In view of the increasing environmental concerns particularly relating to the use of fossil fuels, new solutions to minimize the greenhouse gas effect are continuously sought for. Among the options, biomass has been recognized as the most important energy source for biofuel production to mitigate greenhouse gas emissions (Khan et al. 2009). Furthermore, increasing energy security fears, rising petroleum prices, low barriers to market entry, and government support in increasing number of coun­tries are expected to drive up the world demand for biofuels to a greater height in the near future. A number of technologies are available for the conversion of plant bio­mass of either sugar, starch and oil crops, or cellulosic feedstock to bioethanol, biodiesel, or other types of biofuels (Demirbas 2010).

Today, bioethanol and biodiesel are the two most significant biofuels in the mar­ket. They are largely derived from the use of starch, sugar, and vegetable oils as feedstock. Because of the use of these essentially food-based products as feedstock for biofuels, they will compete with food use. Hence, there is the tendency of policy shift away from traditional use of food-based biomass feedstock to cellulosic

biomass feedstock for biofuel production (Schnepf 2011). However, the technology for cellulosic biofuel production may take more time before it hits commercial pro­duction scale. This development is expected to create investment opportunity in the use of oil palm biomass for biofuel production.

The oil palm industry in Sabah is estimated to produce a total of about 24 million tonnes of dry palm-based biomass in 2010 with the respective component biomass materials as presented in Table 2.2. The volume of palm-based biomass is expected to increase to around 30 million tonnes by 2020. If these palm-based biomass mate­rials are put to good use, it has the potential of generating million or even billion gallons of biofuel annually.