Malaysia said today it will build three plants to produce biodiesel from palm oil, as part of efforts to reduce its dependency on petroleum as oil prices continue to soar on the world market.

"Palm biodiesel is set to become a viable alternative to petroleum diesel," Plantation Industries and Commodities Minister Peter Chin Fah Kui told an international palm oil congress in Kuala Lumpur.

The Malaysian Palm Oil Board (MPOB) will "commence soon the construction of up to three biodiesel plants, each with annual capacity of 60,000 tonnes of biodiesel," he said.

The biodiesel plants, to be constructed at a cost of RM60 million, would also help stabilise palm oil prices by absorbing 500,000 tonnes of the commodity each year, he said.

Each of the plants, one of which will be located in Johor and two in the west coast shipping centre of Port Klang, will be half-owned by MPOB with the remaining stake held by private partners, Chin said.

"MPOB will put in about RM20 million for each of these plants," MPOB director-general Yusof Basiron told reporters, adding that three partners had been selected from 10 companies which submitted bids, but declined to name them.

Construction of the plants will be completed in a years' time, he added.

The plants will produce five percent processed palm oil blended with 95 percent petroleum diesel for diesel engine vehicles and static engines for industrial and power generation.

Strong demand for biodiesel from European nations as well as Colombia, India, South Korea and Turkey was fuelling the growth of the new industry, Chin said.

He brushed aside suggestions there would be a lack of demand for palm biodiesel once world oil prices fell, saying the project would remain viable even if crude oil prices eased back to US$43 a barrel.

Orang-utans extinction a 'wild talk'

Chin also hit out at accusations from environmental group Friends of the Earth that demand for palm oil was driving the endangered orang-utans towards extinction in Indonesia and Malaysia by destroying their habitat.

"Talk factual. Don't just make wild accusations. If they say 500 orang-utans are killed, then produce to us who are the people who are doing it," he said.

"Like all the obstacles that we had to face in the past, we are prepared to answer any such criticisms or unfair labelling of the palm oil industry," he said.

Malaysian crude palm oil production soared to nearly 14 million tonnes last year, accounting for half the world's production.

It exported 12.5 million tonnes of the oil last year, worth some US$8 billion, accounting for 58 percent of global palm oil exports and 27 percent of the global oils and fats trade.