Growing interest in biofuel is expected to boost the already buoyant price of palm oil, Plantation Industries and Commodities Minister Peter Chin said Monday.

Chin said that biofuel, which is derived from natural oils and plants such as coconuts and sugarcane, had created new demand for palm oil which is currently enjoying prices of RM1,600 per tonne.

"With the strategic approaches initiated by the government and supported by the industry in stimulating demand for palm oil, the future for biofuel as an alternative energy source is bright," he said according to Bernama news agency.

Chin said the first palm biodiesel plant using technology introduced by the nation's palm oil board has commenced production and would be officially launched in Johor today.

Chin said the ministry was also exploring the production of renewable energy using "biomass" - the empty fruit bunches generated by palm oil mills.

"The industry must explore further the vast opportunities available in the energy sector given that by 2010, renewable energy share of the national energy demand is targeted at 10 percent," he said.

Malaysia and Indonesia produce about 80 percent of the world's supply of crude palm oil.

Indonesia is expected to produce 15.2 million tonnes in 2006, marginally outstripping Malaysia's expected 15.1 million tonnes.