KUALA LUMPUR, Aug 6 — Malaysia, the largest palm oil producer after Indonesia, has delayed the nationwide implementation of its biodiesel mandate to the end of the year, says Douglas Uggah Embas, Plantation Industries and Commodities Minister.

The B5 programme would be completed by December instead of an original target of July, doubling average monthly consumption, Uggah said in an emailed response to Bloomberg questions.

The delay was because construction of 15 blending facilities in the states of Sabah and Sarawak and the federal territory of Labuan in East Malaysia were taking longer than expected, he said.

The price of alm oil, the world’s most consumed cooking oil, has declined 16 per cent in 2014 and slumped to the lowest level in a year in Kuala Lumpur today as the US government predicts record global inventories of soybeans, used to make an alternative oil.

Prices have also been pressured by the failure of Indonesia and Malaysia to boost use in biofuels, according to Dorab Mistry, director at Godrej International Ltd, on June 26.

The government and the palm oil board were “monitoring the progress of the construction of the blending facilities and exploring ways to accelerate completion”. Uggah said. “Full implementation of the B5 programme is expected to consume 500,000 tons of methyl ester annually.”

The country is set to produce 19.5 million tons of palm this year, the government says.

Futures declined 0.6 per cent to RM2,241 ringgit (US$700) a ton today on the Bursa Malaysia Derivatives in Kuala Lumpur.

Missed expectations

B5, which involves blending 5 per cent of palm methyl ester with 95 per cent of diesel petroleum, was completed in March in Peninsular Malaysia, Uggah said. Monthly usage would average 41,667 tons upon full implementation compared with 20,833 tons now, Uggah said. This would increase to 58,333 tons with the start of the B7 programme in the first quarter, he said.

The government and the palm oil board were in discussions with engine manufacturers and automobile associations to get warranties for B7, he said.

Indonesia in September last year also boosted the amount of biodiesel blended with fuel to 10 per cent from 7.5 per cent and power plants had to blend 20 per cent from January.

The country’s use of palm biodiesel in the first five months was roughly the same as in the same period a year earlier and full-year consumption would not increase, Mistry said at a conference in Mumbai in June. Domestic consumption of biodiesel was not as good as expected, Fadhil Hasan, executive director of the Palm Oil Association, told reporters on July 21.

Indonesia and Malaysia produce 86 per cent of world supply. — Bloomberg