Malaysia Promotes Biolubricants

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Industry observers say biolubricants are unlikely to take off in Asia unless governments provide incentives or mandates for their use. Malaysia appears be taking steps to do just that.

The Southeast Asian nation has begun offering grants and tax breaks to encourage companies to turn its growing supply of plant oils into value-added products such as base stocks and finished lubricants. Sources say the government is also looking for additional ways to foster these industries.

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In Malaysia, research on bio-lubricants is becoming a top priority and the Malaysian government motivates private companies to establish more treatment plants and to upgrade biolubricants for automotive and industrial uses, said Apu Gosalia, head of global competitive intelligence and chief sustainability officer of Fuchs Petrolub SE, of Mannheim, Germany.

Southeast Asian nations such as Malaysia are significant suppliers of oils from plants such as palm, but use of lubricants made from such materials has not yet caught on in that region. A recent report by Kline & Co. consultancy estimated that North America and Europe account for 80 percent to 90 percent of the globes consumption of biolubricants. The firm calculates worldwide biolubricant demand at 250,000 to 300,000 metric tons per year.

Kline and other industry observers say biolubricants havent caught on in Asia because of their expense and that they are unlikely to do so unless governments adopt programs to encourage their use.

Malaysia central Economic Planning Unit (EPU) has recently taken another initiative to consult industry players in order to get the facts and figures for further strategy and it encompass the bio-lubricant base oil and bio-lubricant industry as well, said William Pu, director of Malaysian biolubricant blender Solution Biogen Sdn Bhd, a subsidiary of Solutions Holdings Engineering Berhad.

Biolubricants applications are subdivided into total loss lubricants and products that can enter the environment when spilled. Pure vegetable oils (natural esters) are base oils for total loss applications, including palm oils, where Malaysia is a major producer, for cold forming metalworking applications.

According to the Malaysian Economic Transformation Program website, the Malaysian Government has disbursed capital expenditure incentive grants (under the Entry Point Project 6, or EPP6) since 2011, to companies that are interested to embark further on palm oil downstream ventures.

The grants have been disbursed for production of higher value-added palm oil derivatives such as surfactants, agro-chemicals, bio-polyols, bio-lubricants, glycerol derivatives and bio-based chemicals. The grants are structured in a way where the private sector commits a certain amount of investment. This is given on a reimbursable basis where companies need to invest first before making claims on the grant.

The government sponsored Malaysian Biotechnology Corp. is pushing to build a bio-based ecosystem across the value chain from raw materials supply to downstream market access by the year 2020 and beyond. BioNexus status is a recognition awarded by the Malaysian government to qualified companies that participate in and undertake value-added biotechnology activities in Malaysia, and includes fiscal incentives, grants and other guarantees to assist growth, a spokesman for United States-based natural oils company Elevance Renewable Sciences told Lube Report Asia.

Some incentives include exemption of income tax, import duty and sales tax on imported raw materials and components, machinery and equipment, double deduction on expenditure incurred for research and development. According to the Malaysian Biotechnology Corporations annual report for 2014, total bio-industrial investments grew by 7.9 percent from 2005 to 2013, reaching a total of 566 million Malaysian Ringgit (U.S. $162 million) in 2013.

Kline & Co. released a report earlier this year, Opportunities in Bio-lubricants, which found that in metalworking , the adoption [of biolubricants] is driven mostly by customer health and worker safety concerns, as bio-lubricants have lower flashpoints, reducing risk of fires and lower exhaust fumes, improving sight and reducing toxic inhalation.

We are seeing more demand from metal-working industry.As a formulator, we think that it is a good indicator, although at a premium, there are now more realization of the need for safer working environment and taking care of the effluent as well, said Pu.

However, Andrew Holmes, head of group technology at Petronas Lubricants International warns, Bio-based lubricants are more expensive and we believe that the supply chain advantage of proximity to raw materials will not stimulate growth in Asia sales to match those in North America and Europe. The opportunity of cost reduction through scale is also limited at present as most biolubricant suppliers are catering to small scale demand.