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    Presentation to Mr. Benny Wahyudi,

    Director-General of Chemical,Agriculture and Forestry-Based Industry,Ministry of Industry and Trade Indonesia on

    Malaysia Indonesia Collaboration

    3 February 2005

    Malaysian Palm Oil Board (MPOB)Ministry of Plantation Industries and Commodities

    Malaysia

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    MPOB DELEGATION

    Dr Mohd Basri WahidDeputy Director-General I (R&D)

    Dr Choo Yuen MayDirector, Engineering and

    Processing Division

    Dr Hj Ahmad HitamSenior Research Fellow,Biology Division

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    PALM OIL AS RENEWABLESOURCE OF FOOD, NON-FOOD

    AND BIOFUEL

    VISION OF PALM OIL

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    Indonesia Malaysia Collaboration

    To work out a consensus scheme for palmoil supply rationalisation, i.e. price controlmechanism

    To study the possibility of implementationof MPOB Leverage Model in Indonesia

    To collaborate on biofuel industrialdevelopment to help meet shortage of petroleum fuel through renewable energysources such as palm oil

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    Background

    Not getting optimum value for palm oilknowing that palm oil has a number of positive properties

    Differential duty of palm oil & soyabean oilin India tantamount to price difference

    US$100 US$150 per tonne of oil betweenpalm oil & soyabean oil

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    Product

    CPO

    CSBO- USA

    CRSO- EU

    FOBPrice

    (US$/t)

    380

    515

    728

    Freight

    (US$/t)

    35

    70

    62

    Duty

    (%)

    65.0

    50.8

    50.8

    Landedprice

    (US$/t)

    684.8

    882.2

    1191.3

    INDIAN MARKET1ST January 2005

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    Background (cont)

    Malaysia has a proposal to overcome thisshortcoming by regulating supply /

    demand of palm oil through application of palm oil as biofuel

    If Malaysia & Indonesia, the major producers of palm oil collaborate, it willlead to more equitable price for palm oil

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    Background (cont)

    Use of RBD palm oil & RBD palm olein inpetroleum diesel (B5 & B10) as biofuel

    Use of B5 will result in 0.5 million tonnesof palm oil / palm olein removed from

    market

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    MPOB - Leverage Model

    500,000 tonnes RBDPOo supplied for biofuel use at below market price of say,RM800 per tonne

    Removal of 500,000 tonnes palm oil fromstocks result in average price increase of,say RM300 per tonne

    Assuming 10 million tonnes export, thismeans an additional RM3 billion inrevenue/profits

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    28% or RM1 billion will be paid to theMalaysian Government in the form of increased corporate taxes

    Malaysian Government could allocate half of this i.e. RM0.5 billion as corporate taxcredit to companies supplying the below-cost palm oil for biofuel

    Up to RM1,000 per tonne available tocompensate for price differential betweenthe RM800 and monthly average price of RBDPOo (i.e. up to RM1,800 per tonneRBDPOo price)

    MPOB - Leverage Model (cont)

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    RM 0.5 billion taxcredit to plantation

    companies RM2billion to palm oil

    industry

    Additional RM3billion from exports

    from higher prices of palm oil

    RM 0.5 billionadditional

    corporate taxesfor Government

    MPOB - Leverage Model

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    500,000 tpalm oil

    5% of dieseluse inMalaysia

    RM 3billionrevenue

    50 % of stock of palm oil

    RM 1 billioncorporatetax

    RM 0.5

    billion

    Leverage Effect of MPOB - Leverage Model

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    Will the MPOB - Leverage Model Work?

    Qualitatively, directionally, yes. Pricesituation better with 500,000 tonnes

    removed than with 500,000 tonnesremaining in stocks

    Pearson Correlation Coefficient : - 0.988

    How much price increase?

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    If 28,000 tonnes removed monthly(336,000 tonnes per year) price increaseis RM292.15

    Even a conservative RM100 increaseinstead of RM300 increase workable if government gives full tax credit

    Complementary cess collection fromindustry if necessary

    Will the MPOB - Leverage Model Work? (cont)

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    Rationale

    By removing excess palm oil stock fromthe market, the palm biofuel project willbe able to ward off any major fall of palmoil price in the future

    The palm biofuel project is a viable longterm strategy for price stabilisation

    The palm biofuel project will conserveforeign exchange for the country byreducing the import of petroleum diesel

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    Suggested Areas of Collaboration

    Palm Biofuel Project

    Implementation of MPOB Leverage Model

    Palm Oil Supply Management Scheme

    - RBDPOo / petroleum diesel blends

    (B2, B5 & B10) and RBDPO /petroleum diesel for local market

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    ProposalIf the MPOB Leverage Model is

    acceptable to Indonesia, we inviteIndonesia for a G G meeting at

    the Ministerial level

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    Global BiodieselDevelopment

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    World Production of Biodiesel(000 Tonne)

    0

    500

    1000

    1500

    2000

    2500

    3000

    1991 1993 1995 1997 1999 2001 2003

    WorldEurope WestAsiaNorth AmericaEurope East

    Source: Austrian Biofuels Institute

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    Exciting Developments In Biofuel

    World biodiesel production 4x

    - 1996 (591,000 tonnes) 2003(> 2 million tonnes)

    EUROPEAN UNION

    - 2003 (1.43 million tonnesproduction/capacity 2.246 milliontonnes)

    - 2005 (3.1 million tonnes i.e. 2% of fuelconsumption)

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    - 2010 (17.5 million tonnes i.e 5.75% of fuel consumption)

    - 2020 - 20% of fuels will be biofuel

    - Mandatory Blending of 1% from2009, 1.75% from 2010

    Exciting Developments In Biofuel (cont)

    UNITED STATES

    Energy Policy Act 2003

    - 2005 3.1 billion gallons biofuel(biodiesel & ethanol)

    - 2012 5.0 billion gallons

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    American Jobs Creation Act 2004 (Oct 2004)- 1 Jan 2005 Includes biodiesel tax

    incentive (tax credit) for two years

    Exciting Developments In Biofuel (cont)

    UNITED KINGDOM

    - The Energy Bill 2004 contains

    provisions to bring in legislation for oilcompanies to sell given proportion of annual fossil fuel as biofuels (biodiesel,bioethanol and biogas)

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    BRAZIL- Mandated blending of ethanol in gasoline(24-26%)

    INDIA

    - Mandated 5% ethanol blended petrol in9 states

    THAILAND

    - Mixture of 90% diesel and 10% crop-derivedoil : proposal submitted to Cabinet on17 January 2005

    Exciting Developments In Biofuel (cont)

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    Palm Biofuel ProjectsMalaysias Experience

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    Fast Depletionof PetroleumFossil Fuel

    Energy Crisis inmid 1970s

    GrowingEnvironmental

    Awareness

    IncreasingEnergy

    Consumption

    Search for Alternative Renewable

    Energy

    MPOB BiofuelResearch Programme

    MalaysianGovernments

    four-fuel

    diversificationpolicy

    MPOB Biofuel ResearchProgramme

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    MPOB BiofuelResearch Programme

    Palm Diesel (Palm Oil Methyl Esters) asDiesel Substitute

    Crude Palm Oil as Boiler Fuel

    Crude Palm Oil / Medium Fuel Oil Blends asBoiler Fuel

    RBD Palm Olein / Petroleum Diesel Blendsas Industrial and Transport Fuels

    RBD Palm Oil / Petroleum Diesel Blends asTransport Fuel

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    Role Of Palm Oil Industry

    Already leader in solid biofuel : 364 palm oil

    mills use palm fibre and shell successfully,self sufficient in energy

    Expected to lead again in liquid biofuel

    Potential great, currently < 1% biodiesel frompalm oil

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    Raw Materials for Biodiesel

    Palm Oil (1%)(Malaysia)

    Others (1%)

    Soyabean Oil (1%)(USA)

    Sunflower Oil (13%)(USA & Europe)

    Rapeseed Oil (84%)(Europe)

    Source: Austrian Biofuels Institute

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    Oil Yield

    Yield(tonne / ha / yr)

    Palm Oil (Malaysia) 3.75*

    Rapeseed (EU) 1.33**

    Soyabean (USA) 0.46**

    Sunflower (Argentina) 0.66**

    Source: * MPOB (2004) ** Khoo (2001)

    Highest Yield

    & Cheapest Oil

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    Crude Palm Oilas Biofuel

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    Crude Palm Oil as Biofuel

    2 approaches :(A) Crude Palm Oil (CPO)(B) Crude Palm Oil (CPO) / Medium Fuel

    Oil (MFO) Blends

    Applications :

    Boiler fuel for power generation Boiler fuel for steam generation for

    industrial applications

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    Satisfactory flame characteristics Flue gas emission appeared normal Reduction in CO 2, SO 2 and NOx

    emission

    CO 2 1.55% SO 2 28.27%

    NO 22.62% H 2S 27.76%

    NOX 22.62%

    Research Findings :

    Crude Palm Oil as Biofuel (cont)

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    RBD Palm Olein / Petroleum Diesel Blendsas

    (A) Industrial Fuel

    (B)Transport Fuel

    RBD Palm Oil / Petroleum Diesel asTransport Fuel

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    - all operating parameters withinacceptable limit of engine manufacturer

    - No problem in operation

    RBD Palm Olein / Petroleum DieselBlends as Industrial Fuel for

    Power Generation

    Summary of trials using RBD Palm Olein /

    petroleum diesel

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    RBD Palm Olein / Petroleum DieselBlends as Industrial Fuel for

    Power Generation (cont)

    - Significant improvement in fuel toelectricity onversion efficiency at lower blending ratio (10 12%) of RBD palmolein

    - Optimum diesel engine performance atblending ratio 65 67% of RBD palmolein

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    Palm Oil and Palm Oil Productsas Transport Fuels

    (commenced in 2002)

    Processed Liquid PalmOil / Petroleum DieselBlends (B2, B5, B10)

    RBD Palm Oil / PetroleumDiesel Blend (B5)

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    16 MPOB vehicles have been using RBDPOo / PDblends (B2, B5 and B10) as fuel since 2002

    B2 4 vehicles; B5 8 vehicles; B10 4 vehicles

    Total mileage covered to-date : 850,000 km

    No technical problems encountered so far

    Performance similar to that when petroleumdiesel is used

    RBD Palm Olein (RBDPOo) /Petroleum Diesel (PD) Blends

    as Transport Fuel

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    Property B2 B5 B10 RBDPOo PD

    Density at 15 CASTM D4052

    0.8545 0.8565 0.8597 0.9199 0.8530

    Sulfur Content( mg/kg)ASTM D4294

    0.14 0.14 0.14

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    Trial on B5 blend involving 5 MPOBvehicles since March 2004

    Total mileage covered to-date : 38,000 kmNo technical problems encountered so far

    RBD Palm Oil / Petroleum DieselBlends as Transport Fuel

    MPOB Pajero Participatingin Field Trial

    K F l Ch t i ti f

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    Property B2 B5 RBDPO PD

    Density at 15

    CASTM D4052

    0.8545 0.8563 0.9149 0.8530

    Sulfur Content( mg/kg)ASTM D4294

    0.14 0.14

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    Skid Tanks Storing B2, B5 and B10 of RBD Palm Olein / Petroleum Diesel Blends

    MPOB Pajero Participating

    in Field Trial

    Dispensing Pump

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    Palm Diesel(Palm Oil Methyl Esters)

    as Biodiesel(proposed for overseas market)

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    MPOB Palm Diesel Project

    Commenced in 1981

    Palm diesel : systematically and

    scientifically evaluated as a dieselsubstitute

    Includes laboratory determination of fuelcharacteristics, stationary engine testing,preliminary field trial and exhaustive fieldtrial

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    3000 TPY Palm Diesel Pilot Plant at MPOB

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    Successfully conducted between 1986 1994 ondiesel engines of different makes and models

    Trials involved 30 buses mounted with MercedesBenz OM352 Engine :

    100% palm diesel (10 buses)50% : 50% blend (10 buses)100% Petroleum Diesel as control (10 buses)

    Results in terms of engine performance, fuelconsumption, exhaust emission, repair andmaintenance were promising

    Exhaustive Field Trials using Palm Diesel

    Fi ld T i l i g V i Di l E gi

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    Field Trials using Various Diesel Engines

    ld l d ( ) l

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    Field Trials using Mercedes Benz (OM352) DieselEngines Mounted on Passenger Buses

    (each bus covered 300,000 km)

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    Summary of Field Trial

    No modification of conventional dieselengine required

    Good engine performance

    Much cleaner exhaust gas emission(reduction of hydrocarbon, CO, CO 2, SO 2 content)

    Engine oil: still usable after recommendedmileage

    Cetane number / Diesel Improver ( 62.4 c . f . 37.7 for petroleum diesel from Europe)

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    Summary of Field Trial

    Enhanced safety characteristic in storageand transportation (174 oC = Flash point c . f . 98 oC for petroleum diesel)

    Normal carbon build up in engine fuel nozzleexcept nature of carbon different

    Comparable fuel consumption withpetroleum diesel (e.g. 3 - 4 km per litre for bus tested)

    Key Fuel Characteristics of Palm Diesel

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    Product

    Tests ConductedPalm Diesel Malaysian Diesel

    Specific GravityASTM D1290

    0.8700@ 74.5

    0.8330@ 60.0

    Colour (visual) Reddish Yellow

    Sulfur Content (% wt)

    IP 242

    < 0.04 0.10

    Viscosity @ 40 C (cSt)ASTM D445

    4.5 4.0

    Pour Point ( C)ASTM D97

    15.0 15.0

    Final Recovery (ml) 98.0 -

    Gross Heat of Combustion (kJ/kg)ASTM D2382

    40,135 45,800

    Flash Point ( C)ASTM D 93

    174 98

    Conradson Carbon Residue (% wt)

    ASTM D1980.02 0.14

    y(Crude Palm Oil Methyl Esters)

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    Production of Phytonutrients

    from Palm Diesel usingMPOB Technologies

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    CPO Methyl Esters

    (Palm Diesel)

    Distillation

    Phytonutrients ConcentrateContaining Carotenes, Vitamin

    E, Phospholipids (Lecithin),Sterols, Coenzyme Q and

    Squalene

    Crude Palm Oil ( CPO )

    Distilled MethylEsters

    (Palm Diesel)

    Feedstock for value-added

    oleochemicalproducts

    CarotenesVitamin E

    SterolsSqualene

    Coenzyme QPhospholipids

    (Lecithin)

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    Production Of Individual Carotene,Vitamin E & Cholesterol-free Sterol

    - individual carotene, e.g. a - and b -carotenes, lycopene andphytoene

    - individual vitamin E isomers, e.g.a - and g-tocopherols, a -, g- and d-tocotrienols

    - b -sitosterol

    + +

    High purity (>95%) of the followingproduced :

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    Season Pour Point(C)

    Spring -10

    Summer 0

    Autumn -10

    Winter -20

    Seasonal Pour Point Requirementof Biodiesel

    Autumn

    Winter

    Summer

    Spring

    Fuel Properties of Normal Palm Diesel &

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    Properties UnitEN 14214 ASTM D6751 Normal & Low Pour

    Point Palm Diesel

    Min Max Min Max

    Ester Content % mass 96.5 - - - 98.0 99.5

    Density at 15 C g/cm 3 0.860 0.900 - - 0.87 0.89

    Viscosity at 40 C cSt 3.5 5.0 1.9 6.0 4.0 5.0

    Flash Point C 120 - 130 - 170 - 200

    Sulphur Content mg/kg - 10 - 0.05 1 < 0.01 1

    Carbon Residue(on 10% distillationresidue)

    % mass - 0.3 - 0.05 2 0.02 0.03 2

    Cetane Number - 51.0 - 47.0 - 53.0 59.0Oxidative Stability,110 C hours 6.0 - - - > 6

    Copper StripCorrosion(3h at 50 C)

    rating 1 - - 3 1a

    1Unit in % mass 2Test on 100% distillation residue

    Fuel Properties of Normal Palm Diesel &Low Pour Point Palm Diesel vis--vis EN14214 & ASTM D6751

    F l P i f N l P l Di l &

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    Properties Unit EN 14214 ASTM D6751 Normal & Low Pour Point Palm Diesel Min Max Min Max

    Sulphated AshContent % mass - 0.02 - 0.02 < 0.01

    Basic Sediment andWater mg/kg - 500 - 0.050 < 500

    Acid Value mgKOH/g - 0.5 - 0.8 < 0.3

    Iodine Value - - 120 - - 51 83

    Content of LinolenicAcid Methyl Esters % (m/m) - 12 - -

    0.5

    Content of FattyAcids with more than3 double bonds

    % (m/m) - 1 - - < 0.1

    Fuel Properties of Normal Palm Diesel &Low Pour Point Palm Diesel vis--vis EN14214 & ASTM D6751

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    Properties UnitEN 14214 ASTM D6751 Normal & Low Pour

    Point Palm DieselMin Max Min Max

    Methanol Content % (m/m) - 0.2 - -

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    Palm oil, the cheapest vegetable oil,offers the potential as environment-friendly and renewable fuel

    Palm oil methyl esters (palm diesel)are ready diesel substitute

    Palm Oil as Fuel : A Summary

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    CPO and RBD palm olein blended withmedium fuel oil and petroleum diesel,respectively, have also been used as

    fuel for power station and steamgeneration plant

    RBD palm olein and RBD palm oilblended with petroleum diesel arefound to be suitable as vehicle fuel

    Palm Oil as Fuel : A Summary (cont)

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    Impact of the Palm Biofuels Project toMalaysian Palm Oil Industry / Nation

    Safety Net

    Alternative Renewable Energy inline with Malaysian Governmentscall to source for renewable 5 th fuel

    Diesel Substitute / Diesel Improver

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    Impact of the Palm Biofuels Project toMalaysian Palm Oil Industry / Nation

    (cont)

    Environment-friendly fuel : positiveimpact to the environment

    Carbon Credit under Clean

    Development Mechanism (CDM)

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    Impact of the Palm Biofuels Project toMalaysian Palm Oil Industry / Nation (cont)

    Other Benefits of Palm Diesel Project :

    Provides a source for recovery of phytonutrients e.g. Carotenes, Vitamin E,Sterols, Squalene, Coenzyme Q andPhospholipids

    Alternative process for the production of methyl esters as oleochemicalsfeedstocks

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    Technologies Available from MPOB :

    RBD Palm Olein/Petroleum diesel blends

    Palm diesel (palm oil methyl esters)including low pour point palm diesel

    Palm phytonutrients (e.g. carotenes andvitamin E) from palm diesel

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    ConclusionsIf the MPOB Leverage Model is acceptableto Indonesia, propose a G to G meeting atMinisterial Level

    Malaysia will be pleased to shareexperiences in Biofuel R & D with Indonesiaincluding technology know-how

    Malaysia also welcomes any other proposalfrom Indonesia to achieve optimum value for palm oil

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    Malaysia cordially

    invites your Minister tomeet our Minister todiscuss on Biofuel andSupply Rationalisation

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    Thank You