Resolution on pricing mechanism for ethanol expected this month

Posted on January 13, 2012

THE GOVERNMENT is set to resolve the pricing mechanism for ethanol this month to attract the needed nine new distilleries to meet the demand for bioethanol, officials bared at the 1st Philippine BioEnergy Conference.

A Bionas employee shows fuel additives lubricants and additives for jet fuel all made from coconut byproducts at the BioEnergy Conference in this photo taken yesterday. -- Photo By Jonathan L. Cellona

“We are going to meet with other agencies to reconcile our interpretations of the pricing mechanism for ethanol within the month,” Zenaida Y. Monsada, director of the Oil Indistry Management Bureau of the Energy department, said in an interview on the sidelines of the BioEnergy Conference held yesterday.

She said the Energy department’s recent release of Department Circular 2011-12-0013 states oil firms should source a percentage of its ethanol blending requirements to its fuel from local ethanol producers.

Ms. Monsada said the circular allowed ethanol companies to cater to a captive market and compete less with the imported ethanol.

The pricing mechanism will function much like the pricing formula used in the oil industry.

“With the release of the circular, we expect investors to start building their plants. Our biodiesel program is very successful and we also want to enhance the bioethanol program,” said Energy Undersecretary Jose M. Layug, Jr. during his speech at the conference.

Ethanol is used as a blending component in fuel. Under the Biofuels Act of 2006, oil companies are required to blend a minimum of 5% of ethanol to fuel. The Energy department increased the blend to 10% last year for mid-octane fuels. Full implementation of the 10% blend is in February.

The Department of Agriculture and the Energy department estimate the country needs an additional nine ethanol plants to be able to meet local demand due to the 10% mandate for ethanol blending. “With the demand you need around nine plants with a minimum capacity of 30 million liters. We have an existing supply of 79 million liters and since we have a plant coming online with a capacity of 54 million liters in the first quarter of this year, that would mean a gap of 288 million liters,” said Mario C. Marasigan, director of the Energy department’s Renewable Energy Management Bureau.

He added the estimated amount for one plant is $1.6 billion. -- Emilia Narni J. David