According to Frost & Sullivan's Asia Pacific Research Analyst of Chemicals, Material & Food Practice, Ratneswary Balasingam, bio-diesel is clearly viewed by most governments in the region as a way of reducing air pollution and contributing to the reduction of greenhouse gas emissions; to stimulate domestic agriculture; and most importantly, in many cases, to reduce oil imports and improve fuel security. For the latter two reasons, most countries aim to be self-sufficient in both feedstock and production.
"Despite these drivers, there is generally a low level of consumer awareness regarding bio-diesel and its benefits. In many cases, oil companies remain hesitant about offering bio-diesel blends. Also, unimaginable feedstock prices and lack of government initiatives in some countries, in terms of establishing favorable tax incentives for bio-diesel supply and uptake, is restraining market growth," she added.
In 2008, SEA countries had a total production capacity of above 2.6 million tons. However, most companies were producing at only 10 to 50% of their capacity due to high feedstock prices and uncertainty in government mandates during the economic downturn.
"To address this, some governments have introduced compulsory mandates for bio-fuels, which will create a guaranteed market, although the blending percent is generally low when compared to the EU market," said Balasingam.
In Malaysia, the government will implement the blending of 5% palm-based methyl ester with fossil diesel beginning February 2010 whereas Thailand has mandated B2 on February 2008 and plans to increase to B5 by 2011 which will require almost 4 million liters/day of bio-diesel.
The Indonesian government introduced a mandate in November 2008 for a blend of 1% palm-based bio-diesel in transportation fuels and a blend of 2.5% and 0.25% palm-based bio-diesel for industry and power plant uses respectively. This mandate will be increased to between 2.5% to 3% for transportation, 5% for industry and 1% for power plants by 2010.
The government of Philippines has placed a 2 percent bio-diesel mandate, which took effect in February 2009. The mandate will increase bio-diesel requirement from 133 million liters this year to 160 million liters by 2014.
"In the past four years, the industry witnessed an increase in bio-diesel investments that has resulted in a staggering 623 percent jump in aggregate domestic production capacity to the current 383 million liters from 53 million liters in 2005. The Philippines Government hopes to increase the bio-diesel mandate to B3 by 2011," said Balasingam.
She continued, "The increasing number of European- and US-based companies making significant investments in bio-diesel projects in SEA confirms the interest in the industry. In addition, the successful public listing of some bio-diesel producers in this region has reinforced investor confidence in the feasibility of the bio-diesel business model in the region."
Overall, the drivers for the export of bio-diesel produced in the SEA countries, especially for Malaysia and Singapore, that are focusing on export markets such as the European Union are expected to remain strong in the short and medium terms.
"The substantial increase in bio-diesel production capacity in the region is a clear sign of the industry going beyond its niche status to becoming a mainstream export revenue generator and a strategic part of government-driven environment initiatives domestically. However, domestic consumption will not only depend on the pace of government legislation, but also on the level of enforcement and compliance, in relation to blending targets and supply, achieved in each country," said Balasingam.
She continues, "A growing trend is seen as most SEA countries aims to increase the blend requirement for bio-diesel. Focus into local markets and meeting National Bio-fuel Policy requirements will be the future outlook for bio-diesel within the region. Support from local governments, through either subsidies or tax exemption, will in turn spur growth for the development of bio-diesel."
