Is the Philippine Ethanol Industry Ready for 2011?

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Written by Sabrina Deparine

Tuesday, 30 June 2009 07:39

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To date, oil companies have also decided to “step up” the mandate by voluntarily offering the public 10% ethanol-blended gasoline, or E10, instead of only 5% ethanol blend. According to the Philippine Energy Plan 2007, all Seaoil stations, 55 Shell, and 14 Petron stations in greater Manila area are offering E10. However, not all gasoline products have ethanol content and it is still up to the discretion of the motorist if he wants to load up on E10 or not.

With February 2011 fast approaching, is the Philippine ethanol industry ready for the extensive rollout of ethanol-blended gasoline in the market? By that time, all gasoline products being sold in the market should have at least 10% ethanol content.

Based on the most readily-available data from the Department of Energy (DOE), the overall Philippine oil consumption as of 2006 was at around 100 million barrels of oil. To date, there are only two active ethanol production facilities in terms of commercial operation: San Carlos Bioenergy and Leyte Agri-Corp. Both companies have combined annual production capacity of only 39 million liters. Looking further into statistics, the current mandate of 5% ethanol blend would require about 208 million liters of ethanol per year. There is therefore a shortfall of 169 million liters. In terms of the mandate of 10% ethanol blend by 2011, approximately 461 million liters of ethanol will be needed.

At present, the Philippines is importing ethanol in order to address the lack of supply from local producers. However, in accordance to Section 5.2 of the Biofuels Law, importation of bioethanol to assuage the shortage of local production is only allowed within four years after the passage of the law.

As of now, the Philippine ethanol industry does not have the capacity to address the impending demand for 2011. According to the “Roadmap to Bioethanol through the Sugarcane Industry Route” released by the Sugar Regulatory Commission (SRA), a total of 18 bioethanol distilleries should be up and running in order to meet the 10% mandated blend for all gasoline products by 2011. This forecast is based on a rated capacity of 100,000 liters per day and an overall efficiency of 85%.

To address the concern over the shortage of locally-produced ethanol, the Philippine government, through the Biofuels Act, is encouraging investors to invest in ethanol facilities. The law provides the following incentive schemes to promote investments in the production, distribution, and utilization of E10 as well as to ensure that the bioethanol supply in the country will be enough to cover the mandated blends:

1. Specific Tax – No tax will be charged on local or imported biofuel component.

2. Value Added Tax – Raw materials like coconut, sugarcane, cassava, corn, and sweet sorghum, which are used in biofuel production, are exempted from value-added tax.

3. Water Effluents – Water effluents like distillery slops, which are by-products of biofuel production, are exempted from wastewater charges as declared in the Philippine Clean Water Act.

4. Financial Assistance – Public financial institutions like government banks and other financial institutions may extend financial assistance to Filipinos or to companies that have 60% of capital stocks in the biofuel industry. The conditions for these may vary depending on the charters of the institution.

Aside from this, there are also plans to expand sugarcane plantations in order to grow more sugarcane that can be utilized as feedstock for ethanol production. This is in addition to surplus sugar, classified as “F” sugar, which can also be used as bioethanol feedstock. According to the SRA, sugarcane has the capacity to give the highest yield of ethanol per hectare as compared to the other types of crops.