Malaysia to Roll Out B20 Biodiesel in Phases, Tied to Oil-Palm Price Spread

Malaysia is taking a cautious approach in advancing its palm oil–based biodiesel program. Plantation and Commodities Minister Noraini Ahmad stated that the nationwide rollout of B20 will be implemented in phases, with progress largely დამოკიდ on the price relationship between palm oil and crude oil. Currently, B10 remains the dominant blend across the country, while B20 has only been introduced in Labuan, Langkawi, and most parts of Sarawak. This indicates significant room for further expansion, with a long-term target of B30.

Recently, escalating tensions involving Iran and disruptions around the Strait of Hormuz have driven a sharp rise in global oil prices. This has renewed concerns over energy security and intensified calls to accelerate the transition toward higher biodiesel blending mandates. In this context, boosting domestic consumption of palm oil has also become a key policy consideration.

On the supply side, however, Malaysia’s biodiesel industry still faces notable underutilized capacity. In 2025, production stood at approximately 975,000 tons, well below the total installed capacity of 2.36 million tons. Unlocking this potential will depend on stronger policy support and infrastructure upgrades. The government has approved funding to enhance blending facilities in Sandakan, Tawau, Sepanggar, and Bintulu, with upgrades to be carried out in stages בהתאם to fiscal conditions.

In comparison, neighboring Indonesia has already implemented a B40 mandate and plans to move toward B50, reflecting a more aggressive policy stance that has previously tightened global supply and supported palm oil prices. Overall, Malaysia’s approach remains more measured. In the short term, progress will be constrained by the palm oil–crude oil price spread, but there is clear upside potential over the medium to long term.