over-hype when biodiesel was bandied about. It was more of a political hype than a realistic proposition. Not enough research was done and the industry went overboard into building up the infrastructure for its’ production. Maybe it was land grab too as the government, as usual, was fooled into supporting the project. The money could’ve been well spent if they were channelled into other types of renewable energy like solar energy. And now they want the rakyat to compensate them for their own folly? Please spare us lah.

    • Regarding land grab, just take a disgusting look at Sarawak rainforest. Besides clearing the virgin jungle for oil palm plantation, millions and millions tons of timber are processed from this excuse to clear land.
      Kill 2 birds with one dirty stone – the Gomen is no fool!

  20. Don’t even talk about biofuel lah. Even clean diesel also cannot, we want to look to biofuel or biodiesel.

    In Europe, everybody is going for diesel because diesel is a much cleaner fuel compared to the good old petrol. In addition to this, it gives nearly DOUBLE the mileage compared to petrol and even more power (torque).

    Infact, for example, for every Mercedes/BMW petrol engine sold, Mercedes/BMW sell 3 diesel engines.

    The government should be encouraging the use of diesel if it is concerned that the rakyat is spending too much of money on petrol.

    If one had a diesel car, one would not need to “waste” so much of money filling up petrol. Most diesel cars can even go up to 1000KM with just a mere full tank.

    It is high time that the government push the Petroleum companies to come out with cleaner diesel and target Euro V compliancy in terms of emissions and clealiness of diesel.

    Currently our diesel is so filthy and very high in sulphur. Sadly, its still Euro 2 standards which Europe progressed countless of years ago.

    I have no idea why our government is happy for us to use petrol. It is far better for the population to use half its usage of fuel by moving to diesel.

    Or does the government want us to use more petrol?

    • Unless the Gomen reduces road tax for diesel engine vehicles and further reduces diesel price, the average Malaysian cannot afford to change his petrol vehicle to diesel. Also the Ron 95 is a (questionable) petrol which (I believe may) cause … problems and performances which we are duped into using for its cheaper price at greatly lower quality. Malaysians are always short changed – from car sales tax to petrol/ diesel prices.

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