The Growing Popularity of Biofuels in Southeast Asia

The market for biofuels in the automotive sector - fuels sourced from plant-based oils and sugars, animal fats and other natural occurring sources - rose to an estimated amount of more than $1.78 billion in the Southeast Asian region last year.

The current biofuel penetration rate in Southeast Asia is about 1.8 percent of the total automotive fuels market. This percentage is forecast to grow to 3.3 percent by 2017 for a market worth about $4.3 billion.

According to an analysis from Frost & Sullivan, Southeast Asian governments have been introducing different blending mandates for biofuels to boost their use in their countries. This is seen as a result of ratifying the Kyoto Protocol to curb their emissions, but also as a way to boost their agricultural sector and decrease their dependence on crude oil.

"Most Southeast Asian countries are importers of crude oil. To reduce their dependence on imposts and still meet energy requirements, governments in the region are actively promoting biofuels as a health and potentially more sustainable alternative to petroleum-based oils," said Shree Vidhyaa Karunanidhi, a Frost & Sullivan research analyst.

While the region may be lacking in crude oil, it does have rich agricultural resources that could be used by the biofuel industries. The two challenges facing the biofuel sector in the region are competition from the food industry and out-dated government subsidies for petroleum-based fuels.

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According to the analysis, these problems can be overcome be enforcing blending legislation, removing subsidies for petroleum, and providing incentives for consumers and tax breaks for biofuel companies.

It is also recommended that biofuel companies work on improving extraction efficiency and how they secure their raw materials.

The analysis noted that Thailand has the most mature biofuel market in the region while Malaysia's market is currently frozen with plants ceasing operations in the wake of unfavourable pricing mechanisms.

The Philippines was found to have experienced significant rise in consumption of biodiesel and ethanol but is still mostly reliant on imports. Indonesia has a rudimentary ethanol market and is looking to enhance the production of biodiesel.

Meanwhile, Vietnam is expected to bring blending mandates into play in 2013. The country is also looking to produce its own biofuels such as biodiesel from catfish oil and ethanol from cassava.

By. K.R. Jalbuena