THE PROSPECTS OF PALM OIL IN MALAYSIA: SUBSTRATE FOR

CHEMICAL, FOOD PRODUCTS AND BIOFUEL PRODUCTION

LAW YEN SOON







A project report submitted in partial fulfilment of the
requirements for the award of Bachelor of Engineering
(Hons.) Chemical Engineering





Faculty of Engineering and Science
Universiti Tunku Abdul Rahman


May 2012
ii




DECLARATION





I hereby declare that this project report is based on my original work except for
citations and quotations which have been duly acknowledged. I also declare that it
has not been previously and concurrently submitted for any other degree or award at
UTAR or other institutions.





Signature : _________________________

Name : ______Law Yen Soon_______

ID No. : ______08UEB05114________

Date : ________10/5/2012__________


iii




APPROVAL FOR SUBMISSION





I certify that this project report entitled THE PROSPECTS OF PALM OIL IN
MALAYSIA: SUBSTRATE FOR CHEMICAL, FOOD PRODUCTS AND
BIOFUEL PRODUCTION was prepared by LAW YEN SOON has met the
required standard for submission in partial fulfilment of the requirements for the
award of Bachelor of Engineering (Hons.) Chemical Engineering at Universiti Tunku
Abdul Rahman.





Approved by,


Signature : _________________________

Supervisor : Assistant Prof. Dr. Sim Jia Huey

Date : _________________________


iv












The copyright of this report belongs to the author under the terms of the
copyright Act 1987 as qualified by Intellectual Property Policy of Universiti Tunku
Abdul Rahman. Due acknowledgement shall always be made of the use of any
material contained in, or derived from, this report.


2012, Law Yen Soon. All right reserved.
v





ACKNOWLEDGEMENTS



With earnest gratitude and appreciation, I would like to take this opportunity to
acknowledge and extend my thanks to those whom have contributed in this project.
First and foremost, I offer my outmost gratitude to Universiti Tunku Abdul Rahman
(UTAR) for providing me opportunity to take this final year project as a partial
fulfilment of the requirement for my degree (Degree of Bachelor of Chemical
Engineering).

Next, I would like to express my gratitude to my research supervisor,
Assistant Prof. Dr. Sim Jia Huey for her invaluable advice, guidance and her
enormous patience throughout the development of the research. It has been a great
adventure and experience during the undertaking of this project.

In addition, I would also like to express my gratitude to my lovely parent and
friends who had helped and given me encouragement.


vi




THE PROSPECTS OF PALM OIL IN MALAYSIA: SUBSTRATE FOR
CHEMICAL, FOOD PRODUCTS AND BIOFUEL PRODUCTION



ABSTRACT



Biofuels have attracted worldwide interest for their potential as a substitute for fossil
fuels. Fossil fuels have been rapidly depleted by global industrial development over
the past century, prompting an urgent search for alternatives. Biofuel production in
Malaysia is synonymous with palm oil, a major established agricultural product in
Malaysia. There are two methods of producing biofuel from palm oil. The
conventional method is through transesterification, which produces palm-based
biodiesel that can be used in compression ignition engines without any modification.
The second method is direct blending of straight vegetable oil (SVO) with petroleum
diesel. In Malaysia, an SVO blend of 5 per cent refined palm oil and 95 per cent
petroleum diesel is marketed under the name Envodiesel. Currently, biofuels
require subsidies, tariffs, fuel mandates, or other government support for economic
viability. Thus, governments and consumers, or both, are paying a significant
premium to gain the expected benefits from biofuels. The extent to which the
expected benefits of costly biofuel promotion policies are being obtained is not clear,
and if the expected benefits do not materialise, then it makes little sense to devote
significant resources to them. The vast majority of Malaysias current biodiesel
production is exported, mostly to the EU and U.S. where domestic subsidies support
biodiesel use (including imports). The profitability of Malaysian biodiesel production
is therefore precarious, depending on volatile palm oil and petroleum prices, and
decisions of policymakers both in Malaysia and overseas.

vii





TABLE OF CONTENTS



DECLARATION ii
APPROVAL FOR SUBMISSION iii
ACKNOWLEDGEMENTS v
ABSTRACT vi
TABLE OF CONTENTS vii
LIST OF TABLES ix
LIST OF FIGURES xi
LIST OF SYMBOLS / ABBREVIATIONS xiii
LIST OF APPENDICES xiv



CHAPTER
1 INTRODUCTION 1
1.1 Energy Consumption & Future of Biofuels from Palm Oil in
Malaysia 1
1.2 Problem Statement 4
1.3 Aims and Objectives 5
1.4 Scope of Study 5
2 LITERATURE REVIEW 6
2.1 Palm oil 6
2.2 Type of Biofuel 12
2.3 Biodiesel 14
viii

2.4 Bioethanol 18
2.5 Biohydrogen 23
2.6 Biomethane 28
3 METHODOLOGY 33
3.1 Introduction 33
3.2 Overall View of the Methodology 34
3.3 Research Method 35
3.4 Primary Data 35
3.5 Secondary Data 36
3.6 Data Analysis 37
4 RESULTS AND DISCUSSION 38
4.1 Data Collection 38
4.2 Palm Oil-derived Biodiesel 42
4.3 Energy and Biofuel Policies 52
4.4 SWOT Analysis for Biodiesel Oil Industry in 56
4.5 Projection of Research Development in Asian Countries 63
5 CONCLUSION AND RECOMMANDATIONS 65
5.1 Conclusion 65
5.2 Recommendations 66
REFERENCES 67
5 APPENDICES 70


ix




LIST OF TABLES



TABLE TITLE PAGE

1.1 Projected CPO Production, Projected CPO for
Biodiesel Production and Potential Biodiesel
Production for the Coming 4 years and 14 years

3

2.1 Yield of Palm Oil to Biodiesel Compare to Other
Sources in litres/hectare

11

2.2 Comparison between Diesel and Biodiesel
Properties

16

2.3 Parameters of Bioethanol in Comparison With
Petrol

20

2.4 Electricity Generation by PEMFC 28

2.5 Parameters of methane (from biogas or natural
gas)

30

4.1 Types of Company/Research Institution
Distribution in Selangor, Perak and Johor States

39

4.2 Categories of Research 41

x


4.3 Fuel Properties of B5 Palm Biodiesel and
Malaysian Petroleum Diesel

43

4.4 Fuel Properties of Normal and Low Pour Point
Palm Biodiesel

44

4.5 Monthly Export of Oil Palm Products in Year
2011

48

4.6 Fuel Properties of Palm Oil Biodiesel and
Jatropha Oil Biodiesel

50

4.7 The developments in Malaysias energy policies
from 1974 to 2000

52

4.8 National Biofuel Policy Strategic Objectives 55

4.9 Existing Palm Biodiesel Plants in Malaysia for
2011

58

4.10 Potential Availability of Agricultural Residues
For Second Generation Biofuels in Selected
Asian Countries

64







xi




LIST OF FIGURES



FIGURE TITLE PAGE

1.1 Percentage of Palm Oil World Production 3

2.1 A Typical Palm Oil Triglyceride Structure 7

2.2 Description of Saturated, Monounsaturated and
Polyunsaturated Acid

8

2.3 Palm Oil Processing Unit Operation 10

2.4 The Cycle between Biomass and Biofuel 13

2.5 Chemical Equation of Biodiesel 17

2.6 The Process Diagram of Biodiesel Production 18

2.7 The Fermentation Process Diagram 21

2.8 Cellulose in Plant Structure 22

2.9 Hydrogen Production at Different pH at
Mesophilic Temperature (37 C)

25

2.10 Figure 2.10: pH Optimum Test at Extreme-
Thermophilic Temperatures (70C)

25
xii

2.11 Relevant Stakeholder Groups in Establishing
Alternative Fuels

29

2.12 Flow Process of Hydrolysis, Fermentation,
Acetogenesis and Methanogenesis

32

3.1 Methodology Sequence 34

4.1 Company/Research Institution Distribution in
Selangor, Perak and Johor States

40

4.2 Categories of Research 41

4.3 Percentage of Profits for Palm Oil Products 50

4.4 Biodiesel Export Destination 51

xiii




LIST OF SYMBOLS / ABBREVIATIONS



SVO
EU
US
MPOB
CPO
TFR
CFPP
RSO
SNG
CO
PPO
FFB
EFB
POME
PEMFC
STP
SWOT
GHG
ILUC
Straight vegetable oil
European Union
United State
Malaysia Palm Oil Board
Crude palm oil
Tocotrienol-rich fraction
Cold Filter Plugging Point
Refined Soy Oil
SynGas
Carbon monoxide
Pure Plant Oil
Fresh Fruit Bunch
Empty Fruit Bunch
Palm oil mill effluent
Proton exchange membrane fuel cell
Standard temperature and pressure
Strength, weakness, opportunity, threat
Greenhouse gases
Indirect land use change

xiv





LIST OF APPENDICES



APPENDIX TITLE PAGE


A Questionnaire Survey 69

B Article 70



CHAPTER 1



1 INTRODUCTION



1.1 Energy Consumption & Future of Biofuels from Palm Oil in Malaysia

Most of Malaysia energy sources come from power stations that are using fossil fuels
like oil and gas to generate electricity. However, this gas reserves estimated to last
for another 33 years and oil reserves another 19 years, then sources will eventually
run out (Salsuwanda Selamat and Che Zulzikrami Azner Abidin, 2011). In addition
to this, burning of fossil fuels produce greenhouse gases such as carbon dioxide and
methane that can cause global warming. All participating countries from all over the
world which in policies to mitigate global climate change, are concerning about these
issues and taking appropriate actions action to replace non-renewable energy with the
renewable energy. They are never allowed to choose those policies that will reduce
greenhouse gas emissions at the lowest cost to the country taking the action, even if
such a strategy may involve higher costs to the world (Hillard G. Huntington and
Stephen P.A. Brown, Oct 2003).

Biofuel is known as agro fuel and is mainly derived from biomass or bio
waste. Biofuels also are the best way of reducing the emission of the greenhouse
gases. Great development in technology these days is causing the emission of
greenhouse gases to harm the environments ecosystem. In respond to this, the
research to find alternative energy to reduce greenhouse gases has become the major
concern of the nation. As a result, palm oil was found to be a potential biofuel raw
material. Biofuel substrate from palm oil is biodegradable, non-toxic, and has
2

significantly fewer emissions than petroleum-based diesel (petro-diesel) when
burned.

Oil palm is actually another potential source of renewable energy. The
development of biofuel industry in Malaysia is important because of environmental
protection and energy supply security reasons. In order to supply a good quality of
palm oil biofuel to the market, plantation of palm oil had been expanded in the
country with cooperation between the private sectors and the government of
Malaysia. Subsidies had been given accordingly while policies were set up in order
to protect the plantation of oil palm. Major research is also been done by the
governments organization such as the Malaysia Palm Oil Board (MPOB) while
plantation was mainly done by the private sector such as Sime Darby Plantation and
IOI Corporation.

Malaysia is currently one of the large producers after Indonesia. Malaysia
produces about 47% of the worlds supply of palm oil and accounts the highest
percentage of global vegetable oils and fats trade (S. Sumathi, S.P. Chai, A.R.
Mohamed, 2007). In December 2006, the Malaysian government initiated merger
of Sime Darby Berhad, Golden Hope Plantations Berhad and Kumpulan Guthrie
Berhad to create the worlds largest listed oil palm plantation player. Besides
producing oils and fats, there is a continuous increasing interest on oil palm
renewable energy recently. Research and development were carried out by
professional from Malaysia and Indonesia on renewable energy especially palms oil
to substrate for biofuel production.

The pie chart below (Figure 1.1) is the production rate of palm oil in the
world in 2008 and Malaysia has produced 41.3% of world production. We manage to
determine that Malaysia is a palm oil plantation country and has the high potential to
produce a lot of palm oil for worldwide. Next will be the forecast for the future
production in CPO, from CPO to Biodiesel and successful Biodiesel.
3


Figure 1.1: Percentage of Palm Oil World Production



Table 1.1: Projected CPO Production, Projected CPO for Biodiesel Production
and Potential Biodiesel Production for the Coming 4 years and 14 years
Year
Projected CPO
Production
t / year
Projected CPO for
Biodiesel Production
t / year
Potential
Biodiesel Production
mill. l / year
2015 17,740,000 3,380,000 3,930
2025 17,910,000 3,550,000 4,128

The CPO production forecast was assumed by MPOB, Dr. Chow C.S. The density of
biodiesel was calculated with 0.86 g / l. Density is an important parameter, with
impact on fuel quality. It will optimize the cost of biofuel production by predicting
density of high relevance for a correct formulation in order to meet the quality
standard.

In this study, a complete research on prospects of palm oil in Malaysia
substrate for biofuel production is carried out in order to spread information about
4

this renewable energy. Besides that, it is used to revise back Malaysia governments
efforts on encourage both local and overseas developers in taking parts in biofuel
sector and also the future development of biofuel. By completing the research,
information on characteristics, process on producing, advantages and disadvantages
of biofuel are collected and analysed.



1.2 Problem Statement

In Malaysia, although palm oil is an important commodity vegetable oil to our
country, the commercial value of palm oil in biofuel industry is not promoted yet.
The variability of palm oil usage is still limit to food and oleo chemical products. In
fact, the exploitation on the use of palm oil especially in biofuel production is
necessary to increase its commercial value in the market.

Next is the deforestation and environmental degradation in Malaysia, where
large areas of land are being cleared for the cultivation of biofuel crops. Biofuel
industries in Malaysia are facing the problem where limited resources being obtained
to produce biofuel.

The economic assessments on the process of biofuel production from palm oil
are insufficient. In Malaysia, most of the developers are capital oriented which
means that who has the lower risk, high financial strategy and lower cost of
investment of a project will survived in the industry fields. In fact, nearly every
biofuel developers are depend on the financial support from the Malaysia
government because the loan requirement for bridging loan was too high. Thus, the
lack of information on economic analysis and financial support from Malaysia
government has hindered the growth of biofuel industry in Malaysia.



5

1.3 Aims and Objectives

The main objectives of this research include the following:
To study the biofuel production processes from palm oil.
To perform analysis on the availability of palm oil feedstock for biofuel
industry and oleo chemical industry.
To identify the strategies for the commercial value of biofuel production from
palm oil.



1.4 Scope of Study

The scope of study which will be covered:
To understand the different processes that can be used in bioethanol,
biodiesel, biomethane and biohydrogen production from palm oil.
To investigate the advantages and disadvantages of each process used for
biofuel production.
To perform economic analysis, this includes the capital cost, investment cost
and loan requirements.

Besides, discussion on the methods to produce biofuel from palm oil will also be
carried out as it is important for the development of good quality biofuel.
Additionally, the survey on the company in Malaysia which actively involved in
biofuel production activities will be performed to define the future prospects of
biofuel production from palm oil in Malaysia.



CHAPTER 2



2 LITERATURE REVIEW



2.1 Palm oil

In this 20
th
century, palm oil is being consumed in 150 countries all over world
because it provides crucial source of food and energy supplies to developing world.
There are some scientifically proven for durability, nutritional and health benefits.
Therefore, palm oil becomes an environmentally-friendly alternative fuel source to
supplement decreasing high carbon fossil fuels and supplies nutrients in our food
industry. The oil palm is a monocotyledon belonging to the genus Elaeis, called the
African oil palm tree. It is a perennial tree crop and the highest oil producing plant,
yielding an average of 3.7 tonnes of oil per hectare per year in Malaysia (Kalyana
Sundram PhD, 2007).

Palm oil is made up of triglyceride molecules which are the smallest particle
of a pure chemical substance that still retains its chemical composition and properties.
Triglyceride molecule is made up of carbon, hydrogen and oxygen atoms that can be
presented as a structural formula (Ir Ng Say Bock, 2009). Figure 2.1 shows the palm
oil triglyceride structure.

7


Figure 2.1: A Typical Palm Oil Triglyceride Structure

Native to Malaysia, palm oil is the sources for a fleshy fruit come from the
oil palm tree. It is also odourless, tasteless and is semi-solid at room temperature.
Palm oil is the most versatile of all vegetable oils that consisting of 50% saturated fat
and 50% unsaturated fat. More specifically palm oil contains approximately 44%
palmitic acid, 5% stearic acid, 39% oleic acid (monounsaturated), and 10% linoleic
acid (polyunsaturated). Myristic acid and lauric acid are negligible (American Palm
Oil Council, 2006). Figure 2.2 shows the best explanation for stearic acid which
considers as saturated acid is a fatty acid as a special train with a large number of
carriages. Within each carriage, there are only two seats and all seats are taken. There
are other types of 18-carbon chain acids and one of them has in the ninth and tenth
carbon chain one set of vacant seat on the same side of the carbon chain. This is a
monounsaturated acid and is named Oleic acid, written as C18:1. Similarly, the other
18-carbon chain acids, namely Linoleic and this acid have two and three sets of
vacant seats in their carbon chains respectively. These are collectively called
polyunsaturated acids, written as C18:2 and C18:3.


8



Figure 2.2: Description of Saturated, Monounsaturated and Polyunsaturated
Acid

2.1.2 Nutritional Properties

Palm oil contains minor components including carotenoids, tocopherols, tocotrienols,
sterols, phosphatides, triterpenic and aliphatic alcohols. They play an important role
in the stability and quality of the oil although these components constitute less than
1% in palm oil. Below are some of the usages of some beneficial minor components:

Carotenoids are organic pigments naturally occurring in plants, some algae
and some types of fungus and bacteria Carotenoids are important nutritionally. Palm
oil contains 500-700 ppm of carotenoids, namely the a-carotenoids and b-carotenoids.
Nowadays, carotenoids are the precursors of Vitamin A, with beta carotene having
the highest pro vitamin A activity. Palm oil has 15 times more "vitamin A" activity
than carrots and 300 times more than tomatoes. In crude palm oil these carotenoids
appear to offer some protection against oxidation by themselves being oxidized first
prior to the oxidative attack on the triacylglycerols.

9

Crude palm oil is also a rich source of vitamin E (600-1000 ppm) which has
tocopherols and tocotrienols. These two vitamin E contents have been evaluated for
its effects on cholesterol metabolism, anti-cancer properties as well as their ability to
protect against ischemia/reperfusion injury. The vitamin E of palm oil consists
largely of tocotrienols, the remainder being a-tocopherol. Tocotrienol-rich fraction
(TRF) or Palm Vitee has been subsequently shown to inhibit the proliferation and
growth of human breast cancer cells in vitro.

Plant sterols from palm oil are fat-like compounds with a chemical structure
that is very similar to cholesterol. However, they are minimally absorbed by the body
and do compete with cholesterol for absorption during digestion. Besides that, plant
sterols are naturally occurring plant constituents, and studies have shown that they
can inhibit the absorption of dietary cholesterol. They are important because they
have great potential in the pharmaceutical industry (theStar online, 2011).

2.1.3 Process Description from Palm Oil Harvesting until Palm Oil
Refinering

In general, large-scale fully mechanised palm oil processing involved the evolution
of a sequence of processing steps designed to extract, from a harvested oil palm
bunch, a high yield of a product of acceptable quality for the international edible oil
trade. The oil winning process involves the reception of fresh fruit bunches from the
plantations, sterilizing and threshing of bunches to free the palm fruit, mashing the
fruit and pressing out the crude palm oil. The crude oil is further treated to purify and
dry it for storage and export.

Nevertheless, conversion of crude palm oil to refined oil involves removal
of the products of hydrolysis and oxidation, colour and flavour. After refining, the oil
undergoes a process called fractionation, in which it is separated under controlled
thermal conditions (controlled cooling, crystallization, and filtering) into a solid and
a liquid (Linda, 2003).

The liquid fraction (olein) is used extensively as cooking oil
while the solid fraction (stearin) is then used to form solid fats such as margarine.



10

Extraction of oil from the palm kernels is generally separate from palm oil
extraction, and will often be carried out in mills. The stages in this process comprise
grinding the kernels into small particles, heating (cooking), and extracting the oil
using an oilseed expeller or petroleum-derived solvent. The oil then requires
clarification in a filter press or by sedimentation. Figure 2.3 clearly shows the general
flow diagram of palm oil processing unit operation.


Figure 2.3: Palm Oil Processing Unit Operation

2.1.4 Advantages and Disadvantages of Palm oil as Biofuel Feedstock

Advantages have been discovered when palm oil was used as the feedstock for
biofuel production. For examples, the combustion of palm oil biofuel does not
increase the level of carbon dioxide (greenhouse gas that caused global warming) in
the atmosphere compare to combustion of fossil fuel. The main reason is because
biofuel absorb as much carbon in their growing as they release when they are burned
as fuel. Therefore, biofuel are regarded as carbon neutral. In addition, the palm trees
that produce oil have simultaneously absorbed a lot more carbon dioxide during
11

photosynthesis to form biomass for the other parts of the plant. The amount of carbon
dioxide may reduce with the carbon absorption during photosynthesis (Tan Sri Datuk
Dr Yusof Basiron, 2007).

The relative oxidation rate of palm oil at 37C / 98.6F is 40-65 OSI (h) at
97.8C, with a relative stability of 20, as compared with 13-15 OSI for soybean oil,
with a relative stability of 6; and 16-20 OSI with a relative stability of 6 for rapeseed
oil. As extensive oxidation can cause fuel quality to degrade during storage, the
higher OSI of palm oil renders it more stable with respect to oxidation than other oils,
and therefore comprises an important advantage.

Next is palm oil produces more than 5,675 litres of biodiesel per hectare (600
gallons per acre). However, soy oil only produces approximately 475 litres of
biodiesel per hectare (50 gallons per acre) on average. According to the production
rate, palm oil can produce biodiesel 12 times more than soy oil. Table 2.1 illustrates
the volume of biodiesel that has been produced per area of plantation as compared
with various plant sources:

Table 2.1: Yield of Palm Oil to Biodiesel Compare to Other Sources in
litres/hectare
Source Yield (litres/hectare)
Palm 5950
Coconut 2689
Jatropha 1818
Rapeseed 1190
Soybean 446


However, palm oil also has its own disadvantages such as palm oil has higher
cloud point (the temperature at which dissolved solids in the oil begin to form and
separate from the oil). Therefore, the oil must be kept at a temperature that is above
the cloud point in order to prevent the clogging of filers. Besides that, palm oil also
has higher pour point (the lowest temperature at which oil will flow). Next, in blends
12

of RSO (Refined Soy Oil) and palm oil, palm oil addition is strongly limited by
CFPP (Cold Filter Plugging Point) and viscosity. Furthermore, palm oil addition
yields only limited price flexibility.



2.2 Type of Biofuel

Biofuel can be broadly defined as solid, liquid, or gas fuel consisting of, or derived
from renewable, recently living biological material, most commonly plants.
Theoretically, biofuel can be produced from any biological carbon source. In contrast,
fossil fuels are derived from non-renewable biological material formed from the
decayed remains of prehistoric plants and animals.

All biomass materials can be converted to energy via thermochemical and
biochemical processes as stated in Figure 2.4. In a thermochemical process heat is
the dominant mechanism to convert the biomass into another chemical form. Some
of the commonly used conversion processes are pyrolysis, gasification and
liquefaction producing syn-oil, syn-gas and bio-chemicals. The synthesis gas is
composed of H
2
and carbon monoxide (CO) which is also known as syn-gas. On the
other hand, biochemical conversion makes use of the enzymes of bacteria and other
micro-organisms to break down biomass to produce fuels. Commonly used
conversion processes are anaerobic digestion, fermentation and transesterification to
produce biohydrogen, bioethanol and biodiesel. Some of the main sources of
hydrogen are glucose, starch, food wastes and agricultural residues rich in
carbohydrates; for bioethanol are wheat, maize, sugar beet, potatoes; and for
biodiesel rapeseed, soybean, palm and sunflower (Dr. Anbu Clemensis Johnson,
Ragunathan Santiagoo, Abdul Haqi Ibrahim, 2008). Synthetic biofuels are synthetic
hydrocarbons or mixtures of synthetic hydrocarbons from biomass, e.g. SynGas
(SNG) produced from gasification of forestry biomass or SynDiesel.

13


Figure 2.4: The Cycle between Biomass and Biofuel


Basically, there are two types generations of biofuels and we manage to
briefly differentiate second from first generation. First generation biofuel are those
fuel derived from vegetable or animal fats/oils, starch or sugar with the use of
modern technology. The complex chemical reaction process is known as
transesterification, which is used to produce traditional biodiesel. It is designed to be
ready to use in industrial applications as a 100% replacement for distillate fuels
without mixing or blending with other fuels, equipment modification or loss of
significant engine performance. Second generation biofuel is different because we
produce our biofuels using a proprietary blending technology that is simpler, cleaner,
and less expensive and less energy intensive than previous generation of biofuel.
Proponents claims that increasing industrial and political support for this second
generation biofuel is a more feasible solution to achieve efficient fuel production
utilizing a much greater range of plants and its waste.

2.2.1 First Generation Biofuels

First generation biofuels are biofuels which are on the market in considerable
amounts today. Typical 1st-generation biofuels are sugarcane ethanol, starch-based
or corn ethanol, biodiesel and Pure Plant Oil (PPO). The feedstock for producing 1
st

generation biofuels either consists of sugar, starch and oil bearing crops or animal
fats. This feedstock is characterised by mature commercial markets and has
14

contributed to the recent increases in world prices for food and animal feeds.
Example of 1
st
-generation biofuels are biodiesel, bioalcohols and biogas.

2.2.2 Second Generation of Biofuels

Second generation biofuels are those biofuels produced from the whole of the plant
such as cellulose, hemicellulose or lignin, not just the sugar or oil-rich parts. They
can be produced from biomass. Low-cost crop and forest residues, wood process
wastes, and the organic fraction of municipal solid wastes can all be used as ligno-
cellulosic feedstock. Relatively high annual energy yields can be achieved from these
crops compared with many of the traditional food crops currently grown for 1st-
generation biofuels. These biofuel technologies are not yet commercially viable, and
might be some 5 to 10 years or more from reaching the market. However, these 2nd-
generation biofuels are relatively immature so they should have good potential for
cost reductions and increased production efficiency levels as more experience is
gained. The production of biofuels from ligno-cellulosic feedstocks can be achieved
through two very different processing routes. They are:
biochemical in which enzymes and other micro-organisms are used to
convert cellulose and hemicellulose components of the feedstocks to sugars
prior to their fermentation to produce ethanol.
thermo-chemical where pyrolysis/gasification technologies produce a
synthesis gas from which a wide range of long carbon chain biofuels, such as
synthetic diesel or aviation fuel, can be reformed.
Examples of 2nd-generation biofuels are Enzymatic hydrolysis ethanol, Syngas-to-
Fischer Tropsch diesel and Syngas-to- ethanol.



2.3 Biodiesel

Biodiesel is a non-petroleum based diesel fuel which consists of the mono alkyl
esters of long chain fatty acids derived from renewable lipid sources. Biodiesel is
typically produced through the reaction of a vegetable oil or animal fat with
15

methanol in the presence of a catalyst to yield glycerine and biodiesel (chemically
defined as methyl esters). Biodiesel is predominantly used as liquid fuels in the
automotive industries exclusively for diesel engines. Biodiesel can be mixed with
petroleum diesel in any percentage, from 1 to 99, which is represented by a number
following a B. For example, B5 is 5 percent biodiesel with 95 percent petroleum,
B20 is 20 percent biodiesel with 80 percent petroleum, or B100 is 100 percent
biodiesel, no petroleum. It is less polluting and renewable in nature as compared to
the conventional diesel.

Bio-diesel is mainly produced from vegetable oils, which are derived from
the seeds or the pulp of oil-bearing crops. There are two types of oil crops. It can be
annual (rapeseed, groundnut, soybean, and sunflower) or perennials (coconut palms,
oil palms, physical nut, and Chinese tallow tree). Oil from the rapeseed was the first
type used for bio-diesel production and in Europe rapeseed is still the main feedstock
for bio-diesel production. Among the sources, palm oil is the cheapest vegetable oil
and has the highest oil yields/ha of plantation.

Biodiesel can be used in existing diesel applications with little or no
modification to the engine or fuelling system. Biodiesel can be utilized in pure form
however it may necessitate engine modifications to refrain from maintenance and
performance troubles. It is most often blended with traditional diesel fuel at any level
to lessen automobile emissions. When biodiesel is mixed with petroleum diesel, it
yields a fuel which is compatible with diesel engines, shifts imported petroleum and
decrease toxic emissions.

Biodiesel production is the process of producing the biofuel, biodiesel,
through either transesterification or alcoholysis. It involves reacting vegetable oils or
animal fats catalytically with short-chain aliphatic alcohols (typically methanol or
ethanol).

16

2.3.1 Properties of Biodiesel

Biodiesel has physical and chemical properties similar to petroleum based especially
its viscosity and ignition properties. Table 2.2 shows the properties for biodiesel and
diesel.

Table 2.2: Comparison between Diesel and Biodiesel Properties


However, biodiesel is sensitive to cold weather and require special anti-freezing
precautions which similar to standard diesel. Therefore winter compatibility is
achieved by mixing additives, allowing the use down to -20 C. Besides, biodiesel is
readily oxidizes. Thus, long term storage may cause problems but additives can
enhance stability.

2.3.2 Process for Biodiesel Production from Palm oil

Transesterification of natural palm oil with methanol to methyl esters is a technically
important reaction that has been used extensively in biodiesel industry. It is a
reversible reaction and proceeds essentially by mixing the reactants in which the
catalysts is a liquid acid or a liquid base. Figure 2.5 indicates the reaction of
transesterification which involves the reaction of methanol with the triglycerides of
the rapeseed oil to form the corresponding methyl esters and glycerine.
17



Triglyceride + Methanol Methyl Esters (Biodiesel) + Glycerine
Figure 2.5: Chemical Equation of Biodiesel


In the transesterification process, the glycerol is deprotonated with a base,
such as ethanol or methanol to make it a stronger nucleophile, producing methyl
esters (biodiesel) in the process. Heat and an acid or base catalyst are used to help
the reaction proceed more quickly (Leadbetter, Nicholas E, 2007). It is important to
note that the acid or base are not consumed by the transesterification reaction, thus
they are not reactants but catalysts. Transesterification can happen at ambient/70 F,
need 4-8 hours for completion. Reaction is shortened to 2-4 hours at 105 F and even
shorter time 1-2 hours at 140 F. However, the temperature should not higher than
148 F because methanol boils at 148 F.

The general process is depicted in Figure 2.6. A palm oil is reacted with an
alcohol, like methanol, in the presence of a catalyst to produce glycerine and methyl
esters or biodiesel. The methanol is charged in excess to assist in quick conversion
and recovered for reuse. The catalyst is usually sodium or potassium hydroxide
which has already been mixed with the methanol.

18


Figure 2.6: The Process Diagram of Biodiesel Production

Glycerine that has been separated during transesterification process is released as the
by-product of the chemical reaction. Glycerine will either sink to the bottom of
reaction vessel or come to the surface depending on its phase. It can be easily
separated by the centrifuges. The by-product of the transesterification chemical
reaction is known as glycerine that originally formed bond between the chains of
fatty acids and can be used for various purposes. Thus during transesterification
process nothing goes wasted, all the products and by-products are utilized for various
purposes (Haresh Khemani, 2008).



2.4 Bioethanol

Bioethanol is ethanol (alcohol) that can be produced from any biological feedstock
that contains appreciable amounts of sugars or materials that can be converted into
sugar such as starch or cellulose. Even though ethanol can be extracted as a by-
product from a chemical reaction with ethylene and other petroleum products, these
sources are not considered renewable. Actually, bioethanol is mainly produced by the
sugar fermentation process. Chemically, bioethanol is identical to ethanol and can be
represented by either the formula C
2
H
6
O or C
2
H
5
OH.

Palm oil
19

Bioethanol is a high octane fuel and has replaced lead as an octane enhancer
in petrol. By blending bioethanol with gasoline we can also oxygenate the fuel
mixture so it burns more completely and reduces polluting emissions. The most
common blend is 10% ethanol and 90% petrol (E10). Vehicle engines require no
modifications to run on E10 and vehicle warranties are unaffected also. Only flexible
fuel vehicles can run on up to 85% ethanol and 15% petrol blends (E85).

Bioethanol has taken precedence as Prime Biofuel after lot of controversy
erupted on international food shortages and spiralling food prices. In spite of all the
controversy Shrouding Biofuels, there has been understanding that we need to
continually look at alternate sources of fuels and feedstock's which are non-food and
this has seen visible interest for Sugarcane based Bioethanol to wheat, Maize and
other food crops. Non-food Crops like Jatropha, Karanjia have not seen visible
success and are also viewed as invasive species by certain nations.

Bioethanol is considered an alternative to petroleum and diesel and its
popularity is emerging as a fuel for cars it is particularly well established in Brazil.
It is estimated that for 100 Joules energy consumed for bioethanol production, 135
Joules energy is provided by using ethanol as fuel. Production of bioethanol involves
the conversion of a feedstock crop into fermentable sugars through enzyme amylases.
Yeast is then added to ferment the sugars into alcohol and carbon dioxide. The main
crop used in bioethanol production varies throughout the world in Brazil, sugar
cane is preferred, in the USA its corn, in Malaysia, old palm trunk (>25 years) and
across Europe its predominantly wheat and barley.

2.4.1 Properties of Bioethanol

Bioethanol has many favourable properties such as it is a clear colourless liquid, it is
biodegradable, low in toxicity and causes little environmental pollution if spilt
(Dominik Rutz and Rainer Janssen, 2007). Bioethanol burns to produce carbon
dioxide and water. The properties bioethanol is shown in Table 2.3 and compared to
the properties of fossil petrol.

20

Table 2.3: Parameters of Bioethanol in Comparison With Petrol
Fuel Properties Petrol Bioethanol
Density, kg/l 0.76 0.79
Viscosity, mm
2
/s 0.6 1.5
Flashpoint, C <21 <21
Caloric Value (at 20 CMJ/kg) 42.7 26.8
Caloric Value, MJ/l 36.45 21.17
Octane-number (RON) 92 >100
Fuel Equivalence, l 1 0.65


Bioethanol is a monohydric primary alcohol. It melts at -117.3C and boils at
78.5C. It is completely free of water is called absolute bioethanol. Bioethanol forms
a constant-boiling mixture, or azeotrope, with water that contains 95% ethanol and
5% water and that boils at 78.15C; since the boiling point of this binary azeotrope is
below that of pure ethanol, absolute ethanol cannot be obtained by simple distillation.
There is a main property which is bioethanol has low vapor pressure. When stored as
a pure fuel, it has a lower vapor pressure than gasoline, and thus will have fewer
evaporative emissions. In low temperature climates, the low vapor pressure of pure
ethanol will cause cold start problems. Therefore in cold climates ethanol is blended
with gasoline (E85). In contrast, lower-level blends of ethanol in gasoline, tend to
raise the vapor pressure of the base gasoline to which ethanol is added. When ethanol
is blended up to about 40% with gasoline, the two fuels combined have higher
evaporative emissions than either does on its own (Columbia University Press, 2007).

Bioethanol burns in air with a blue flame, forming carbon dioxide and water.
It reacts with active metals to form the metal ethoxide and hydrogen. For example,
with sodium it forms sodium ethoxide. It reacts with certain acids to form esters.
Another example is with acetic acid, it forms ethyl acetate. It can be oxidized to form
acetic acid and acetaldehyde. It can be dehydrated to form diethyl ether or, at higher
temperatures, ethylene.

21

2.4.2 Process of Bioethanol Production from Palm Oil

Fermentation, one of the oldest chemical processes known to man, is used to make a
variety of products, including foods, flavourings, beverages, pharmaceuticals, and
chemicals. At present, however, many of the simpler products such as ethanol are
synthesized from petroleum feedstock at lower costs. The future of the fermentation
industry, therefore, depends on its ability to utilize the high efficiency and specificity
of enzyme catalysis to synthesize complex products and on its ability to overcome
variations in quality and availability of raw materials.

Figure 2.7 is a diagram about the process of fermentation. Production of
bioethanol involves the conversion of a feedstock crop into fermentable sugars
through enzyme amylases. Yeast is then added to ferment the sugars into alcohol and
carbon dioxide. pH and sugar concentration will be adjusted and then will proceed to
sterilized filtration.

Figure 2.7: The Fermentation Process Diagram

Palm oil mills produce a large amount of solid wastes. The remainder of the
oil palm consists of huge amount of lignocellulosic materials such as oil palm fronds,
trunks and empty fruit bunches. The residues contain 7.0 million tonnes of oil palm
trunks, 26.2 million tonnes of oil palm fronds and 23% of Empty Fruit Bunch (EFB)
A=Core of Old Oil Palm Trunk
B=Middle of Old Oil Palm Trunk
C=Outer of Old Oil Palm Trunk
22

per tonne of Fresh Fruit Bunch (FFB) processed in oil palm mill. Cellulose is the
most abundant substance found in the plant kingdom. It is the major component of all
plant material, comprising up to half of the plant's dry weight. Figure 2.8 is the
example of cellulose in plant structure.


Figure 2.8: Cellulose in Plant Structure

The most widely used fermentation is blackstrap molasses which contains
about 35 40 wt% sucrose, 15 20 wt% invert sugars such as glucose and fructose,
and 28 35 wt% of non-sugar solids. However, in Malaysia, we are producing
bioethanol by using oil palm trunk and also EFB. Both sources have molecules of
cellulose are organized into long, unbranched microfibrils that give support to the
cell wall. Therefore, we are using cellulosic materials to bioethanol fermentation.
Each step in the process of the conversion of cellulose to ethanol proceeded with
100% yield; almost two-thirds of the mass would disappear during the sequence,
most of it as carbon dioxide in the fermentation of glucose to ethanol. This amount of
carbon dioxide leads to a disposal problem rather than to a raw material credit.
Another problem is that the aqueous acid used to hydrolyze the cellulose in wood to
glucose and other simple sugars destroys much of the sugars in the process.

One way of making cellulose wastes more susceptible to hydrolysis is by
subjecting them to a short burst of high energy electron beam radiation. An
alternative to acid hydrolysis is the use of enzymes. Although they avoid the
corrosion problems and loss of fuel product associated with acid hydrolysis, enzymes
have their own drawbacks. Enzymatic hydrolysis slows as the glucose product
23

accumulates in a reaction vessel. This end-product inhibition eventually halts the
hydrolysis unless some way is found to draw off the glucose as it is formed.



2.5 Biohydrogen

Hydrogen is the most abundant element in the Universe and very common on earth.
Its atomic structure is the simplest of all atoms which is diatomic (H
2
), since it is
composed of one proton and one electron. Usually, pure hydrogen does not exist
naturally since it easily combines with other elements. However, many experiments
have been carried out to study the possibility of hydrogen production using organic
wastes from various industries and this type of hydrogen we called it as biohydrogen.
The term biohydrogen refers to non-fossilized and biodegradable organic material
originating from plants, animals and microorganisms derived from biological sources.
Biohydrogen has been well documented in recent years and has generated increased
attention from researchers due to its characteristics as an ideal, clean and sustainable
energy resource for the future. In nature, biohydrogen is produced during acidogenic
waste treatment process where acid forming bacteria produces organic acid
compound, hydrogen and carbon dioxide.

Biohydrogen production can be achieved by light driven photosynthesis or
dark fermentation. Certain species of green algae produce hydrogen in the presence
of sunlight. Researchers manipulated the photosynthetic process of spinach plants to
produce hydrogen. However, these biological hydrogen productions are known only
as immature lab experiment. Dark fermentation of organic waste materials had
presented a promising route of biohydrogen production compared to photosynthetic
routes. The major advantages of dark fermentation are high rate of cell growth, no
light energy required, no oxygen limitation problems and ability to run on low capital
cost.

In Malaysia, the palm oil industry annually generates about 15.2 million tons
of wastewater, known as palm oil mill efuent (POME). The effluent resulted from
24

the palm oil industry can cause serious pollution if left untreated. This is a problem
of considerable magnitude, notably in Malaysia. Due to the nature of POME, with
high cellulose and lignocellulosic material, it takes a long time to degrade the organic
substances. Therefore, research has been carried out to use POME sludge as an
inoculum, and it has produced a promising level of hydrogen production.

2.5.1 Properties of Biohydrogen

Biohydrogen fermentation has been extensively studied because it has the potential
for providing sustainable and renewable energy for the future. The temperature, pH,
HRT, hydrogen/carbon dioxide partial pressure, volatile fatty acids and inorganic
content are the main parameters that affect the anaerobic hydrogen fermentation
process.

Firstly is the temperature affects the hydrogen producing bacteria activities
and hydrogen production rate. Dark fermentation reactions can be operated at
different temperatures: mesophilic (25-40C), thermophilic (40-65C), extreme
thermophilic (65-80C) or hyperthermophilic (>80C). Most of dark fermentation
experiments are conducted at 35-55 C until nowadays. The extreme thermophilic
process provides a number of advantages compared with the mesophilic and
thermophilic such as the hydrogen production is much higher, it has much better
pathogenic destruction for digested residues performed at high temperatures and it
minimizes the contamination by hydrogen consumers such as methanogens,
solventogens.

Secondly is the pH level has an effect on enzyme activity in microorganisms,
since each enzyme is active only in a specific pH range and has maximum activity at
its optimal pH. For mesophilic hydrogen dark fermentation, it has been found that the
optimal pH is around 5.0-5.5 as shown in Figure 2.9.

25


Figure 2.9: Hydrogen Production at Different pH at Mesophilic Temperature
(37 C)

However, for hydrogen fermentation at extreme-thermophilic temperatures, the
optimum pH is about 7. Figure 2.10 below has proven that hydrogen has been
produced the highest rate at pH 7.


Figure 2.10: pH Optimum Test at extreme-thermophilic temperatures (70C)

HRT is also a third important parameter for dark fermentation process.
Normally, in an anaerobic process, pH and HRT are coupled parameters: short HRT
(<3 days) results in low pH. Both pH and HRT have been demonstrated as the
effective ways to separate hydrogen producing bacteria and hydrogen consuming
Achaea at mesophilic and thermophilic conditions. However, for extreme-
26

thermophilic temperatures, HRT should not be less than 2 days. If not, it resulted in
bad hydrolysis and washout the bacteria.

Next, the partial pressure of H
2
(pH
2
) is an extremely important factor
especially for continuous H
2
synthesis. Continuous H
2
synthesis requires pH2 of 50
kPa at 60 C, 20 kPa at 70 C and 2 kPa at 98 C under standard conditions. In case
of carbon dioxide, the removal of CO
2
can improve the hydrogen production in dark
fermentation. After CO
2
was removed, the hydrogen production was doubled.

Finally is high concentration of the organic acids result in a collapse of the
pH gradient across the membrane and cause the total inhibition of all metabolic
functions in the cell. However, inorganic elements such as iron concentration can
increase hydrogen production significantly.

2.5.2 Dark Hydrogen Fermentation Process

Dark hydrogen production is a ubiquitous phenomenon under anaerobic conditions.
A wide variety of bacteria use the reduction of protons to hydrogen to dispose of
reducing equivalents which result from primary metabolism. Bacteria such as
Enterobacter, Bacillus and Clostridium are known for the dark hydrogen
fermentation. When bacteria grow on organic substrates (heterotrophic growth),
these substrates are degraded by oxidation to provide building blocks and metabolic
energy for growth. In anaerobic environments, protons are reduced to molecular
hydrogen (H
2
), need to act as electron acceptor. Anaerobic fermentation enables the
mass production of hydrogen through relatively simple processes from a wide
spectrum of potentially utilizable substrates, including refuse and waste products.
Moreover, fermentative hydrogen production generally proceeds at a higher rate and
does not rely on the availability of light sources. Carbohydrates, mainly glucose, are
the preferred carbon sources for fermentation process.

The complete oxidation of glucose to hydrogen and carbon dioxide yields a
maximum of 12 mole hydrogen per mole of glucose. However, there are no
27

metabolic energy is obtained in this case and currently this high yield reaction is not
yet in fermentative systems.

C
6
H
12
O
6
+6 H
2
O12H
2
+6CO
2
G
0
=+3.2 kJ

The available hydrogen production from glucose is determined by the
butyrate/acetate ratio. When acetic acid is the end-product, a theoretical maximum of
4 moles hydrogen per mole glucose is obtained.

C
6
H12O
6
+2H
2
O4H
2
+2CH
3
COOH (acetate)+2CO
2
G
0
= -206kJ

When butyrate is the end-product, a theoretical maximum of 2 moles hydrogen per
mole glucose is produced. The equation is given below:

C
6
H12O
6
+2H
2
O2H
2
+CH
3
CH
2
CH
2
COOH(butyrate)+2CO
2
G
0
=-254kJ

Thus, the highest theoretical yields of hydrogen are associated with acetate as the
fermentation end-product.

In Malaysia, the main reason that we interested in dark fermentation over the
other method is because of high hydrogen yields and low operating volumes. By
using proton exchange membrane fuel cell (PEMFC), the best option is dark
fermentation. Despite their high potential, fuel cells are not ready for full commercial
application for stationary plants because of high costs and limited durability. Table
2.4 shows the result of electricity generation by PEMFC.

28

Table 2.4: Electricity Generation by PEMFC




2.6 Biomethane

One of the promising future options for sustainable transport fuels is the
subsidization of natural gas by biomethane. Biomethane is the most efficient and
clean burning biofuel which is available today. It can be produced from nearly all
types of biomass including wet biomass which is not usable for most other biofuels.
There is no clear definition of biomethane. The raw material for the production of
biomethane is biogas, which can be processed from various feedstock sources.
Biogas is formed during microbial decomposition of organic material in an anaerob
environment. A smaller proportion undergoes anaerobic conversion which gives rise
to biogas containing a high percentage of methane representing a significant energy
source. Like the composition of natural gas depends on its origins, methane content
of biogas varies from 50 to 70%, depending on the feedstock composition.
Upgrading and cleaning phases enable biogas to match the local or national
regulation and specification for natural gas when biomethane feeds in grid. The
different production
processes of biogas also affect the content of minor polluting compounds.

One main advantage of biomethane production is the ability to use so-called
wet biomass as feedstock source. Wet biomass cannot be used for the production
of other biofuels. Examples for wet biomass are sewage sludge, manure from dairy
29

and swine farms as well as residues from food processing. They all are characterized
by moisture contents of more than 6070 %.

The approaches to the use of biomethane as motor fuel which have recently
been devised at a national and international level emphasise the long-term relevance
of this technology to achieving climate protection targets. It is doubtful whether the
parties concerned are on their way to achieving the stated targets. One particularly
problematic issue is the large number of different stakeholder groups who have to
contribute to achieving the targets. This stakeholder groups must co-operate to do
their parts in order to make biomethane to be successful develop in their countries.
Figure 2.11 represents the relevant stake holder groups in establishing alternative
fuels.


Figure 2.11: Relevant stakeholder groups in establishing alternative fuels

2.6.1 Properties of Biomethane

Biomethane is the simplest hydrocarbon which is a gas at standard temperature and
pressure (STP). Its chemical formula is CH
4
. Further, biomethane is a combustible
and odorless gas. It burns in air with a bluish, non-sooty flame to form water and
CO
2
. Due to the 1:4 carbon:hydrogen ratio, combustion yields less CO
2
than when
for example petrol is burnt It is also a greenhouse gas with a global warming
potential (GWP) of 23 in 100 years (IPCC 2001). That means that each kg of
methane warms the earth 23 times as much as the same mass of CO
2
when averaged
30

over 100 years. Below are the important characteristic values which are listed in
Table 2.5.

Table 2.5: Parameters of methane (from biogas or natural gas)

After the digestion and purification process of biomass, biomethane is
obtained. Without human interruption, the release of methane could be easily
absorbed by the eco-system. However, with industrialization and human activities,
the emission of methane has increased which partly contributed to the global
warming phenomena.

Further improvements in terms of climate impact, environmental
characteristics and availability of raw materials can be achieved by feeding
biomethane produced in Germany into the existing natural gas grid and making use
of it in transport applications. Admixing 20 % biomethane can reduce CO
2
emissions
by 39 % in comparison with petrol, while if pure biomethane is used, reductions of
up to 97 % can be achieved depending on the method of assessment used.

2.6.2 Bio-methanation Process

Bio- methanation process is one of the most essential processes for treating the Bio-
degradable portion of Municipal Solid Waste. Municipal solid waste is a
heterogeneous waste and contains the following fractions:

1) Putrescible fraction (40%)
This is also called digestible fraction and contains biodegradable organic
matter such as vegetable market waste, paper and yard trimmings
2) Combustible fraction (20%)
31

Also known as refractory organics, these are either slowly digestible or
indigestible organic matter. For example: wood, plastics, rubber, and other
synthetics.
3) Inert fraction (15%)
They are typically non-digestible and non-combustibles such as stones, sand,
glass, and metals.
4) Remaining 25% is the moisture content.

In this process the organic matter is converted into biogas that is a very useful form
of energy. For the bio-methanation process, the bio-methanation process reactor,
called Bio-digester are used in which the temperature and atmosphere is controlled
for the process to occur.


Anaerobic processing of organic material could either occur naturally or in a
controlled environment such as a biogas plant. It is a two-stage process, where large
organic polymers are fermented into short-chain volatile fatty acids. These acids are
then converted into methane and carbon dioxide. Organic waste such as livestock
manure and various types of bacteria are put in a digest and normally biogas has 50-
70% pure methane. Typically, there are four steps in order to produce biomethane as
mentioned in process flow diagram (Figure 2.12):

Hydrolysis: complex organic matter is decomposed into simple soluble
organic molecules using water to split the chemical bonds between the
substances.
Acidogenesis: the chemical decomposition of carbohydrates by enzymes,
bacteria, yeasts, or molds in the absence of oxygen.
Acetogenesis: the fermentation products are converted into acetate, hydrogen
and carbon dioxide by so-called acetogenic bacteria.
Methanogenesis: methane (CH
4
) is formed from acetate and hydrogen/carbon
dioxide by methanogenic bacteria.

32


Figure 2.12: Flow Process of Hydrolysis, Fermentation, Acetogenesis and
Methanogenesis

In the absence of oxygen, anaerobic bacteria decompose organic matter as
follows:

Organic matter + anaerobic bacteria CH4 + CO2 + H2S+ NH3 + other end
products + energy

The conditions for biogasification need to be anaerobic, for which a totally enclosed
process vessel is required. Although this necessitates a higher level of technology
than compared to composting, it allows a greater control over the process itself and
the emission of noxious odours. Greater process control, especially of temperature,
allows a reduction in treatment time, when compared to composting. Since a biogas
plant is usually vertical, it also required less area than a composting plant.



CHAPTER 3



3 METHODOLOGY



3.1 Introduction

In this chapter, the problems encountered and the tools/steps that had been used to
carry out the investigations were elaborated. The methodology included the data
collection method used to obtain and gather relevant information for analysing and
defining the prospects of Palm Oil in Malaysia specifically in the Biofuel Production.
The research methodology was important as the good methodologies would ensure
the successful of the progress study completed within the time frame productive and
informative data can be collected. The project methodology included appropriate
questionnaire design for data collection. Besides, informative data analysed before
the hypothesis and conclusion can be obtained.


34
3.2 Overall View of the Methodology

Figure 3.1 below showed the overall view methodology sequence of the prospects of
Palm Oil in Malaysia specifically in the Biofuel Production. The methodology
included the data collection method used to obtain and gather relevant information
for analysing.






















Figure 3.1: Methodology Sequence



Secondary
Data
Primary
Data
Survey Questionnaire,
Observation, Postal
Method,
Supply and
Demand Studies,
Desk Studies-
Journals, Books,
Articles, Internet
Thesis Writing
Defining the Types/Methods of
Data Collection
Analysing and Interpreting All Data in
order to Figure Problems
Journals, Books, Articles, Internet
35
3.3 Research Method

The research method could be divided into two main categories source of data which
are primary data and secondary data. Primary data was data that had not been
previously published and was derived from a new or original research study and
collected at the source. For further explanation, it was information that obtained
directly from first-hand sources such as surveys, observation or experimentation.
Meanwhile, secondary data was information that had been gathered by researchers
and recorded in books, articles, and other publications.



3.4 Primary Data

In this study, primary data which consisted of survey questionnaires, postal method
and observations were used to understand the background of the companies for
producing the biofuel from palm oil. The primary data was selected because of the
following advantages. The primary data was basic data which consisted unbiased
information about palm oil and biofuel from palm oil. This data was original data
from the primary market and the population that had not been modified by other
authors or publishers. The data was directly getting from population through survey
questionnaires, postal method and observations techniques.



3.3.1 Survey Questionnaires

Survey questionnaire was a data collection method which came out with a form
containing a set of questions, especially one addressed to a statistically significant
number of subjects as a way of gathering information for a survey. The
questionnaire-based survey forms were targeted to the respondents of engineers and
researchers involved in Malaysia Palm Oil Industries and Government Institution for
Palm Oil. Through questionnaire survey, the opinion, the awareness on the current
36
development and the perceptions and expectations of the respondents on prospects of
palm oil as biofuel feedstock in Malaysia could be defined.

The structure of the questionnaire for respondents were designed 3-point
scale (from less frequent to very frequent, 5-point scale (from strongly disagree
to strongly agree) or 10-point scale (from less important to most important)
according to the types and levels of the questions. Besides that, the respondents were
asked to indicate their opinions on direct closed questions to ease the data analyses
by using the graphical method.

3.3.2 Postal Method

Postal was also a regular method which can used in order to obtain the information
about biofuel in Malaysia. This survey was accomplished with an explanatory letter
and prepaid return envelope from government sectors and private companies through
postal method.

3.3.3 Observations

Observation is a simple way to gather data on human behaviour using time and
motion study. This method can observe accurate information and learn to improve
method. From this method, clear pictures and process about producing biofuel from
palm oil could be obtained.



3.5 Secondary Data

In this study, secondary data which consisted of desk studies was used to understand
the advantages and disadvantages for producing the biofuel from palm oil and its
specific requirement in order to produce biofuel feedstock. The secondary data was
selected because of the following advantages such as economical, save efforts and
expenses. Besides that, a lot of time could be saved and primary data collection could
become more specific by using secondary data. The secondary data could improve
37
the understanding about the problem because it provide a basis for comparison for
the data that is collected by the researcher.

3.2.5 Desk Studies

This study was adopted to review the relevant literature on various type of biofuel
production plant that operates in Malaysia and the process for each element of
biofuel. At the same time, develop an understanding on the characteristic of each
type of biofuel. This can be done by using various devices such as internet searching,
reference books, journals, magazines, newspaper and articles.



3.6 Data Analysis

All the information is collected from primary and secondary resources where
analysed and interpreted by using graphs to analysed. The biofuel substrates from
palm oil that currently obtainable in the surveyed commercial area will be analysed
by presenting the photographs. There will be some problems to figured out and will
do some comparisons between commercial and lab scale.




CHAPTER 4



4 RESULTS AND DISCUSSION



This chapter presented the results and discussion on the prospects of palm oil in
Malaysia substrate for biofuel production which obtained from questionnaire survey
on behalf to achieve the objective of characterizing biofuel and quantifying
government subsidies and other support for biofuel production, distribution and
consumption. The sending outs questionnaire survey took about three months (from
October 2011 to December 2011) in order to complete gather all the information for
analysing. This chapter began with analysing data collection and followed by palm
oil-derived biodiesel, energy and biofuel policies and SWOT analysis for biofuel
industry in Malaysia.



4.1 Data Collection

Due to this survey was a combination of qualitative and quantitative type, therefore
the questions were conduct in open-ended style and close ended style. The
questionnaires were sent to biofuel and palm oil based companies in Selangor, Kuala
Lumpur and Perak research institutions. Two sets of questionnaire were designed as
type A and type B with questions in type A was targeted to parties who involved in
palm oil and biofuel companies, aiming at the point of view about the prospects and
productivity in biofuel industry. Whereas, questions in type B was distributed to
researchers in government research institutions and universities. The feedback from
biofuel industries were less encouraged due to the processes for biofuel production
39
was still in the progressing stage. The overall questionnaire questions could be
referring to Appendix A. Data analysis was carried out based on the informative
reply from the returned questionnaire.

4.1.1 Demographic Profile of the Respondents

Table 4.1 and Figure 4.1 showed the states distribution of respondents. The result
showed that Selangor respondents are higher compare to the other states because
large numbers of active palm oil based industries were located in Selangor.
Company/institution distributions were divided into 4 types which were current
biofuel producer, palm oil mill, university research institution and government
research institution. 72.2% of respondents were from Selangor and 16.7% of them
were from Johor while the remaining of 11.1% was from Perak respondents out of
the total of 18 respondents. Most of the research institution from university and
government were located in Selangor as the research activities actually carried out in
Selangor to ease the collaboration with industry players.

Table 4.1: Types of Company/Research Institution Distribution in Selangor,
Perak and Johor States

State
Type of Industry
No. of Company Percentage %
Selangor


Current Biofuel Producer
Palm Oil Mill
University Research Institution
Government Research Institution
6
3
2
2
72.2
Perak Current Biofuel Producer 2 11.1
Johor Current Biofuel Producer 3 16.7
Total 18 100.0

40
Selangor
Perak
Johor

Figure 4.1: Company/Research Institution Distribution in Selangor, Perak and
Johor States

4.1.2 Research in Biofuel

Table 4.2 and Figure 4.2 showed the type research activities on biofuel that currently
conducted by the respondents. 80% of a total of 18 companies and research
institutions were recently doing the research on biodiesel. The second higher was
followed by palm oil which was the raw material for biofuel (10%). Furthermore, 5%
of research activities were on bioethanol and biohydrogen fields.

World biodiesel prices have increased in 2010 in a context of rising palm oil
and other vegetable oil prices and high crude oil prices. This price increase is smaller
in proportion than for ethanol. Besides that, current Prime Minister Datuk Seri Najib
Razak was encouraging to make Malaysia leading biodiesel producer. Appendix B
showed the article of encourage the production of biodiesel. Therefore, the overall
research that conducted in Malaysia was still focus in biodiesel.


41
Table 4.2 Categories of Research

Frequency Percentage %
Biodiesel
Bioethanol
Biohydrogen
Palm Oil
15
1
1
2
80.0
5.0
5.0
10.0
Total 18 100.0

Biodiesel
Bioethanol
Biohydrogen
Palm Oil

Figure 4.2: Categories of Research



42
4.2 Palm Oil-derived Biodiesel

4.2.1 Properties of Palm Oil based Biodiesel

Biodiesel produced from palm oil had been found to have very similar fuel properties
to petroleum-derived diesel. Palm diesel was successfully evaluated as diesel
substituted with extensively field trial from 1983 to 1994. The 100% palm biodiesel
could be used as fuel in diesel engine without any modification. According to Dr.
Puah Chiew Wei, research officer in the engineering & processing research division
at the Malaysia Palm Oil Board (MPOB), the current sulfur content of 100% pure
palm biodiesel was <10 ppm (<0.001%) which met the stringent requirements of
MS2008:2008 and EN14214:2008.

Malaysian petroleum diesel currently had a sulfur content of 300 to 400 ppm
(0.03 to 0.04%). The low sulfur palm biodiesel contributed to reduction of sulfur
content in B5, and B5 met the requirement of maximum sulfur content of 0.05% as
stipulated under MS123:2005. Based on the latest analysis from Malaysia Palm Oil
Board (MPOB), B5 palm biodiesel (methyl esters) had nearly similar properties as
Malaysian Petroleum Diesel. B5 palm biodiesel resulted from the blend between 5%
of palm biodiesel into 95% petroleum diesel. B5 had provided significant
environmental benefits with a minimum increase in cost for the consumers. B5
reduced emissions of carbon monoxide (CO) by approximately 50% and carbon
dioxide by 78% on a net lifecycle basis because the carbon in biodiesel emissions is
recycled from carbon that was in the atmosphere. As regards the fuel efficiency 1
litre of palm biodiesel contained approximate 10% less energy per litre of than fossil
diesel and yet it did produce more NOx emissions than standard diesel fuel. The fuel
properties for palm biodiesel and petroleum diesel were showed in Table 4.3.

43
Table 4.3: Fuel Properties of B5 Palm Biodiesel and Malaysian Petroleum Diesel
(Source MPOB, 2009)

PROPERTIES UNIT B5
MALAYSIAN
PETROLEUM DIESEL
MS 123:2005
MIN. MAX.
Density @ 15C kg/litre 0.8547 0.8538 0.810 0.870
Viscosity @ 40C mm
2
/s 4.570 4.5424 1.5 5.8
Flash point C 93.0 93.0 60 -
Cloud point C 18 18 - -
Pour point C 9 12 - 15
Total sulphur % mass 0.26 0.28 - 0.05
Carbon residue (on 10%
distillation residue)
% mass <0.1 <0.1 - 0.2
Cetane number - 56.1 54.6 49 -
Cetane index - - 51-57 49 -
Ash content % mass 0.003 0.003 - 0.01
Sediment by extraction % mass <0.01 <0.01 - 0.01
Copper strip corrosion
(3hr at 100C)
rating 1a 1a - 1
Distillation at 90% C 364.7 367.9 - -
Distillation at 95% C 382.3 385.4 - 370
Water by distillation
%
volume
<0.05 <0.05 - 0.05
Colour - L2.0 1.5 - 2.5
Gross calorific value MJ/kg 45.135 45.280 - -
Acid number
mg
KOH/g
0.10 0.08 - 0.25
Electrical conductivity pS/m 110 128-240 50 -
Lubricity m 261.5 324-344 - 460
Note:
B5: 5% palm biodiesel +95% petroleum diesel
MS 123:2005: Specification for diesel fuel (third revision).

Besides that, palm biodiesel with low pour point (winter grade) that was
suitable as diesel substitute in temperate countries had been successfully produced by
MPOB. The normal palm biodiesel with pour point of +15C could only be used in
tropical countries while the winter grade palm biodiesel (-21C to 0C) could be used
44
in temperate countries to meet the seasonal pour point requirements (summer grade,
0C; spring and autumn grades, -10C; and winter grade, -20C).

By overcoming the pour point problem, the MPOB patented technology
(Choo et al., 2002) had turned palm diesel into a more versatile product. There were
three important tests had been verified such as ASTM D6751:07b, EN14214:2003
and MS 2008:2008. ASTM D6751:07b was American Standard Specification for
biodiesel fuel blend stock (B100) for middle distillate fuels. EN14214:2003 was a
requirements and test methods for automotive fuels especially Fatty Acid Methyl
Esters (FAME) for diesel engines. Finally, MS 2008:2008 was another requirements
and test methods for automotive fuels involving Palm Methyl Esters (PME) for
engines. Table 4.4 showed the fuel properties between normal palm biodiesel and
low pour point palm biodiesel.

Table 4.4: Fuel Properties of Normal and Low Pour Point Palm Biodiesel
(Source: MPOB, 2009)

Properties Unit
Normal Palm
Biodiesel
Low Pour Point
Palm Biodiesel
Ester content % (m/m) 98.5 98.0-99.5
Density at 15C kg/m
3
878.3 870-890
Viscosity at 40C mm
2
/s 4.415 4.423
Flash point C 182 180
Cloud point C 15.2 -18 0
Pour point C 15 -21 0
Cold filter plugging point C 15 -18 3
Total contamination mg/kg 12 14
Oxidation stability, 110C hr 16 10.2


45
4.2.2 Palm Oil as Feedstock

One of the important criteria for any vegetable oils to be used as biofuel is it must be
cheap in price. Palm oil meets this criterion perfectly. It is already common
knowledge within the world of oils and fats that the development of the oil palm
industry in Malaysia has been remarkable. Malaysia takes pride of the fact that
within a relatively short period of time, we have become the worlds largest producer
and largest exporter of palm oil products in the international oils and fats market.

Furthermore, the advantage which palm oil holds over other soils and fats lies
in its productivity, yield and efficiency factors. Oil palm is the most productive oil
bearing plant species known. The yield of palm oil per unit area is 5 and 10 times
higher than rapeseed and soybean oil respectively. With lower energy needs to
process and a lower price, palm oil is fast becoming recognised as the best feedstock
for biodiesel there is. The cost of producing one tonne of rape seed biodiesel is 500
to 600 euros whereas palm oil based biodiesel costs far less at 150 to 200 euros.
When the world is looking at vegetable oils as renewable fuel, palm oil will
undoubtedly stand out among other vegetable oils. This yield factor alone is adequate
for the world to decide which vegetable oil should be produced to meet the
expending requirement for Greener and Cleaner Energy for its growing population.

According to Wolfgang Rupilius, a consultant from Germany had said that
palm oil based biodiesel would have higher chances of survival under certain
conditions compared with biodiesel based on canola oil or rapeseed. The
development of canola oil based biodiesel as the fastest growing oleo chemical
products was artificial, and based on the biodiesel tax exemption. Based on studies,
1.2 tonnes of fossil fuel has to be utilised to produce one tonne of canola oil based
biodiesel. However, palm based biomass was used in the heating boiler system that
produces biodiesel; palm oil production did not require much fossil energy.

Palm oil was the right feedstock and will survive in the biodiesel sector by
eliminating political influences and subsidies. If our country had a free economy,
European biodiesel producers would stop buying canola oil and rape seed oil and
instead started buying palm oil. Producing palm oil based biodiesel was a lot cheaper
46
than other feedstock based biodiesel based on Rupilius. Hence, some kind of
restrictions will come or otherwise palm oil will take over completely the biodiesel
market in Europe.

4.2.3 Global Market Value

From the Table 4.5, monthly export in Year 2011 for palm oil in Malaysia was
17,991,285 tonnes and the total sales due exportation was RM60464.50 mil. The
total of oleochemical products attribute to 2,180,681 tonnes and the total sales was
RM10843.60 mil. Followed by finished products with 402,806 tonnes and the total
earning was RM1716.65 mil. In Year 2011, the amount of biodiesel from palm oil in
Malaysia for export was 49,999 tonnes. The earning that had been achieved was
RM179.72 mil.

In general, the total amount of biodiesel that had been exported was relatively
low compare to other products because biodiesel could be considered as new
emerging technology product. High feedstock prices coupled with unmatched rise in
biodiesel export prices squeeze producers profit margins. During high feedstock
prices, companies had to cut production or wait for feedstock prices to moderate.
Palm biodiesel had less significant market value compared with oleochemical
finished products derived from palm oil because oleochemical products supplied the
personal care, automotive and construction industries, which were doing
exceptionally well. Capacity utilization from top Association of Southeast Asian
Nations (ASEAN) producers was above 95%, whereas the European and US
oleochemical industries operated around the mid-70% (Kongkrapan Intarajang CEO,
Emery Oleochemicals, 2011). The total sales of oleochemical final products could
achieve 13.5% out of RM 80,411.43 mil while palm-based biodiesel was only 0.22%
out of the total sales of palm oil products.

Based on the Table 4.5, biodiesel production was nearly at a standstill for
most of the first half of 2011. Most players were unable to maintain the biodiesel
operations due to the high cost of feedstock. Some plants operate sporadically
depending on purchase orders and were able to withstand closure because they were
supported by their parent companies. Due to the lack of demand for biodiesel exports
47
and high palm oil prices in the second half of 2010, these plants were operating on
and off alternatively, with the average of three to four plants in operation each month.
Furthermore, the Malaysia Palm Oil Board reported zero export of local biodiesel for
two months in December 2010 and in January 2011. The zero export predicaments
was a sad situation for many biodiesel producers in the country which had so far
invested more than RM21bil over the last three years hence putting many of them
into the negative margins territory.

Although many biodiesel producers had the existing plant, they were unable
to maintain operations due to high cost of production as well as the lack of incentives
from the Government, according to Malaysian Biodiesel Association (MBA). In
2010, biodiesel exported less than halved in both quantity and earnings, compared
with 2009. Malaysia palm-based biodiesel industry exported 227,457 tonnes of palm
biodiesel which earned about RM 605.75 million for the year, however only 89,609
tonnes exported in 2010, bringing in RM 266.53 million in earnings for the year. The
difference between both years in term of export was 60.60% that achieved the
difference quantity value of 137,848 tonnes while in term of export revenue was 56%
that achieved the difference quantity value of RM339.22 million. For the latest
summary, export of biodiesel decreased by 44.2% to 49,999 tonnes in 2011 as
against 89,609 tonnes in the previous.

Replanting done under the SITS incentive programme which took place in
2009 and 2010 gave an impact on the crude palm oil (CPO) production. In 2009 and
2010, a total of 207,754 hectares of oil palm trees had been felled for replanting and
this would affect the reduction on CPO production in 2010 for an estimated 350,000
to 400,000 tonnes. Besides that, Palm Kernel (PK) production and Crude Palm
Kernel Oil (CPKO) also declined by 4.6% to 4.29 million tonnes and 3.9% to 2.01
million tonnes respectively. (Datuk Dr. Choo Yuen May, January 2011). On the
other hand, some quarters opined that even with the escalating crude oil prices, the
production of palm oil as an alternative feedstock for biodiesel might still not be
viable as the cost of the main feedstock - palm methyl ester - was also on the rise as
crude palm oil (CPO) was trading above RM 3,600 per tonne (Hanim Adnan, 8
March 2011).
48
Table 4.5: Monthly Export of Oil Palm Products in Year 2011

PRODUCT UNIT JAN FEB MAR APR MAY JUNE JULY
PALM OIL
Tonnes 1,222,067 1,114,593 1,235,261 1,349,739 1,411,314 1,585,039 1,735,891
RM Mil 4235.97 4066.72 4550.43 4805.44 4897.79 5484.18 5,829.59
OLEOCHEMICALS
Tonnes 142,696 159,528 159,366 171,019 184,658 169,839 185,387
RM Mil 694.46 829.21 887.99 955.08 1013.10 897.49 971.75
FINISHED PRODUCTS
Tonnes 31,138 22,453 32,643 38,424 33,051 32,700 27,710
RM Mil 130.77 107.17 138.85 168.26 148.15 141.54 117.44
BIODIESEL
Tonnes - 14 75 75 54 5706 224
RM Mil - 0.08 0.35 0.33 0.26 21.09 0.77

PRODUCT UNIT AUG SEP OCT NOV DEC JAN-DEC PERCENTAGE
PALM OIL
Tonnes 1,693,110 1,546,196 1,843,602 1,664,591 1,589,883 17,991,285
82.60 %
RM Mil 5,414.77 5,002.36 5,916.40 5,224.99 5,035.86 6,0464.50
OLEOCHEMICALS
Tonnes 195,683 196,220 206,127 202,085 20,8074 2,180,681
14.80 %
RM Mil 946.37 911.30 955.59 894.40 886.91 10,843.63
FINISHED PRODUCTS
Tonnes 27,344 35,323 43,167 41,246 37,608 402,806
2.35 %
RM Mil 116.66 151.18 183.31 164.50 148.81 1716.65
BIODIESEL
Tonnes 14,007 2,960 14,068 12,411 405 49,999
0.25 %
RM Mil 49.12 10.55 53.71 42.04 1.43 179.72

49
With the violent swing of palm oil prices, the Group of Ministers (GOM) had
started to look at a promising alternative feedstock, Jatropha. It had excellent small-
scale potential but needed more research before it could be cultivated on a larger-
scale area. The GOM had allocated funds to facilitate research and development of
the crop. The Malaysian Palm Oil Board was tasked to carry out performance tests
on jatropha-based biodiesel. The Malaysian Rubber Board was to engage in seed
breeding and the National Tobacco Board was to gauge the suitability of cultivating
jatropha on bris soil in the northern part of the country.

Table 4.6 showed the fuel properties of palm oil biodiesel and jatropha oil
biodiesel. The data also shows that jatropha has a higher energy released than Palm
Oil during combustion, but slightly less energy than petro diesel as noted by the
calorific value. As per Cetane Number, jatropha and Palm Oil has a higher value
compared to Diesel, which would mean that it would ignite earlier once it was
injected in the chamber. However, while jatropha might not need significant amounts
of water to survive, it needed more water and fertilisers to increase the yield of seeds
and oil. Moreover, jatropha would do better on higher quality land, so there were
concerned that it might be difficult to limit jatropha to wastelands. The acidic value
of jatropha was much higher than palm oil. Jatropha was more acidic compared to
Palm Oil which might not be so good for diesel vehicles fuel system and engine in
the long run. When researchers tested at the glycerol content of the jatropha, it also
had a higher content compared to Palm Oil. This could be the effect of just bad
washing on the part of Jatropha biodiesel preparation, wherein molecular glycerine
was not properly removed from the biodiesel (Dr. Iman Reksowardojo, 2006).
Jatropha oil based biodiesel was probably not a solution for FUEL problem.

50
Table 4.6: Fuel Properties of Palm Oil Biodiesel and Jathropha Oil Biodiesel


Palm Oil
Oleochemicals
Finished Products
Biodiesel

Figure 4.3: Percentage of Profits for Different Products from Palm Oil
51
The major markets for biodiesel were the European Union (EU), the United State,
Singapore and Taiwan. Based on the pie chart below (Figure 4.4), the result had
shown that the EU was the main biodiesel export destination which accounted for
56% of overall biodiesel export. United State was the second choice of country to
export biodiesel (23%) as it was a developed country and the government was very
concerned about the environment. Next was followed by Singapore (16%) and
finally was Taiwan which accounted for 3% of biodiesel export. 2% of biodiesel
export was achieved by others such as South Korea, India, Japan and many more.

The future of global biofuels would depend on their profitability, which
depended on a number of interrelated factors. Key to this will be high oil prices: 6
years of steadily rising oil prices have provided economic support for alternative
fuels, unlike previous periods when oil prices spiked and then fell rapidly,
undercutting the profitability of nascent alternative fuel programs. On the other hand,
the sectors profitability had been negatively affected by rising feedstock prices,
which accounted for a very large share of biofuel cost of production. For this
commodity-dependent industry, government support to reduce profit uncertainty had
been a common theme in the U.S., Brazil, and the EU, where biofuel production had
been most significant.
2%
3%
16%
23%
56%
European Union
USA
Singapore
Taiwan
South Korea,
India, Japan

Figure 4.4: Biodiesel Export Destination



52
4.3 Energy and Biofuel Policies

4.3.1 Energy Policies

Since the energy crisis of 19731974, the government had introduced a variety of
policies strengthen the energy security for the country besides continuous ensuring
economic growth (Table 4.7). These policies were found to help to increase energy
efficient in Malaysia with limited fossil fuel and reduce the large exploitation on
fossil fuel itself. Besides that, the policy also encouraged the exploration on
renewable energy resources.

Table 4.7: The developments in Malaysias energy policies from 1974 to 2000
(Source: UNDP Malaysia, 2007)
Policy Broad Objectives
Petroleum Development
Act, 1974
The Act established Petroliam Nasional Berhad
(Petronas) as a corporatized company, wholly owned by
the Government of Malaysia, vested with ownership and
control of petroleum resources in Malaysia.
National Petroleum
Policy,
1975
Introduced to ensure optimal use of petroleum resources;
regulation of ownership and management of the industry;
and economic, social and environmental safeguards in the
exploitation of this resource.
National Energy Policy,
1979
Formulated to achieve a range of supply, utilization and
environmental objectives.
National Depletion
Policy,
1980
Introduced to guard against over-exploitation of national
oil and gas reserves.
Four Fuel
Diversification
Policy, 1981
Emphasis given to fuel diversification. Designed to
reduce dependence on oil and to place increased emphasis
on gas, hydro-electricity and coal as energy sources.
Five Fuel
Diversification
Strategy, 2000
Adds renewable energy to the Four Fuel Diversification
policy. Introduced in recognition of the potential of
biomass, biogas and other renewable energy resources.
53
Petroleum products had comprised 60% of Malaysias end usage for energy.
Natural gas and electricity comprised approximately 18% each, while coal and coke
made up around 4%. The biggest components of petroleum products were
automotive gasoline and diesel which largely used in the transportation sector.
According to Petronas (Malaysias national oil company), Malaysias crude oil
reserves of 5.25 billion barrels would last another 20 years at current rates of
extraction if no new oil fields are discovered.

Petroleum fuels had been heavily subsidized in Malaysia. There were no clear
indications of when fuel was first subsidized in Malaysia. Moreover, it was believed
to have begun in 1982 when the Mahathir administration expanded existing subsidies
to include fuel products. This policy had serious budgetary implications, which will
be exacerbated once Malaysia became a net oil importer. The mechanism for setting
retail prices for petroleum products had been in effect since 1983 (Thillainathan,
2008). The product price was determined after taking into consideration prevailing
international prices, as well as operating costs linked to distribution, marketing, and
sales tax. The subsidy was determined every month using the average oil price for
the particular month. The subsidy is paid every two months to distributors of
petroleum products, mainly the oil companies (Yazid, 2007).

On 5 June 2008, the government revised fuel subsidies, due to the untenable
and rising costs to budget, and standardized the subsidy rates. Transport fuel prices
would henceforth be adjusted monthly but would remain RM 0.30 (US$ 0.09) below
the international market price. The Malaysian government had not released details
about how the subsidized price will be calculated (i.e. whether it will take into
account distribution and retailer costs). For specific target groups, additional
subsidies were provided: For example:

Vehicles with engine capacities of up to 2000cc, and trucks and jeeps with
capacities up to 2500cc, will receive a cash rebate of RM 625 (US$ 192) per
year. Motorcycles up to 250cc will receive a cash rebate of RM 150 (US$ 46)
per year.
54
Vehicles with engine capacities above 2000cc will receive a road tax rebate
of RM 200. Motorcycles exceeding 250cc will receive a road tax rebate of
RM 50 (US$ 15) per year.
Registered fishermen and vessel operators will receive RM 200 (US$ 62) per
month.
Vessel operators will receive 10 cent per kilogram of fish catch landed.

The total cost of diesel subsidies has varied over recent years, reflecting the
international price for fuel. Fuel subsidies rose from RM 4.2 billion (US$ 1.1 billion)
in 2002 to RM 14.7 billion (US$ 4.3 billion) in 2006, before further price reforms
were introduced. In 2007, subsidies rose to RM 16.2 billion (US$ 4.7 billion). Finally,
in 2008, with the international oil price averaging over US$ 130 per barrel during the
first half of the year, the estimated total cost to the federal budget was RM 25
(US$ 5.5) billion (Thillainathan, 2008).

4.3.2 National Biofuel Policy

Encouraging a domestic biodiesel industry based on the existing palm oil sector
appeared to an ideal means to improve energy security, reduce petroleum subsidies,
add value in the palm oil sector, as a poverty alleviation strategy and develop a new
export product. Environmental motivations, such as urban air quality and lower
greenhouse gas emissions, have not been primary drivers behind Malaysias
promotion of biofuels.

The key biofuel policies were developed when palm oil prices were relatively
low and the possibility of replacing some petroleum use with biofuel appeared
feasible. In August 2005, the Malaysian Government launched the National Biofuel
Policy (NBP) under its Five Fuel Diversification Strategy (see Table 4.8) with a view
to developing the biofuels industry. The policy provides the overarching framework
to develop biofuels as one of the five main energy sources for Malaysia.

The NBP aims to supplement the depleting supply of fossil fuels with
renewable resources; mobilize local resources for biofuel production; exploit local
technology to generate energy for the transportation and industrial sectors; pave the
55
way for export of biofuels; and benefit from the spin-off effects of more stable prices
for palm oil. It also aims to be consistent with the United Nations Framework
Convention on Climate Change (UNFCCC), but only on the assumption that biofuels
help reduce greenhouse gases by definition. There are no specific criteria to ensure
this is actually the case.

The policy was underpinned by five strategic objectives (Table 4.8). The first
two objectives refer to the institution of 5% biofuel mandate, using palm oil as the
feedstock. The NBP does not specify whether the processed palm oil to be used in
the blend would be palm olein (Envodiesel) or palm methyl ester (PME). In this
perspective, as noted in the table below, B5 should be considered a general term
for a five per cent blend palm-based biofuel, not necessarily a direct blend of palm
oil. The policy notes that a B5 mandate would create new demand for 500 000 tonnes
of palm oil (assuming national consumption of 10 million tonnes of diesel per year).

Table 4.8: National Biofuel Policy Strategic Objectives
Objective Description
Biofuel for
transport
Diesel for land and sea transport will be a blend of 5% processed
palm oil and 95% petroleum diesel. This B5 would be made
available throughout the country.
Biofuel for
industry
Supply B5 diesel to the industrial sector, to be used as fuel in
industrial boilers, construction machinery and diesel-powered
generators.
Biofuel
technologies
Promote research, development and commercialization of biofuel
technologies.
Biofuel for
export
Encourage and facilitate the establishment of plants for producing
biofuel for export.
Biofuel for a
cleaner
environment
Enhance the quality of the ambient air, reduce the use of fossil fuels
and minimize emissions of carbon dioxide, carbon monoxide,
sulphur dioxide and particulates through increased use of biofuels.

By the end of 2007, 28 months after the launching of the NBP, the
government had completed trials in which a five per cent blend of PME and 95 per
cent petroleum diesel (B5) was used by selected government department fleets as
56
well as by selected users in industry. The Malaysian Standard specifications for PME
B5 were set, and some commercial biodiesel plants established.



4.4 SWOT Analysis for Biodiesel Oil Industry in

4.4.1 Challenges on Palm Biodiesel

Technological Challenge
The European Standard for Biodiesel (EN 14214) and the American Standard
Specification for Biodiesel Fuel (B100) Blend Stock for Distillate Fuels (ASTM
6751-02) were the two major international biodiesel standards for Palm Methyl Ester
(PME). In order to meet EN 14214/ASTM D 6751 specification, MPOB conducted
the analyzing on content of PME produced in Malaysia. However, there were still
some challenges that must be overcome in order to use PME in cold weather. These
related to the low pour point of PME because it solidified in cold temperatures. For
information, standard PME had high cold filter plugging point (CFPP) which was
15C while low pour point PME had CFPP of -18C to -3C. Therefore, Malaysia
is considering setting its own national biodiesel standard for PME which followed
closely to the EU and U.S. standards.

Environmental Challenge
There would be environment concern from all over the countries, especially from
European Union (EU) questioning sustainability of palm oil production for biodiesel.
For example, allegations of destruction of orang utans, rainforests and loss of
biodiversity. Under the Constitution of the Federation of Malaysia, most land matters
were delegated to the states. The states of Sabah and Sarawak managed their own
environmental regulations. Next were allegations that development of peat land gives
net emission of Greenhouse Gases (GHG) and also the struggling debate between
food and fuel. Diversion of land and food crops to biofuels could result in escalating
food prices (Msangi et al. 2006; Food and Agricultural Policy Research Institute
2005; Rajagopal and Zilberman 2007), especially in conjunction with several other
factors contributing to rising food prices such as increasing population and bad
57
weather. The food-fuel conflict appears to be already occurring, partly due to the
conversion of agricultural land from food crops to biofuel crops.

Expensive Production Cost
The price of crude oil and crude palm oil (CPO) prices were not stable and yet kept
fluctuating. Therefore, the margin had thinned in fact became negative. Here was
some calculating to be proved:

1) Cost of Refined Bleached Deodorised (RBD) Palm Oil USD700/Tonne
2) Cost of Maintenance and Insurance USD120/Tonne
3) Cost Production of Palm Biodiesel (USD700 + USD120) USD820/Tonne
4) Selling Price of Biodiesel USD850/Tonne
5) Overall Profit USD 30/Tonne

As the result, palm biodiesel was not economically viable with todays RBD palm oil
price. Therefore, Jatropha had taken into consideration to produce biodiesel because
it was cheap feedstock.

Besides that, the margin for biodiesel production also very much depend on
foreign exchange rate. Besides the palm biodiesel that export and import, it could
also affect investors for make international investments. For example, if investors
needed to convert money currency in order to make a certain investment, then the
changed in the currency exchange rate would affect the investment's value to either
gain or lose when the investment was sold and converted back into the original
currency.

4.4.2 Strength

Facilities

Malaysia were potential to become biodiesel producer country with the well-developed
infrastructures and great integrated biodiesel facilities particularly zones in Pasir Gudang
(Johor), Pulau Carey and Port Klang. Moreover, Malaysia and Indonesia were
responsible for 86% of the worlds palm oil production. The main proportion of palm oil
58
would be used for food. However, Malaysia and Indonesia had agreed to gazette a total
of 6 million tonnes of palm oil to be used as biofuel. Table 4.9 showed operation for
existing palm biodiesel plants in Malaysia for 2011.

Table 4.9: Existing Palm Biodiesel Plants in Malaysia for 2011 (Source: MPOB
Biodiesel Plant In Operation In Malaysia, 2011)
No Company Name Location Operation
1 AJ Oleo Industries Sdn. Bhd. Segamat, Johor Active
2 AM Biofuel Sdn. Bhd. Pasir Gudang, Johor Active
3 Carotino Sdn. Bhd. Pasir Gudang, Johor Active
4 YPJ Palm International Sdn. Bhd. Pasir Gudang, Johor Less Active
5 Malaysia Vegetable Oil Refinery
Sdn. Bhd.
Pasir Gudang, Johor
Less Active
6 Nexsol (Malaysia) Sdn. Bhd. Pasir Gudang, Johor Less Active
7 PGEO Bioproducts Sdn. Bhd. Pasir Gudang, Johor Less Active
8 Vance Bioenergy Sdn. Bhd. Pasir Gudang, Johor Less Active
9 Mission Biofuels Sdn. Bhd. Kuantan, Pahang Less Active
10 Mission Biotechnologies Sdn. Bhd. Kuantan, Pahang Less Active
11 Plant Biofuels Corporation Sdn. Bhd. Kuantan, Pahang Less Active
12 Carotech Berhad (Chemor Plant) Chemor, Perak Active
13 Carotech Berhad (Lumut Plant) Setiawan, Perak Active
14 Lereno Sdn. Bhd. Setiawan, Perak Active
15 Man Jang Bio Sdn. Bhd. Port Klang, Selangor Less Active
16 Intrack Technology (M) Sdn. Bhd. Rawang Selangor Less Active
17 Sime Darby Biodiesel Sdn. Bhd.-
Carey Island
Pulau Carey, Selangor
Active
18 Sime Darby Biodiesel Sdn. Bhd.-
Panglima Garang
Teluk Panglima
Garang, Selangor
Active
19 FIMA Biodiesel Sdn. Bhd. (Titian
Asli S/B)
Port Klang, Selangor
Active
20 Weschem Technologies Sdn. Bhd. Batang Kali, Selangor Active
21 KLK Bioenergy Sdn. Bhd. (Zoop
Sdn. Bhd.)
Shah Alam, Selangor
Active
59
22 Future Prelude Sdn. Bhd. Port Klang, Selangor Less Active
23 Innovans Bio Fuel Sdn. Bhd. Port Klang, Selangor Less Active
24 Global Bio-Diesel Sdn. Bhd. Lahad Datu, Sabah Active
25 Green Edible Oil Sdn. Bhd. (Green
Biofuels)
Sandakan, Sabah
Active
26 SPC Bio-diesel Sdn. Bhd. Lahad Datu, Sabah Less Active
27 Platinum Biofuels Sdn. Bhd. Seremban, Negeri
Sembilan
Less Active
28 Senari Biofuels Sdn. Bhd. (Global
Bonanza)
Kuching, Sarawak
Less Active

Environmental Source

There were many environmental benefits of using palm biodiesel as compared to
petroleum-based diesel. The use of renewable palm oil as biofuel would help to
reduce the use of fossil fuel and indirectly reduce the emissions of greenhouse gases
such as carbon dioxide to atmosphere. Various studies indicated that sulphur dioxide,
hydrocarbons, carbon monoxide and carbon dioxide emissions and particulate
matters were reduced with the use of biodiesel. Biodiesel had a higher cetane number
that improved engine performance and results in cleaner emissions compared to
petroleum diesel.

Based on the current practices in the Malaysian palm oil industry, data that
had shown that palm biodiesel typically contributed to greenhouse gases (GHG)
emission savings of 70% as compared to petroleum diesel if the biogas in the palm
oil mill effluents was captured. If the biogas was emitted to the atmosphere, the GHG
emission savings was >50%.

New Demand for Palm Oil

When palm oil was used in biofuel production, an increasing demand for palm oil
will be stimulated. Generally, the demand for this commodity was increasing rapidly
because of the increasing demand of edible oil in consumer countries, especially
60
China, European Union, Pakistan, India and the United State. The use of palm
biodiesel also contributed to this increased demand and thus to some extent helped to
enhance palm oil prices. Malaysia being the worlds second largest producer and
exporter of palm oil would benefit through the creation of new markets for palm oil
based biodiesel either in nation or in global.

Extensive Research and Development Activities

Research and development in the palm oil was conducted in industry, and by
dedicated government research institutions, such as the Malaysia Palm Oil Board
(MPOB), and universities. The MPOB relied mainly on funds generated through
compulsory taxes collected by government on the industry. Biodiesel production,
Research and Development and the commercialization of new technology for palm
oil and palm oil based product, had been undertaken by the MPOB together with
Petronas. In 2004, Petronas contributed RM 12 million (US$ 3.8 million) to build a
pilot plant for biodiesel production (Ong Soon Hock, 2004).

In 2006, the MPOB received Research and Development for biodiesel
research granted from the government with a total of RM 13.58 million (US$ 3.69
million) when three firms producing biodiesel are using technology developed by the
MPOB.

Energy Security

The introduction of palm oil based biofuel as a diesel substitute would help to reduce
the imports of petroleum diesel. This would help to reduce the dependency on fossil
fuel. Therefore, government provided subsidy for the use of B5 fir in the private
sector. Thus, B5 at petrol stations could be purchased at the price same as petroleum
diesel. For example, petrol stations in central region started with Putrajaya in June
2011 and followed by all other petrol stations which located in Melaka, Negeri
Sembilan, Kuala Lumpur and Selangor.

61
4.4.3 Weakness

Fuel Subsidies and Opportunity Cost of Subsidies

Without including biofuel subsidies, it has been estimated that Malaysian
government consumption subsidies for petroleum fuels are likely to total around
RM25 billion (US$ 7.8 billion) in 2008 alone (Thillainathan, 2008). This includes
around RM18 billion in direct subsidies and around RM7 billions of foregone tax
revenue for transport fuels (assuming an oil price of US$ 100120 per barrel). A
further RM20 billion is expected to be spent on natural gas used for electricity
generation, leading to total fuel subsidies of RM45 billion (US$ 13.85) in 2008
higher than the record RM 40 billion (US$ 12.30 billion) allocated for development
for 2008 under the 9th Malaysia Plan. Biofuel subsidies would create a new expense
for government, diverting taxpayer funds to private interests and encouraging
production of an economically unviable product. The Malaysian Palm Oil Board
noted that cost of producing palm oil-based biodiesel was RM 2487 (US$ 820) per
tonne compared with a market price of RM 3 630 (US$ 1 115) per tonne for the fuel.
Bridging this gap with taxpayers funds makes no economic sense and squanders the
finite resources of government.

Contributor to GHG Emissions

The significant contributor to the greenhouse gases (GHG) emission is the biogas
from the palm oil mill effluents. The biogas consists of 60%-70% of methane, 30%-
40% of carbon dioxide and trace amount of hydrogen sulphide. Methane is 23 times
more global warming potential compared to carbon dioxide and thus contributes
considerably towards GHG emission.

Indirect Land Use Change (ILUC)

The indirect land use change impacts of biofuels, also known as ILUC, related to the
unintended consequence of releasing more carbon emissions due to land-use changes
around the world induced by the expansion of croplands for biodiesel production in
response to the increased global demand for biofuels. There are some criteria of
62
ILUC that was taken into consideration in the proposed European Country Directive.
For example, a legally binding reference to indirect land use change has not been
included. However, the EU will have to come forward with proposals in 2010 to
limit indirect land use change caused by the switch to biofuel production.

4.4.4 Opportunities

An early introduction of biodiesel facilitated a peaceful change from the era of fossil
fuels to the era of future fuels. Therefore, biodiesel had the opportunity to replace a
large percentage of fossil fuels. Biodiesel managed to decrease dependency on crude
oil and also decrease imports of crude oil from other countries. Since biodiesel raised
the interest of many exist research initiatives, there were new efficient energy crops
would be found for biofuels production. New and effective conversion technologies
would be found to replace the existing technologies. Due to Directive 2003/96/EC,
tax reductions for biofuels were introduced in many European countries while
Directive 2003/17/EC allowed blending fossil fuels with biofuels. Thus, in some
European countries blending of fossil fuels with biofuels was mandatory.

4.4.5 Threats

The biofuel market was a relatively new market and yet the political lobby for
biofuels was weak when compared to the lobby of fossil fuels. Besides that, biofuel
production was limited due to land availability for feedstock production. Furthermore,
feedstock production of biofuels is in competition with food production.



63
4.5 Projection of Research Development in Asian Countries

4.5.1 Previous Research Development

First Generation of Biofuel

In Malaysia, governments and the private sector already had ambitious planned to
rapidly expand the production and consumption of first generation biofuels. Refer to
Appendix B as the prove of Malaysias government was moving towards biodiesel
direction since 2004. Indonesia and Malaysia had bold plans to produce biodiesel
from oil palm. The quality of data available on biofuel production, consumption, and
feedstock utilisation in the Malaysia was not very high especially data on biodiesel
was scarce and only rough estimated of biofuel consumption was available. Better
data on production, sales, trade, and inventories of biofuels was needed, especially
internationally comparable standardised country-level data. The production and
consumption of biofuels were expected to grow further, both worldwide and in the
Asia Pacific region, along with the rising energy demand and fossil fuel prices.

The choice of feedstock in Malaysia had been based on existing crops,
existing feedstock production and processing infrastructure, climatic conditions, and,
in some cases, government policies. Oil palm was the most important feedstock
crops for biodiesel production. Oil palm produced the highest amount of biodiesel
per hectare followed by jatropha and coconut.

4.5.2 Current Research Development

Second Generation Biofuel

Acknowledging the limitations of the first generation biofuels, there was a move in
the direction of second generation biofuels. In terms of large-scale production,
biofuels from cellulosic biomass were still at the demonstration stage. Research had
been conducted focusing on large-scale production in the USA, Canada, Germany,
Sweden, China and Brazil (World Business Council for Sustainable Development
2007). It was previously believed that second generation biofuel technologies would
64
not be available in the market until 2030. However, the World Business Council for
Sustainable Development (WBCSD) believes that technological breakthroughs are
possible in the near future depending on government funding (World Business
Council for Sustainable Development 2007).

India, Indonesia, China, Malaysia, Japan and Vietnam together could produce
about 402 billion litres of ethanol by collecting the residues from rice, wheat,
sugarcane and corn alone (Table 4.10). There is potential to produce even more if
residues from other agricultural crops, timber mills, forests, grasslands and organic
waste from urban and rural areas are included:

Table 4.10: Potential availability of agricultural residues for second generation
biofuels in selected Asian countries

Crop Residue Type
I
n
d
i
a

I
n
d
o
n
e
s
i
a

C
h
i
n
a

M
a
l
a
y
s
i
a

J
a
p
a
n

V
i
e
t
n
a
m

Rice Straw, husk 229 90 303 4 19 60
Wheat Straw, husk 110 - 156 - 1 -
Sugarcane Leaves, bagasse 119 15 44 - 1 8
Corn Stalks, cobs, leaves, husk 14 13 140 0.1 0 4
Total Residues (Mt per year) 472 117 643 4 21 71
Cellulosic Ethanol (billion litres per year) 143 35 195 1 6 21



CHAPTER 5



5 CONCLUSION AND RECOMMANDATIONS



5.1 Conclusion

In conclusion, the research objectives had been achieved and the research questions
had been answered with evidences.

Palm oil was the most economical feedstock for biodiesel production because
it had the highest yield per unit area. The biofuel policy will help the country reduce
the dependency on fossil fuels. Being renewable, palm oil industry had important
role to play in supporting the energy needed in transportation and industrial sectors
for local and overseas demand. Biodiesel derived from palm oil provided option for
vertical integration opportunity which would enhance the viability of biodiesel
business despite of high crude oil prices.

Biodiesel would be competitive without subsidies when CPO prices were
below RM 3 000 per tonne and crude petroleum oil prices above US$ 140 per barrel.
However, such a divergence in the prices is unlikely to be sustained for long, given
that vegetable oil prices now appear to be following petroleum oil prices. The
outlook for the Malaysian biodiesel industry hinged upon whether substantial
government subsidies or incentives were forthcoming in the near future. In February
2010, the government decided to push back the implementation of the B5 mandate to
June 2011. Even with this mandate, it was unlikely that domestic demand will be
sufficient to sustain the industry. The industry was extremely vulnerable as a result
66
of fluctuating palm oil and petroleum prices and restrictive biofuel policies in key
consumer markets.

If biodiesel was to be consumed primarily in the domestic transport sector,
the government would have to subsidise it as well as restructure fossil fuel subsidies,
in order for the domestic biodiesel market to be viable. Biofuels would not serve as a
significant new source of energy for Malaysia, which made the added expense of
introducing a separate biodiesel subsidy difficult to justify. Instead, the domestic
biofuel sector should be encouraged to diversify the choice of feedstock to reduce
dependency on palm oil. Palm biogas and solid biomass have as sources of green fuel
to support the development of renewable energy and 2ndgeneration biofuel feedstock
in Malaysia.



5.2 Recommendations



Additional research on biofuels is needed in order to effectively inform future
policies, especially in the following areas:
a) A move domestic retail fuel price towards the world price is commendable,
particularly as steps are also being envisaged to ensure that adequate
safeguards are provided for the poor.
b) Economic and social effects of biofuels
c) More cost effective and environmentally friendly ways to produce biofuels,
especially second generation biofuels.
Advanced countries are already conducting considerable research, but developing
countries should conduct their own research because results on these topics could
likely be location specific. For example, each country has different potential
feedstock and production conditions for second generation biofuels.



67



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70



5 APPENDICES



APPENDIX A
71




APPENDIX B