"Maybe by next week, I will be able to table it at the cabinet," Chin told Reuters. "We still have to get it through the hurdle of the cabinet to see whether the legislation needs to be amended before it goes to parliament."

Climbing oil prices and dwindling supplies of petroleum make it commercially viable to produce palm diesel, which Malaysia plans to blend with petroleum diesel in the ratio of two to five percent, Chin has said earlier.

Biofuels have taken on new importance worldwide as countries look to cut their emissions to adhere to the UN Kyoto Protocol. Burning the environmentally friendly fuel is considered carbon dioxide neutral and does not require emissions rights.

The Malaysian Palm Oil Board and Golden Hope Plantations Bhd have joined hands to set up an $11-million plant to produce upto 5,000 tonnes of palm fuel for export every month, which is expected to be complete by the end of next year.

Japan has expressed interest in Malaysia's green fuel, and officials say a German rail company that tried out the fuel was satisfied with the results and wants to buy it regularly.

EU MEASURES BOOST INTEREST

EU measures to reduce dependence on fossil fuel oil imports and cut greenhouse gas emissions have boosted interest in biofuels in Europe. The EU wants member states to use vehicle fuel with two percent biofuel by 2005 and 5.75 percent by 2010.

On Tuesday Chin did not say what the proportions of Malaysia's green fuel mix would be. But he said it would be a blend of methyl ester -- the raw product input for biodiesel -- and conventional diesel.

"Suffice it to say, we can never have enough palm oil to produce all the diesel required in our country," he added.

Malaysia consumes up to 190,000 barrels per day of diesel and gas oil, while it produces less than 14 million tonnes of palm oil, more than 12 million tonnes of which are exported.

Biofuels are expensive, and growing the crops to make them in quantities sufficient to satisfy global energy demand would require unfeasibly large tracts of farmland, some experts say.

The palm crop's high year-round yield gives it an edge over rapeseed and soybean, the other crops from which biofuels are most commonly made. It is also cheaper.

Elsewhere, ethanol fuel is produced from sugarcane, maize and other grains.

Chin visited the United States in March to woo American firms to help produce and market Malaysian biodiesel for the automotive industry.

"Our private sector will be collaborating with the Americans on this," he said, elaborating on that plan. "The Americans have the technology as well and they want to work with us."

But some green groups say the environmental benefits of biofuels depend on where they are made, and countries should produce their own biofuels, since importing green energy could negate the environmental gain.