Malaysia will begin producing B15 biodiesel through 19 licensed plants from June 1st, 2026, according to Deputy Prime Minister Ahmad Zahid Hamidi.

The rollout will follow a phased approach, beginning with B15 before progressing to B20, with the potential to reach B50 within the next two to three years. The government stated that this transition is intended to limit the impact of fluctuations in crude palm oil (CPO) prices on biodiesel production costs.

Malaysia currently operates 19 biodiesel plants utilising rubber waste, with a combined monthly production capacity of approximately 1.5 million litres. However, industry experts indicate that the overall capacity is higher and has been underutilised under the existing B10 mandate. According to Harald Sippel, these facilities are capable of producing around 23 million to 24 million tons, indicating that supply constraints are not expected to hinder the transition.

The government estimates that shifting from B10 to B15 will require approximately 800,000 tons of crude palm oil, representing an additional 400,000 tons compared with current consumption levels. Infrastructure remains an area requiring attention. Inspections have found that more than 70% of fuel depots are capable of handling the higher biodiesel blend using existing systems, with operators making adjustments to maintain supply continuity. The remaining 30% of facilities will require further upgrades to support full implementation.

The transition to higher biodiesel blends is expected to have broader economic implications. The government considers palm oil-based biodiesel within the context of rural economic activity and the national energy strategy. In addition, increasing the blend from B10 to B15 or B20 could reduce Malaysia's fuel subsidy burden by an estimated RM1.5 billion annually.

Rising diesel prices in Peninsular Malaysia have led to increased focus on this policy change. A higher biodiesel blend is being considered as a measure to reduce exposure to global oil price volatility, particularly for sectors such as logistics and transportation that are sensitive to fuel cost fluctuations. A pricing structure partly linked to domestically produced palm oil is expected to provide greater predictability for businesses.

The move towards higher biodiesel blends is aligned with Malaysia's environmental, social and governance (ESG) objectives. The development of a domestic biodiesel system with higher blend ratios and verifiable sustainability standards is expected to influence the country's position in international markets. A higher level of domestic consumption of palm oil may also affect Malaysia's role as a producer and exporter.

Current retail fuel prices remain under observation, with Euro 5 B10 diesel priced at MYR 5.12 (US$ 1.3) per litre and Euro 5 B7 at MYR 5.32 per litre for the week beginning April 30th. The future of the 'premium' B7 blend, including whether its biofuel content will be revised, has not yet been clarified.