Malaysia raises biodiesel content in diesel to 15% to cut crude imports

PUTRAJAYA, KLANG VALLEY, PENINSULAR MALAYSIA, SARAWAK, BINTULU, LABUAN, LANGKAWI, MELAKA, NEGERI SEMBILAN, 30 AUGUST 2026 —

Malaysia increased the palm oil methyl ester (PME) content in diesel to 15% from 10% on June 1, raising the B10 blend to B15 to conserve fuel reserves as crude shipments through the Strait of Hormuz remain disrupted.

The change applies immediately at the Klang Valley Distribution Terminal (KVDT), Malaysia’s largest fuel depot, where road tankers are loaded with 35,000-litre consignments of the blended fuel. “The blending of diesel and PME is done during the journey to petrol stations or factories, resulting in a more homogeneous biodiesel mixture,” a PS Pipeline spokeswoman said on June 3.

The policy follows the Iran war, which has choked the Strait of Hormuz, a critical oil shipping lane. Although a peace deal has been agreed, the backlog of vessels is expected to take several weeks to clear. Kuala Lumpur has warned that existing diesel stockpiles may last only until July, prompting the Ministry of Economy to announce a ministerial statement on June 22.

Malaysia imported 3.4 million tonnes of crude petroleum and condensate in the first quarter of 2026, about one-third lower than a year earlier, official data show. Domestic production meets only half of the country’s 700,000-barrel daily consumption, leaving it exposed to supply shocks.

A senior PS Pipeline representative said each additional percentage point of PME blended into diesel reduces diesel consumption by an equivalent amount. “The move to B15 could lower diesel usage by about 5%,” she said.

Malaysia, the world’s second-largest palm oil exporter after Indonesia, is among countries turning to biofuels to reduce reliance on imported crude. Between June and December 2024, Malaysians consumed an average of 465 million litres of diesel monthly. Increasing the biomass portion from 10% to 15% would save at least 23 million litres monthly.

The higher PME-blend mandate will consume an additional 300,000 tonnes of palm oil, taking the total to 800,000 tonnes from the four million tonnes allocated annually to the domestic market, Plantation and Commodities Minister Noraini Ahmad said on June 4. She added that the measure would not affect the roughly 16 million tonnes Malaysia exports each year.

“All petrol stations will offer B12 and eventually B15 from June 1 onwards. Sarawak – except Bintulu – as well as Labuan and Langkawi, have already implemented B20 diesel,” Noraini told reporters. “This initiative will help strengthen Malaysia’s environmental, social and governance agenda.”

The national biodiesel network comprises 452 palm oil mills, 54 refineries, 19 biodiesel plants and 34 blending depots, supplying 4,400 petrol stations nationwide. KVDT, jointly owned by Petronas (40%), Shell (40%) and Petron (20%), meets 60% of Peninsular Malaysia’s fuel demand and sources diesel and petrol via a 130km pipeline from refineries in Melaka and Negeri Sembilan.

Each day, 600 road tankers transport the higher PME-blend biodiesel from KVDT. A PS Pipeline representative said PME carriers undergo laboratory testing to ensure standards are met and prevent contamination that could affect biodiesel quality.

With the push for B15, 69% of existing biodiesel blending capacity is now in use, up from 40% before the policy was introduced, Minister of Economy Akmal Nasir said on June 11. The Malaysian Biodiesel Association, which represents 17 members and six associates, said government funding to upgrade blending infrastructure would support higher blends, including a target of B30 by 2030 under the 13th Malaysia Plan.

“As global oil prices become increasingly volatile owing to the Iran war, biodiesel could offer a competitive alternative for Malaysia’s transport and logistics sectors,” the association said.

Related: Noraini Ahmad