Investment in the Asian biodiesel sector has soared in response to booming global demand for biofuels. With EU member states required to source 5.75pc of their road transport fuel from biofuels by 2010, Asian exports of biodiesel to Europe are set to increase as European buyers look to source competitively priced fuels and diversify supply. As most countries in the Asia Pacific region are net importers of fuel oil, several government-driven initiatives are encouraging domestic use of alternate fuels such as biodiesel to reduce dependence on imported oil. “In addition to providing licenses for biodiesel production, tax allowances, and capital grants, many governments are planning to introduce mandatory quotas for biofuels,” says the analyst of this research service. “The initiatives of governments are also evident in the conduction of consumer education campaigns regarding awareness and use of biodiesel.” The increased penetration of diesel-powered vehicles in many countries is expected to further help take biodiesel mainstream.

In another move to encourage production of biodiesel, several biodiesel producers have been publicly listed in 2005 and 2006, notes the analyst. These listings and the subsequent media attention have not only helped biodiesel gain public attention, but have also increased investor confidence in the sector and stimulated further investments in new capacities and necessary infrastructure for the distribution of blends.

The Malaysian biofuel project, when fully implemented in 2008, is expected to absorb up to 500,000 tonnes of palm oil per annum. Malaysia has also agreed to set aside up to 40% (about six million tonnes) of the country’s total palm oil production for biodiesel. Sabah has the largest oil palm planted area at 1.24 million ha, accounting for 30% of Malaysia’s total oil palm planted area in the country. Matured areas stood at 3.5 million ha or 87.5% of Malaysia’s total planted area in 2006. Last year, Malaysia announced a mammoth plantation merger which will result in the largest listed palm oil company in Southeast Asia and the world. The combined entity is expected to have an estimated market capitalisation of RM75.5 billion, planted estates of 511,000 ha, plantation landbank of 578,337 ha and produces 5% to 6% of global CPO output.

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