Feb 20, 2009

Philippine Ethanol Industry Strong Despite Falling Demand For Oil

AHN-USA, February 19, 2009

Manila, Philippines (AHN) - Despite the downturn in the ethanol industry in the U.S. due to falling demand for oil, the ethanol industry in the Philippines is still pushing through with the operation or construction of production facilities in southern Philippines.

One of the leading players in the industry, San Carlos BioEnergy, started commercial operations of its $52 million (2.5 billion pesos) commercial integrated ethanol distillery and co-generation power plant in mid-January. The facility could produce 125,000 liters of ethanol daily or 30 million liters yearly and generate 8 megawatts of power. The feedstock will come from 400,000 tons of sugar cane sourced from 9,000 hectares of sugar land at San Carlos City in the province of Negros Occidental.

Another major player, Basic Energy, entered into a memorandum of agreement with Canadian firm Nexum Energy, to jointly develop a bioethanol plant in the Philippines. When completed, Basic will have a 200,000 liters daily production capacity using cassava as a feedstock, according to Oscar de Venecia Jr., president of Basic Energy. The company shifted to cassava as feedstock from initial plans to use sugar cane. Aside from the ethanol production, Basic's plant, to be located in Zamboanga del Norte, will generate 8 megawatts of green energy.

A third player, Roxol Energy Corporation, is also putting up a bioethanol plant in La Carlota City, also located in Negros Occidental. The Roxol plant will have a capacity of 10,000 liters per day and is expected to be operational by 2010.

In contrast, ethanol production facilities in the U.S. are facing a difficult time. VeraSun Energy, one of the largest producers of ethanol, suspended the operation of 12 out of 16 facilities, and is selling five of its plants. Aside from VeraSun, 24 out of 180 ethanol plants across the U.S. shuttered plants in the last three months, according to Bob Dinneen, president of the Renewable Fuels Association trade group.

The move has prompted Sen. Jeff Bingaman, chairman of the U.S. Senate Energy and Natural Resources Committee, to consider revisiting ethanol production targets set under the country's 2007 energy law.

The financial problems of U.S. ethanol producers was attributed to falling demand for ethanol as pump prices went down below $2 a gallon, spurred by the low demand for oil due to the global recession.

For the Philippine Department of Energy, its Alternative Fuels Program remains one of the five key components of the country's Energy Independence Agenda that aims to attain 60 percent energy self-sufficiency by 2010. Aside from ethanol production, the DOE is pushing for the development of other forms of clean energy such as geothermal, natural gas, liquefied petroleum gas and hydrogen.

Mario Marasigan, director of DOE's Energy Utilization and Management Bureau, confirms the San Carlos operations will be sufficient to meet the 5 percent required biofuel mix with gasoline mandated by the Philippine Biofuels Act of 2006.

Other sectors are supporting the move to give alternative energy sources a push. The Development Bank of the Philippines signed a Memorandum of Understanding with three foreign energy firms to jointly develop viable and renewal energy projects in the Philippines.

Unconfirmed reports said San Carlos will set aside plans to increase ethanol production due to lack of long term contracts from oil companies and instead shift its resources to build a 15 megawatt biomass power plant. Meanwhile, Basic Energy shifted from sugar cane as feedstock to cassava because it could earn also on the side from the sale of cassava chips to animal feed manufacturers in the Philippines.

The adaptability to shift resources and change plans amid a volatile oil demand and turbulent economic times seems to be the reason why the Philippine ethanol industry is surviving better compared to its counterpart in the U.S.

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