Malaysia will be able to export environmentally friendly bio-diesel fuel following the completion of a RM40 million pilot plant by October 2006, a report said today.

Malaysian Palm Oil Board director-general Yusof Basiron said work on the plant would start in October this year, with production capacity expected to reach 60,000 tonnes per year when it is fully operational next year.

The plant would add processed plam oil to conventional diesel with initial production intended for export, Yusof said in an Edge Financial Daily newspaper report.

"There are 10 companies, including non-plantation firms, which are bidding to operate the plant," he said.

Yusof said more bio-diesel plants were expected to be set up over the next two years to produce between 300,000 to 400,000 tonnes.

Bio-diesel would be profitable due to high oil prices, he said. Oil prices recently hit an all-time high of US$70 per barrel before easing to around US$64.67 a barrel Tuesday.

Yusof said the target market would be the transport and industrial sectors.