THE Philippines’ ethanol production is expected to increase through next year due to a modest buildup in capacity, but meeting the mandated 10 percent ethanol blend using local ethanol remains problematic.
In a report, the United States Department of Agriculture (USDA)-Foreign Agricultural Service said it expects Manila’s ethanol imports to decline from 311 million liters (MLi) in 2015 to 281 MLi in 2016, further dropping to 278 MLi by 2017.
The Biofuels Act or Republic Act (RA) 9367 was signed in January 2007 making the Philippines the first country in Southeast Asia to have biofuels legislation in place. The current blend mandates are 10 percent and 2.0 percent for ethanol and biodiesel, respectively.
Sugarcane and molasses are used in Philippine ethanol production while coconut oil (CNO), where coconut methyl ester (CME) is derived, is the preferred biodiesel feedstock.
The Biofuels Act gives priority to local ethanol over imports, but the mandated blend historically has largely been met through the latter.
“Meeting the current ten percent ethanol blend using local ethanol, however, has been problematic; while there have been no supply issues complying with the mandated two percent blend for biodiesel,” the USDA said, citing preliminary data from the Philippine Government.
In 2015, the Philippines was the third largest market for US ethanol accounting for sales of over $170 million.
Last year, there were eight ethanol plants operating, unchanged from the previous year’s level, with a combined capacity of 222 MLi.
By 2017, the USDA said that there will be 11 distilleries, with an aggregate capacity of 322 MLi, that will produce close to 300 MLi or roughly half of total ethanol requirements.
“Compliance with the 10 percent mandate this year is expected due to stricter enforcement as local output increases. This is premised on an optimistic capacity utilization rate of above 90 percent for 2016 and 2017. As a result, imports are projected to decline through 2017,” it said.
On the other hand, RA 9367 disallows biodiesel importation, and local biodiesel has consistently met blend requirements.
Last year, 11 refineries produced 204 MLi, well over B2 (2 percent biodiesel blend) requirements with carryover stocks, and strengthening its position for a possible increase in the blend mandate in 2015.
Capacity utilization was only at 35 percent of total aggregate capacity of 585 MLi in 2015.
“The planned B5 blend last year did not happen, however, and is assumed to be implemented in 2016,” the USDA said. It said the GPH (Government of the Philippines) goal is to raise the ethanol mandate to 20 percent by 2020 and the biodiesel mandate to 10 percent (also by 2020, but increasing to 20 percent by 2030).
“Existing production capacity, however, will only support marginal increments in blending that fall far short of targets, and delivery infrastructure is entirely inadequate for large increases,” it added.
Although the Duterte government’s energy policy is not very clear, the USDA said that public statements from the President and senior officials indicate that the general priority places economic development ahead of environmental concerns.
“As a result, a review and possible revisions of energy targets and strategies, including the fuel mix policy and biofuels, are expected under the new government,” it said.
“In general terms, the continued growth of the Philippine economy, coupled with the expanding Philippine population, are expected to drive increasing fuel demand through 2026,” it added.