MALAYSIA BIODIESEL INDUSTRY UPDATE

OCOPOP 2021

Malaysian Biodiesel Association (MBA)

Presentation Outline

1. Palm Biodiesel update - Malaysia

2. Economics for Biodiesel mandates in Malaysia & Indonesia
3. EU Regulations & its effect on Biodiesel industry
4. Emerging trends
5. Conclusion and Palm Oil Price Outlook

Malaysian Biodiesel Association (MBA)

PALM BIODIESEL UPDATE

Malaysian Biodiesel Association (MBA)

Malaysian Biodiesel Statistics
Biodiesel [PME]
Biodiesel [PME] Biodiesel Blended
Production
Years Export Quantity locally
Quantity
(MT) (MT)
(MT)
2008 171,555 102,108

2009 222,217 227,457

2010 117,173 89,609

2011 173,220 49,999 20,343

2012 249,213 28,983 113,276

2013 472,129 175,032 185,039

2014 600,524 87,856 295,451

2015 763,532 178,942 382,000

2016 500, 857 83,581 350,000

2017 720,410 235,291 358,586

2018 1,089,964 515,467 429,213

2019 1,422,871 609,777 641,878

2020 906,156 378,582 803,307

2021 YTD Q2 452,815 139,825 390,351

Source: MPIC & MPOB

Malaysian Biodiesel Association (MBA)

Malaysia Monthly Biodiesel Exports
Malaysia biodiesel export 2018 to June 2021
Biodiesel exports surged in August 2021 later than the usual European summer
peaks this year and is likely to trend lower in the fourth quarter. Full year 2021
90 exports are seen declining by 7.50% from 2020.
80

In thousand metric tons

70
60
50
40
30
20
10
0
Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec
2020 2019 2021

Malaysia filed a case with WTO challenging the E.U ban on palm oil use in biodiesel in Jan 2021. The
WTO agreed to set-up a panel in May 2021 to investigate Malaysia's claim. It will take about a year
for the panel to deliver its outcome. Indonesia filed a separate case

E.U policy on Renewable Energy Directive II. The directive calls for capping of palm biodiesel at 2019
levels through to 2023 and eventual elimination of unsustainably produced palm based biodiesel
into the E.U by 2030. The policy been enshrined in the E.U law since March of 2018 but the
countdown began middle of 2019. Source: Palm Oil Analytics

Malaysian Biodiesel Association (MBA)

Malaysia annual Export
Malaysia biodiesel exports
Biodiesel exports will see another year of reduction in 2022 to reach the lowest in 5 years from
increasing pursuit of de-carbon agenda in the E.U away from crop biodiesel as enshrined in the E.U
Delegated Act and from persistent
700

600

In thousand metric tons

500

400

300

200

100

0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
(est) (proj)

Over 90% of Malaysia biodiesel exports are destined to the E.U with consumption centered largely in Spain,
Italy, Germany and France. Raising of restrictions to movement of people and vehicles, led to the lowest
biodiesel consumption in 4 years in 2020 year. Source: Palm Oil Analytics

Malaysian Biodiesel Association (MBA)

Indonesia total PME Export

Indonesia biodiesel exports seen picking up in 2021

but from a low base in 2020

Indonesia been absent from PME export market

since October 2019 when the European
Commission slapped antidumping duties of between
8-18% major Indonesian biodiesel exporters in
August 2019. The duties were company specific.

Malaysian Biodiesel Association (MBA)

 Malaysia & Indonesia
Total PME Export to EU

E.U produces 2.4-2.6 million tons of Malaysia and Indonesia total PME export
biodiesel from palm oil. Rapeseed The E.U accounts for nearly 80% of Malaysian and Indonesian PME exports (Source : ITS data)
and waste oil are the other
feedstocks. Malaysia and Indonesia 250
collectively exported 384,506 tons of
In thousand metric tons

PME in 2020 of which 326,301 tons 200

or 85% were destined to the E.U. In
2021 Malaysia and Indonesia is likely 150
to export 307,000 tons to the E.U
Source: Palm Oil Analytics
100

50

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Total export - 2019 To the E.U - 2020 To the E.U - 2019 Total export - 2020

Malaysian Biodiesel Association (MBA)

 Biodiesel Blending Road Map
1. B20 for transport sector announced in Feb 2020

2. B20 implementation is in phases:

• Langkawi- Jan 1, 2020
• Labuan- Jan 15, 2020
• Sarawak- Sept 1, 2020
• Sabah- Jan 1, 2021(delayed to possibly end of 2022)
• Peninsular- June 1, 2021(delayed to possibly end of 2022)

3. 12th Malaysia Plan( RMK-12) outlines

• B30 for Transport sector by 2025
• Industry sector will gradually move from B7 to B10, B15, B20 & eventually B30
• Introduction of Carbon Tax (mechanism yet to be worked out)

U.R.Unnithan, POC 2019 Malaysian Biodiesel Association (MBA)

 Malaysian Biodiesel Projections

Biodiesel [PME]
Biodiesel [PME] Biodiesel
Production
Year Export Quantity Blended locally
Quantity
(MT) (MT)
(MT)

2021 1,000,000 300,000 700,000

2022 1,200,000 250,000 950,000

2025 1,500,000 200,000 1,300,000

2030 2,500,000 300,000 2,150,000

Source: MPIC & MPOB

Malaysian Biodiesel Association (MBA)

PALM BIODIESEL ECONOMICS

Malaysian Biodiesel Association (MBA)

 Can POGO Save The Day?
• POGO has at times been helpful as a balancing act, but with fossil fuel prices expected to
remain low, we might never see favorable POGO for discretionary blending
• If fossil fuel prices remain low and POGO is favorable, that will mean that Palm Oil prices
have already crashed
POGO (US$/MT)
600
500
400
300
200
100
0
-100
-200
-300
-400

Malaysian Biodiesel Association (MBA)

 Indonesia’s Biodiesel Support Fund

1. Biofuels Business Entities supply biodiesel to Pertamina / PT ANEKA KIMIA RAYA (AKR).
2. Pertamina / AKR will pay for the Biodiesel based on the Diesel Fuel Market Price Index
assigned by the Director General of Oil and Gas, Ministry of Energy and Mineral
Resources.
3. Ministry of Energy and Mineral Resources cq DG EBTKE verify the delivery of Biodiesel
from Biofuels Business Entities to Pertamina / AKR
4. IECF will disburse the Biodiesel financing funds based on the verification results.
5. Biodiesel Support Funds = The difference between the Market Price Index of Biodiesel
March 2016
and Diesel Fuel Market Price Index determined by the Ministry of Energy and Mineral
Resources.

Source: IECF, 2015

Malaysian Biodiesel Association (MBA)
Indonesian Biodiesel volume vs CPO Price

Source: LMC

Malaysian Biodiesel Association (MBA)

Indonesia Biodiesel use & Spending – Nov 2021
Indonesia domestic biodiesel subsidy paid
Biodiesel subsidy payment is expected to shoot up to US$253 in September as consumption rises from easing of lockdown
measures leading to greater movement of people and vehicles. Sept-2021 usage is an estimate
(Sou
900 350

800
300
In thousand kiloliters

700
250
600

500 200

400 150
300
100
200
50
100

0 0
Jan-21 Feb Mar Apr May Jun Jul Aug Sept
Monthly biodiesel use in kiloliters - LHS Subsidy paid in million US$ - RHS

Malaysian Biodiesel Association (MBA)

GHG Savings from Malaysian Biodiesel Program

GHG
Biodiesel Blending GHG Avoidance GHG Avoidance
Avoidance
Mandate savings @USD savings @USD
(Million
(Transport + 50/MTCo2eq 150/MTCo2eq
MT/yr,
Industry) USD Million USD Million
CO2eq)

B10 + B7 2.83 141.5 424.5

B20 + B7 3.88 194.0 582.0

Source: MPIC & MPOB

Malaysian Biodiesel Association (MBA)

THE EU REGULATIONS

Malaysian Biodiesel Association (MBA)

 A Short History …..
ENVI Report proposes ban on use
of non-sustainable veg oils for
biofuels by 2020
RED II in force. Contribution of high
ILUC biofuels capped to the level
of 2019. From 1 Jan 2024 to 31 Dec
2030, the limit shall gradually
decrease to 0%.
The final version of the Commission
Delegated Regulation 2019/807
was published on May 21 in the EU
Official Journal.

Dec 2015 Jan 2018 Feb 2019 Jun 2019

Apr 2017 Dec 2018 May 2019

Amsterdam Declaration EU Parliament voted on EU commission released draft Delegated Act comes
amendments to the RED II which Delegated Act including criteria in Force on Jun 10
was also covered within the EU for the determination of high ILUC
Resolution (2017) feedstock

Malaysian Biodiesel Association (MBA)

Delegated Act - High ILUC-Risk Criteria
• High ILUC-risk fuels are those produced from feedstock with a significant expansion into land
with high carbon stock. The Delegated Act identifies the following, cumulative, conditions:

– the global production area of the feedstock has increased annually by

more than 1% and 100,000 hectares after 2008
– more than 10% of such expansion has taken place on land with high
carbon stock
• Only Palm fulfills the cumulative criteria
Sources:
DIRECTIVE (EU) 2018/2001 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 11 December 2018 on the promotion of the use of energy from renewable sources
COMMISSION DELEGATED REGULATION (EU) of 13.3.2019 supplementing Directive (EU) 2018/2001 as regards the determination of high indirect land-use change-risk feedstock for
which a significant expansion of the production area into land with high carbon stock is observed and the certification of low indirect landuse change-risk biofuels, bioliquids and
biomass fuels
ANNEX to the COMMISSION DELEGATED REGULATION (EU) supplementing Directive (EU) 2018/2001 as regards the determination of high indirect land-use change-risk feedstock for
which a significant expansion of the production area into land with high carbon stock is observed and the certification of low indirect landuse
change-risk biofuels, bioliquids and biomass fuels

Malaysian Biodiesel Association (MBA)

What is Next?
Palm Oil (high ILUC) to be capped EU commission will review the Palm Oil biodiesel will reach 0% by
at 2019 consumption levels criteria for low and high ILUC end 2030
biofuels

Aug 2020 June 2021 Jan 2024

Jan 2021 Sep 2023 Dec 2030

Review of Directive (EU) RED II implemented by EU Palm Oil biodiesel will start to
2018/2001. Getting feedback member states be phased out (High Risk
on changing RED II targets or (Implementing Act) ILUC)
stay the course

Malaysian Biodiesel Association (MBA)

 Limits of Palm Use in Biofuel under RED II
• According to RED II (Article 26), 6.2m MT
the share of high ILUC biofuels
(Palm) shall not exceed the level of
consumption of such fuels in that
Member State in 2019
• Starting from 2024 till end of
2030, high ILUC palm biodiesel
“shall gradually decrease to 0 MT”

0 MT
2021 2024 2030

Source: Estimates from “More palm and rapeseed in our tanks than on our plates”, July 2020, OILWORLD

Malaysian Biodiesel Association (MBA)

Malaysian Biodiesel Association (MBA)
EMERGING TRENDS

Malaysian Biodiesel Association (MBA)

Media Campaign Against Palm for Fuel

https://www.flickr.com/photos/sumofus/45875031305/in/album-72157705937737634/ , "Creative Commons DeathbyDiesel" by SumOfUs is licensed under CC BY 2.0

Malaysian Biodiesel Association (MBA)

#NotInMyTank Protests across EU Cities

"Creative Commons BERLIN, BRUSSELS, PARIS

NotInMyTank event 21 January 2019" by SumOfUs is licensed
under CC BY 2.0
Malaysian Biodiesel Association (MBA)
Lawmakers call for green ‘due diligence’ in Europe’s supply
chains

Malaysian Biodiesel Association (MBA)

HVO PROJECTED CAPACITY, Million MT

Global Capacity in 2017- 4.75 M MT, expected to grow to 6.8 M MT in 4 years

Source: Greenea Consulting Research

Malaysian Biodiesel Association (MBA)
HVO Plants in the EU
Location Company Capacity, MT Feedstock
Porvoo, Finland Neste 525,000 Animal Fat, Crude Tall
Oil(CTO), Veg Oils

Lapeenrata, Finland UPM 120,000 CTO

Rotterdam, Netherlands Neste 800,000 Animal Fat, Veg Oils

Pitea, Sweden SunPine 50,000 CTO

Port Marghera, Itlay ENI 300,000 Veg Oils, UCO

Gothernburg, Sweden Preem 100,000 CTO

Total 1,895,000

Source: STRATAS ADVISORS

Malaysian Biodiesel Association (MBA)

Planned HVO Plants in the EU
Location Company Capacity, MT Feedstock
La Mede, France TOTAL 500,000 CPO, UCO, Animal Fat(
Uncertain due to feed
constraints)
Gela, Italy ENI 600,000 CPO, UCO( Q2 2019)

Porto Marghera, Italy ENI 240,000 CPO, UC0( In 2021)

Kotka, Finland UPM 500,000 CTO( Final decision

pending)
Gothernburg, Sweden St1 100,000 CTO( Online in 2021)

Lysekil & Gothenberg, Preem 1,200,000 Not disclosed( intention

Sweden to increase to 1.3 M MT
by 2023
Plock Poland PKN Orlen Not disclosed( Capacity
Litvinov, Czech Republic Not Disclosed to be Determined
Total 3,140,000
Source: STRATAS ADVISORS
Malaysian Biodiesel
40Association (MBA)
 Conclusions & Palm Oil Price Outlook
1. COP 26 has pushed for increasing share of renewables.
2. Emerging trends highlight reduced use of crop-based biofuels and an increase
in waste based raw materials.
3. Tightening EU regulations will see lower exports from SEA.
4. Very high POGO Spread will delay increase in local blending targets.
5. HVO as the next frontier for Palm Biodiesel will need careful evaluation of
strategic considerations
6. Lower CPO production in 2021 due to Covid pandemic has pushed CPO Prices
above RM 5300/MT.
8. Increase in local mandates will continue to be a strategic lever to support CPO
prices.
9. The introduction of Carbon Tax will justify the economics of higher local
mandates.
10. With easing of Covid restrictions and production picking up could see CPO
prices drop to RM 3500-4000/MT in 2022

U.R.Unnithan, POC 2019 Malaysian Biodiesel Association (MBA)

 Malaysian Biodiesel Association (MBA)
: + 603-6286 7200 /  : secretariat@mybiodiesel.org.my
www.mybiodiesel.org.my

Malaysian Biodiesel Association (MBA)