Govt asked to compel ethanol off-take deals

INVESTORS in the ethanol industry want the Department of Energy (DOE) to recognize the capacity of production plants in the pipeline to compell oil companies to pursue supply contracts with them. In a media briefing, Tetchi Cruz-Capellan, Ethanol Producers Association of the Philippines (EPAP) director, said the Energy department needs to certify the output of new ethanol producers to keep oil firms from importing their requirements.

”We are very conscious [that we need to] import but we have to live by the spirit of the law,” she said.

Under the Biofuels Act of 2006, oil companies are mandated to blend a minimum 5 percent of locally sourced bioethanol (ethanol sourced from crops) with their gasoline products. By 2011, the minimum blend will rise to 10 percent.

Oil companies, however, import the bulk of their requirements because of the limited local production of the alternative fuel.

They also said that locally produced ethanol is costlier than imported versions, especially supply coming from countries with fully developed industries.

Capellan admitted that the country’s two ethanol producers, San Carlos Bioenergy Inc. and Leyte Agri Corp., have a combined capacity of 50 million liters.

This is well short of the estimated current demand of 110 million liters, much less the 220 million liter required come 2011.

But Capellan said the Energy department also has to take into account upcoming ethanol plants to compel oil firms to limit their imports.

”The implication is that if the government doesn’t declare [pipeline projects as part of the local capacity], then [oil firms] won’t buy and would instead import. [Barring a declaration, ethanol plant] investors [would be left without off-takers],” she said in the vernacular.

Besides Roxol Bioenergy, which is slated to contribute 27 million liters next year, at least three more companies—Alto Power, Green Future Innovations, and Cavite.

Biofuels have committed to produce some 33 million liters, 54 million liters, and 37 million liters of ethanol, respectively.

The additional capacity of these four new plants will reach as much as 151 million liters by 2011, bringing local supply to 201 million liters. Capellan said ethanol producers also want more government support to help them meet domestic demand.

She said the government has to work closely with other stakeholders to attain domestic production of 220 million liters by 2011.

“The stakeholders, especially government, have to continue promoting biofuels and work harder to improve the investment climate by providing greater incentives, encouraging more off take agreements, and by reducing red tape to fast-track the construction of more ethanol plants and accelerate commercial operations to beat the deadline set by the Biofuels Law,” she said.

Without these, oil companies would be forced to import the bulk of their ethanol requirements, she said.

“The Philippines is entering this arena in the late stage of the game. Brazil for example has larger farms, bigger plants, and more efficient operations. Our producers are optimistic that in time, the Philippines will match their efficiency and catch up with the pace of our Asean neighbors. But given the huge investments required to build plants, the producers need a more favorable climate to start up and scale up their operations,” she added. –Euan Paulo C. Añonuevo, Reporter, Manila Times