Japan s largest refiner, Nippon Oil Corp., and auto giant Toyota Motor Corp. plan to develop biodiesel from palm oil with Malaysian state oil firm Petronas [PETR.UL], a Japanese newspaper said on Monday.

The companies will start a joint development study in 2007 and begin producing palm oil-based biodiesel in 2009 for test bases in Malaysia, the Yomiuri Shimbun evening edition reported. For the study, Petronas will supply palm oil and Nippon Oil will develop refining technologies to convert it to biodiesel for automobiles. Toyota will check if the developed fuels are safe to use for car engines, the paper said.

The companies will decide when they can commercialise the product and the volume of production based on the study. Nippon Oil aims to import the palm oil-based diesel to Japan or sell it to other overseas markets, the paper said.

Toyota and Nippon Oil declined to confirm the report. Malaysia, the world s top producer of palm oil, has approved about 52 projects to turn its crude palm oil into biodiesel, known as B100. It is sold to oil firms or retailers for blending with crude oil-derived diesel and used in conventional engines. Japan, the world s third-largest oil consumer, will set out nationwide biodiesel standards by the end of this year in an effort to kick-start demand.

Lagging international moves to use more biofuel to battle high crude oil prices and help ease global warming, Japan hopes the law -- allowing about 5 percent of fatty acid-derived fuel in diesel -- will spur more sales of green fuels made from renewable sources such as palm oil and sugar.
(Planet Ark, 24/10/2006)