news/updates
Supply concerns weighing on next year's biofuel deadline
By Maria Kristina C. Conti
BusinessWorld
January 17, 2008
THIS YEAR will be decisive for the local bioethanol industry as February 9 marks a one-year countdown to the implementation of a blending mandate set via the Biofuels Law.
The government, industry stakeholders said, should work out issues on the affordability and availability of bioethanol, required as a 5% mix in locally-distributed gasoline.
Mario C. Marasigan, Energy department director for energy utilization and management, said next month will be critical.
"We must be able to estimate how much production we can expect by next year, when the 5% blend is mandated for gasoline already," he told BusinessWorld.
Based on projected gasoline demand, the bioethanol requirement for 2009 will be around 268 million liters. For now, there are seven Board of Investments-registered projects with a total of 343.80 million liters in potential production capacity.
Only one, however, the San Carlos Bioenergy Inc. project with capacity of 30 million liters, is expected come onstream by the end of the year.
"In a sense it's not yet even fully-accredited, because we would have to inspect their facilities [and actual production] first. San Carlos said it could produce 32-45 million liters ... it's still lacking. But there are at least nine other companies undergoing accreditation, expressing interest in hope that they can also be accredited," said Mr. Marasigan, who oversees the department's alternative fuels program.
"There are basically small issues, I hear, like right of way," he added when asked about barriers to the establishment of ethanol refineries and feedstock areas.
The required investments for one plant is estimated to be P2 billion, inclusive of land planted with feedstock.
If supply turns up short, the private sector can turn to stopgap measures, Mr. Marasigan said.
"What could happen is, [investors] can turn to ethanol distilleries, yes, alcohol producers. They can just add a dehydrator to the facility and they can produce 99% ethanol. Or, alternatively, they can use sugar refinery facilities. You just have to further refine the sugar to get ethanol anyway," he said.
Ethanol can be produced using different feedstock but the most popular at present is sugar. "We can't use corn, which is used in the US, because it's food," he said.
Rafael Coscolluela, chief of the Sugar Regulatory Administration, said in a phone interview that there are two schemes to ensure that enough sugar would be available for food use.
"One, an ethanol plant could be built in an area which is planted [with sugar cane] exclusively for ethanol. This could be set aside, these 'green areas', but the permit must be granted [stringently].
"Two, if an ethanol plant is built within an existing sugarcane area, we can specify a percentage of production which should go to ethanol production. Say, 60-40 in favor of food," he said.
Mr. Coscolluela said he hopes these policy questions will be settled by the National Biofuels Board, an interagency body created by the Biofuels Law, as soon as possible.
"The government could also promote sweet sorghum as a feedstock. The Agriculture department is pushing for that. It's easy to produce and unlike sugar, doesn't have too many issues," he said.
Francis Glenn L. Yu, president of Seaoil Philippines Inc., said his company would welcome locally-produced ethanol. But for sweet sorghum-based fuel, the government needs to show commercial studies which prove its viability first, he said last week.
Seaoil has been selling E10, a 10% blend, to receptive customers since 2005. E10 is about P2 per liter cheaper than regular gasoline at Seaoil. It is mixed with ethanol imported from countries such as Brazil, which use sugar as feedstock.
Pilipinas Shell Petroleum Corp. also offers E10 in select gasoline stations.
Other oil companies are raring to follow. Eastern Petroleum Corp. President Fernando L. Martinez is looking at a billion-dollar bioethanol project with Chinese partners.
"We're going to use cassava so there are [fewer] issues,' he said.
Local bioethanol production is supported by a clause in the law which requires oil companies to use domestic supply.
"The law protects the local industry, same as with biodiesel industry," Mr. Marasigan said.
The law, signed by President Gloria Macapagal Arroyo in January 2007, provides financial incentives such as income tax-holidays for projects.
It immediately required a 1% blend of biodiesel into regular diesel pumped by all gasoline stations in the country. But while there is excess supply of coconut oil-based biodiesel, every liter, however, is currently more expensive than regular diesel.
Economist Peter Lee U commented: "Filipinos same as in every developing country will most likely value cost over all other benefits. True, biofuels help the environment, but we worry more about the money."
To lower the cost of fuel will be a challenge for the budding bioethanol industry, he concluded.
