news/updates
Eastern starts groundwork on Mindanao bioethanol facility
By Romer S. Sarmiento and Maria Kristina C. Conti
BusinessWorld
December 10, 2007
GENERAL SANTOS CITY — Independent oil company Eastern Petroleum Corp. is planning to construct a P1.8-billion ethanol plant with Chinese firm Guanxi State Farm, an official said.
Fernando Martinez, Eastern Petroleum chairperson, said the company has already started cassava farms under the Eastern Renewable-Fuels Corp. within Central Mindanao region.
He said Eastern Renewables has so far consolidated 2,000 hectares, with half already planted with cassava in various phases of cultivation.
Mr. Martinez said Eastern Petroleum was targeting to put up 12,000 hectares of cassava farms in this city and the provinces of South Cotabato, Sultan Kudarat and Sarangani to provide the requirement of the planned ethanol plant.
The target of 12,000 hectares is expected to be hit by the end of 2009, after which the construction of the ethanol plant will immediately follow.
The company prefers to locate its ethanol plant in the city due to its strategic location towards available agricultural lands suited for cassava cultivation, Mr. Martinez said.
Under Republic Act 9637 or the Biofuels Act of 2006, oil companies are mandated to blend 5% ethanol in gasoline products two years after the signing, or starting next year.
Four years after the effectivity of the law, the blend will be increased to 10%.
At a mandatory 5% blend, Mr. Martinez said ethanol demand in the country would run to around 200 million to 300 million liters yearly starting next year and 600 million liters by 2010. He projected that up to five plants need to be constructed to meet the 300 million liters estimated demand.
"The construction of the ethanol plant [in General Santos] is almost certain because we have already mobilized the ground works. We started planting the cassava in July," he said.
He added that Eastern Petroleum has signed a memorandum of agreement with Guanxi to set up the ethanol plant.
Guanxi is a Chinese-government owned corporation with nearly 100 subsidiaries.
A 60-40 investment sharing scheme would be adopted with Guanxi, with Eastern Petroleum taking on the majority.
Eastern Petroleum, Mr. Martinez said, would be willing to tender 20% of its share to an interested Filipino-Chinese group.
Citing data from the Department of Agriculture, he said there are currently three million hectares of available lands in the country that can be utilized as cassava plantations.
President Gloria Macapagal-Arroyo signed the biofuels act as a strategy towards "energy independence" from imported oil.
It also aims to increase economic activity and boost employment in the agriculture sector and contribute to improving air quality.
Mr. Martinez urged farmers in the region to enter into a contract growing agreement with the company to plant the crop which would be bought at P1.20 per kilo at a standing price, meaning the company would take charge of the harvesting cost.
A hectare could yield about 30 tons or P36,000 in one production cycle of about 10 months, he said.
The company is also open for consolidators, joint venture and leasehold agreement with individuals, corporations or cooperatives.
As this developed, Spanish fund manager Coromato Comunicacion is poised to invest as much as $100 million on a jatropha plantation in Bukidnon, Senator Juan Miguel F. Zubiri said over the weekend.
The firm wants to follow the lead of three other Madrid-based companies engaged in the biofuels business which have already signed agreements with the Philippine government, said Mr. Zubiri, who witnessed the signing of the documents.
The Philippine delegation on official business last week closed a $200-million deal with Bionor Transformacion for a jatropha plantation; a $175-million deal with Abengoa Bioenergy for cassava cultivation as a biofuel feedstock and a $150-million deal with Greenfuel Corporacion for a jatropha plantation.
On its Web site, Coromoto Communicacion described itself as a global consulting company, which helps add "value" to their customers' specialized businesses. With the absence of a representative from the Energy department, it approached Mr. Zubiri, author of the Philippine biofuels law for the signing.
It has yet to tap a local partner, Mr. Zubiri said.
He said Coromoto Director Jose Martin identified Bukidnon, specifically Kibawe and Kitantan, as a potential site for the proposed plantation and bioethanol distillery.
If after due diligence the firm commits to invest in the country, biofuels investments clinched during the Spanish trip would total $625 million.
Bionor and Abengoa struck deals with the Philippine Agricultural Development and Commercial Corp.
In a letter to the Senate, Agriculture Secretary Arthur C. Yap said Bionor committed to start jatropha production in the first quarter of 2008 in Pila, Laguna, and three municipalities in Palawan. Per a memorandum of understanding, Abengoa will explore sites in Ozamis City as cassava grow-out areas.
The latest agreement for a comprehensive joint venture was signed on Friday between Green Fuel, a biodiesel company owned by Endesa, and local company Guidance Management Corp.
In a government statement, Green Fuel President José Luis del Val was quoted as saying that the Philippines could be its foothold in its Asia-Pacific expansion.
It wants to begin in Davao Oriental with a 60,000-hectare palm oil plantation.
Mr. Zubiri said the Philippine government should, in turn, try to speed up processing of the paperwork for new investments.
He noted that the conversion of land from agricultural to agro-industrial status at the P1.5-billion bioethanol project of British firm Bronzeoak, Inc. in San Carlos, Negros Occidental, took a year.
"This slows down the financial process. The National Biofuels Board should see if it's feasible to have the sites declared economic zones," he said.
The biofuels law, or Republic Act 9367, already gives biofuels investments pioneering project status. They are allowed a six-year tax holiday.
