BMW drops wrench into palm energy plan

[KUALA LUMPUR] BMW AG just tossed a wrench into plans by Malaysia to boost its biofuel program.

A drive to introduce a blend that uses 10 per cent palm oil, up from 7 per cent, risks causing severe engine damage, according to BMW Group Malaysia.

The largest palm producer after Indonesia promotes the crop for use in foods and energy, and has been stepping up the amount that's blended into local fuels. Plantation Industries and Commodities Minister Douglas Uggah Embas said this week the so- called B10 program will be implemented from October.

"In our tests with B10 biodiesel worldwide, we have found technical challenges," Alan Harris, managing director and chief executive officer at BMW Group Malaysia, said in a statement. Checks found that palm's fatty-acid methyl ester can thin motor oil, which leads to oil sludge and reduced lubricity with the risk of severe engine damage, Mr Harris said.

The current diesel engines in Malaysia are well-suited to run on B7 levels of biodiesel, Mr Harris said. Mr Uggah's ministry should take into account the opinion of the Malaysian automotive industry before implementing B10, he said.

The introduction of the B10 variety needs further consideration, according to Mercedes-Benz AG. The company's diesel-powered vehicles can use up to 7 per cent biodiesel, while the Fuso truck models are fitted to take a maximum 5 per cent blend, Roland S. Folger, president of the company's local unit, said in an e-mailed reply to questions.

"We are going to engage talks with MPOB and bring automotive players deeper into the discussion," said Mohd Madani Sahari, chief executive officer of the Malaysia Automotive Institute, referring to the country's palm oil board by its initials. "Automotive-industry players have said it's not compatible in the past two to three years."

The government is in the midst of consultations on the B10 mandate, Mr Uggah said in Bangi, outside Kuala Lumpur, on Tuesday. With B10 in place, consumption of palm will rise to 1 million metric tons from about 700,000 with B7, he said.

"We're taking note of the comment by BMW," Mr Uggah told reporters. "At the same time, we hope they understand the need for us to have some mechanism to assist the palm oil industry. Of course, if that mechanism is causing issues, we'll sit down and discuss how these issues can be resolved."

BLOOMBERG