Malaysian palm oil producer Kulim will build two biodiesel plants, including one in Singapore, amid higher prices of fuel and increasing demand for alternatives, reports said today.

The biodiesel plants in southern Johor state and in Singapore will be built jointly with German company CremerOleo GmbH and Co at a cost of US$40 million, said Kulim chief operating officer Zulkifli Ibrahim.

"The plants, which will start operating middle of next year and produce 100,000 tonnes of biodiesel annually, are expected to contribute RM500 million (US$133 million) to Kulim's turnover by 2008," Zulkifli was quoted as saying by the national Bernama news agency.

The plants would be built under a 50/50 joint venture with the German company based in Singapore, Wong Seng Lee, managing director of Kulim subsidiary Natural Oleochemicals (NatOleo) told Bernama.

The biodiesel from the Singapore plant, which will be located at the Jurong Island Petrochemical hub, would be 100 percent exported overseas.

Fuelling industry's growth

Johor state investment arm Johor Corporation is the major shareholder of Kulim, whose business activities include palm oil plantations.

The government, keen to reduce dependence on fossil fuel, is building three biodiesel plants.

Strong demand for biodiesel from Europe as well as Colombia, India, South Korea and Turkey was fuelling the industry's growth, as more countries sought to reduce their reliance on oil.

Malaysia has already begun preparations to change from diesel to bio-fuels by 2008, including drafting legislation that will make the switch mandatory.

Malaysia is the world's largest producer of crude palm oil. Output soared to nearly 14 million tonnes last year, half the world's production.