Malaysia to tap idle biodiesel capacity to cushion fuel price shocks

Malaysia will raise its biodiesel blend mandate from 10% (B10) to 15% or B15, to safeguard domestic diesel supply and reduce reliance on imported fossil fuels, Economy Minister Akmal Nasrullah Mohd Nasir said April 14.

The transition will begin with a rollout of B12 blending mandate, as Malaysia looks to accelerate its renewable energy transition in response to supply disruptions triggered by the crisis in West Asia, Nasir said in a televised announcement after a governmental briefing on the global energy crisis.

Malaysia is the world's second-largest producer and exporter of palm oil. Palm oil and its byproducts are the main source of feedstock for the country's biodiesel industry.

Malaysia has a B10 mandate for its transportation sector, but a B20 mandate has been implemented in the territory of Labuan, Langkawi Island and the state of Sarawak, excluding the town of Bintulu.

The move comes close on the heels of Indonesia, the world's largest palm oil supplier and neighbor, expanding its biodiesel mandate to 50% by July from the current blending target of 40% (B40).

Unlike Indonesia's rapidly growing biodiesel mandate, Malaysia's biodiesel production has stagnated in recent years, with capacity utilization stuck at 58% as persistently high crude palm oil prices widen the cost gap with fossil diesel and stall the government's push for higher blending mandates, the US Department of Agriculture said in a report on April 9.

Malaysia's B10 mandate has remained unchanged since 2019, while the B20 target, originally slated for nationwide rollout in 2021-22, continues to stall. In February 2025, the plantation and commodities minister conceded there was insufficient infrastructure or investment to implement B20 nationally, the USDA report noted.

Malaysia's biodiesel production reached 975,207 metric tons in 2025, with an installed capacity of 2.36 million mt, underscoring the industry's ability to scale up quickly. Nasir said the existing blending infrastructure allows the immediate rollout of B12 without additional costs.

The National Economic Action Council has endorsed biodiesel as a practical near-term alternative fuel.

"Biodiesel meets the requirements of being mobilized immediately, having a direct impact, and relying on domestic capabilities," Nasir said during the televised address.

Speaking to reporters after a briefing, Nasir said: "We must restructure the economy through renewable energy to ensure more secure domestic sources."

The Malaysian Biodiesel Association on April 7 called on the government to accelerate the nationwide rollout of higher biodiesel blending mandates, citing disruptions to global fuel supply chains due to the war in the Middle East.

Malaysia is also preparing for a B30 mandate under the 13th Malaysia Plan, with depot upgrades underway to support higher blends for commercial and public sectors.

The USDA report said said Malaysia's biodiesel production is set to remain unchanged for the second consecutive year at 1.39 billion liters in 2025.

Platts, part of S&P Global Energy, assessed UCOME FOB Straits at $1,300/mt on April 14, unchanged day over day.