pip_admin – Page 5 – PIP – Philippine Institute of Petroleum

Posted on: October 30, 2020 by pip_admin

Source: https://www.doe.gov.ph/oil-monitor

WORLD OIL PRICES (October 19-23, 2020 trading days)

Dubai crude has increased week-on-week by a little of US$0.03/bbl. On the contrary MOPS gasoline and diesel have decreased; MOPS gasoline by about US$0.15 per barrel and MOPS diesel by around US$0.90 per barrel.

Reasons for the Adjustment

Libya plans to ramp up crude production to 1 million b/d (MMB/D) in four weeks following the September United Nations-backed ceasefire in the country. The recently peace agreement lifted an eight-month blockade by the Libyan National Army on most crude exports.

Libya National Oil Corp. confirmed in reports last week that production would rise to 800,000 b/d in two weeks and to about 1 MMB/D in four weeks. As of October 20, Libyan production had risen to more than 500,000 b/d according to S&P Global Platts. Libya produced about 1.6 MMB/D of crude in normal situation.

Some analysts see the rapid rising of Libyan barrels to be an issue to the OPEC+ group as it could disrupt its quest to balance the oil market. Libya’s additional crude could change the story back to oversupply concerns as crude demand outlook weakens, as the world continues on restrictive measures and lockdowns to contain COVID-19.

OPEC+ tapered production cut to 7.8 MMB/D from 9.7 MMB/D in August, and is scheduled to roll back further to 5.8 MMB/D starting in January. However, with a second wave of coronavirus infections weighing on the oil market’s outlook, many OPEC+ ministers are expected to keep the current cuts in place.
Asian demand for Middle East crude was noted to have been recently increasing in view of higher demand by key importers-China and India for the December-loading cycle. Improved refining margins in October also helped boosted demand.
The Asian gasoline market ended the week on a soft note amid lackluster demand and greater supply, with more cargo offerings from India. Platts expect regional gasoline supply in an upturn as runs begin to climb in November after the maintenance.

The Asian gasoil/diesel market ended the week also on a soft note with oil industry sources reiterating that low demand and good supplies were still weighing on the market complex. Refinery runs are set to begin rising in November following the conclusion of October maintenance works. Platts however noted that healthy outflows of gasoil from Singapore to Australia, Malaysia and Myanmar were recorded in the past week.

FOREX: Philippine peso depreciated week-on-week against the US dollar by P0.02 to P48.58 from P48.56 in previous week.

DOMESTIC OIL PRICES

The oil companies implemented their price adjustments effective today, 27 October 2020. Diesel and kerosene have decreased; diesel by P0.25 per liter and kerosene by P0.15 per liter. No price movement has been effected on the price of gasoline.

These resulted to the total year-to-date adjustments to stand at a net decrease of P4.67/liter for gasoline, P10.26/liter for diesel and P13.59/liter for kerosene.

For the updated prevailing retail pump price, please browse this link: https://www.doe.gov.ph/price-monitoring-charts?q=retail-pump-prices-metro-manila.

_______

For more information, call the

Department of Energy
Pricing: 840-2187
LPG: 840-2130
Fuels: 840-5669
SMS: (0915) 4469421
Email: oilmonitor@doe.gov.ph
Website: https://www.doe.gov.ph

Posted on: October 30, 2020 by pip_admin

The Mutual Aid for Response to Emergencies & Incidents Exercise/Drill aims to assess effectiveness of Mutual Aid Central Committee (MACC) procedure in terms of responding personnel’s safety and accounting of equipment lent. Built on mutual cooperation as the basic foundation of mutual aid and support, the Drills also test the inter-operability of PIP-member companies emergency response procedures vis-à-vis its alignment with the government, Local Government Units and other stakeholders’ emergency response resources available in a specific area of the drill site.

Critique sessions are conducted to draw lessons to identify improvements in emergency response mechanism of PIP member-companies and other stakeholders particularly in the event of any disasters and/or emergencies that is beyond the capabilities of the affected entity

Posted on: September 16, 2020 by pip_admin

WORLD OIL PRICES (September 7- 11, 2020 trading days)

Dubai crude has decreased week-on-week by about US$4.50/bbl. Both MOPS gasoline and MOPS diesel have also decreased: gasoline by around US$3.35 per barrel and diesel by nearly US$ 5.00 per barrel.

Reasons for the Adjustment

The US Energy Information Administration (EIA) stated in its monthly Short-Term Energy Outlook released this week that global oil demand grew by 1 million b/d (MMB/D) in August, the slowest month-on-month increase since demand started recovering from coronavirus lockdowns in May. Last month (August) global supply growth surpassed demand growth, the first time during the recovery period.
The EIA cut its outlook for 2021 global oil demand growth by 500,000 b/d from last previous month forecast to 6.5 MMB/D on lower expected consumption growth in China. EIA now sees China demand growing 1 MMB/D next year, down from 1.5 MMB/D in last month’s forecast.
Reportedly, OPEC 13 members produced 24.37 MMBD in August (a 4% rise from July) while its nine partners, including Russia, added 12.67 MMB/D (a 6% increase). The higher output was expected as the OPEC+ coalition had been scheduled to ease output to 7.7 MMB/D (from 9.7 MMB/D in June and July) for the rest of the year starting in August. The group achieved 97% compliance with its new quotas in the month, according to Platts calculations.
However, OPEC’s increased production is coming at a time when the rapid recovery of global oil demand appears to be stalling, amid fears of a growing second wave of COVID-19 infections. Thus, Crude oil markets have softened markedly over the past week, with Dated Brent falling below $40/b for the first time since mid-June. In the sour crude market, Dubai times-spreads had been on an upward trend for the second half of August but have seen a sharp reversal over the past two weeks. The Dubai M1/M3 time-spread was at minus 73 cents/b on September 10.
Asian gasoline weakens during the week (Sep 4-11) as supply concerns return, dragging on fundamentals of Asian gasoline time-spreads that slipped deeper into contango later in the week. However, Singapore gasoline cracks (crude vs. gasoline) are now above gasoil/diesel for the first time since 2017 and could see additional support with refinery maintenance set to rise heading into October, in addition to extended accident-related outages such as Taiwan’s Formosa and Malaysia’s Pengerang.
The slump in Asian gasoil/diesel markets bottomed out, but with little sign of any recovery developing. The Singapore gasoil vs. Dubai crack was stable at $3.00/b, up moderately from last week lows. Market sentiment remains unpromising on a slowing demand recovery, high stock levels, and expectations of continued heavy exports from China though the rest of the year.
Singapore middle distillate stocks fell by 6% week-on-week to 15.05 million barrels. But despite the drop, Platts noted that stock levels remain high by historical standards, as this week’s total is the second-highest since September 2016.
A lack of European demand for gasoil will see more Middle Eastern and Indian volumes heading east to Southeast Asia, adding to the pressure on Singapore prices. With US Gulf Coast low sulfur gasoil stock at record highs and 66% higher year on year, it is difficult to see additional gasoil from the East of Suez moving to Europe even as the winter season approaches.1

1 Platts’ Asia Pacific Weekly Recap, 11 September 2020

FOREX: Philippine peso depreciated week-on-week against the US dollar by P0.05 to P48.60 from P48.55 in previous week.

DOMESTIC OIL PRICES

The oil companies implemented their price adjustments effective today, 15 September 2020. Gasoline has decreased of P1.00 per liter, diesel by P1.50-P1.55 per liter and kerosene by P1.45 per liter.

These resulted to the total year-to-date adjustments to stand at a net decrease of P5.22/liter for gasoline, P10.99/liter for diesel and P15.39/liter for kerosene.

For the updated prevailing retail pump price, please browse this link: https://www.doe.gov.ph/price-monitoring-charts?q=retail-pump-prices-metro-manila.

For more information, call the

Department of Energy
Pricing: 840-2187
LPG: 840-2130
Fuels: 840-5669
SMS: (0915) 4469421
Email: oilmonitor@doe.gov.ph
Website: https://www.doe.gov.ph

Posted on: August 11, 2020 by pip_admin

Enacted into Law on 19 December 2017 and took effect 01 January 2018, the Tax Reform for Acceleration and Inclusion (TRAIN Act) generally, was established to generate revenue to achieve the vision of the Duterte Administration for the country including eradication of poverty, create inclusive economic environments to open equal opportunities, achieve higher income country status and pave the way for simpler, fairer and efficient tax system.

Being the first of four packages of tax reforms to the National Internal Revenue Code of 1997 (Tax Code), some modifications introduced in the package includes changes in the personal income tax (PIT), estate tax, donor’s tax, value added tax (VAT), documentary stamp tax (DST) and the excise tax of tobacco products, petroleum products, mineral products, automobiles, sweetened beverages and cosmetic procedures.

The TRAIN Act imposes excise tax on downstream oil industry including LPG, diesel fuel and premium gasoline (regular and unleaded) with a total increased amount per liter of P3.00, P6.00 and P10.00 respectively, implemented in three tranches from 2018, 2019 and 2020. The translated incremental increase on excise tax per product from 2018, 2019 and 2020 is presented in Table below.

	Prior to 2018	1^st Tranche 2018	2^nd Tranche 2019	3^rd Tranche 2020	Total Excise Taxes
LPG	0	+1.00	+1.00	+1.00	+3.00
Diesel	0	+2.50	+2.00	+1.50	+6.00
MOGAS	4.35	+2.65	+2.00	+1.00	+10.00

In 2018 alone, excise tax per liter for specific fuel products is priced for LPG (P1.00), bunker fuels (P2.50), Diesel (P2.50), Petcoke (P2.50), Kerosene (P3.00), Avgas (P4.00), gasoline (P7.00), naphtha (P7.00), asphalt (P8.00), lubricating oil (P8.00), paraffin wax (P8.00) and refined fuels (P8.00).

The Philippine Institute of Petroleum (PIP) supports the government’s infrastructure program to sustain inclusive economic growth and investments in the social capital and likewise recognizes the inflationary impact of high fuel prices as traders readily blame the fuel price hike as reason for increase in prices of prime commodities. This given the fact that BSP has estimated that out of 6.7% inflation hike, only 0.7% point is attributable to TRAIN and fuel only accounts for 0.4% point.

PIP posits that the imposition of TRAIN 1 to downstream oil industry specifically the significant increase in the specific/excise taxes will have inflationary impact to various sectors, calculated impact/impact study of inflation, and further incentivization of fuel smuggling activities in the country.

Furthermore, PIP recommends to the government to highly consider minimal disruption on company operations in Fuel Marking Program implementation; sale of power or fuel generated from renewable sources of energy to be VAT-exempt instead of zero-rated; removal of exemption of sales to entities covered by special laws; and inclusion of VAT-exempt transactions (Sect. 109) – on the sale of raw materials used in the production of biofuels.

CITIRA (formerly TRABAHO Bill)

House Bill (HB) No. 7458 or the Corporate Income Tax and Incentives Reform Act (CITIRA) formerly Tax Reform for Attracting Better and High Quality Opportunities (TRABAHO Bill), with Senate version SB No. 1357, forms part of the Package 2 of the Comprehensive Tax Reform Package (CTRP) of the Duterte Administration. This Package 2 ‘seeks to lower corporate income tax (CIT) rate gradually from 30% to 20%, reorient fiscal incentives toward strategic growth industries, and make incentives available to investors who make net positive contributions to society’.

PIP supports the lowering of the Corporate Income Tax Rate, reforming the tax system and broadening the tax base in support of sustained economic growth and job generation. Further, PIP recommends a revisit of the provision on the repeal of tax incentive benefits of its customers, i.e. exemption from VAT and other local business taxes; revisit the plan to repeal the 123 special law granting various incentives to the deserving taxpayers; retain the current 5% tax benefit based on net taxable income; maintain the optional standard deduction (OSD) at 40% instead of the proposal to reduce the 40% to 20% and reword of Transfer Pricing provisions in the Philippine Tax Code. Reword of Transfer Pricing to reflect the application of transfer pricing guidelines for domestic and cross-border transactions instead of granting the Commissioner blanket authority to disregard and counteract tax avoidance arrangement (consider same as void).

Posted on: August 11, 2020 by pip_admin

The Philippines having been a signatory to the International Maritime Organization’s (IMO) directive on October 2017 under the terms of the IMO’s MARPOL Annex VI Regulation, is directed to go ahead with a global sulfur cap of 0.5% on marine fuels starting from 01 January 2020. The Convention on IMO conferred upon the function of Marine Environment Protection Committee (MEPC) for the prevention and control of marine pollution from ships. MEPC adopted in its resolution (RESOLUTION MEPC.320 74) a revised MARPOL Annex VI which significantly strengthens the emission limits for sulfur oxide (SO_x).

The Department of Foreign Affairs (DFA) provides representation of the Philippine Government in the International Maritime Organization and the Maritime Industry Administration (MARINA) serves as implementing agency of MARPOL Annex VI.

In June 2018, PIP generally sought the government’s plan on its implementation, enforcement and monitoring. The position and recommendation cover the readiness of the shipping industry (both international and local) to comply with MARPOL Annex VI, country’s assessment of the supply availability of readily-compliant fuel, and engagement of relevant stakeholders (i.e. shipping industry, oil suppliers and government enforcement agencies). The stakeholder engagement is crucial to assess the potential impacts of this international regulation not only to marine fuels but also on the cost of impact on freight for all sea-borne imports and exports of petroleum products.

The PIP expresses its concern that with the increasing trend in crude and finished product’s price in the world market, compliance to MARPOL Annex VI strict regulation on ship’s engine emissions addressed either by installation of the prohibitively priced emission control devices (scrubbers) or use of the high priced 0.5% sulfur bunker fuel, the regulation will further put the domestic shipping industry in an uncompetitive stance via-a-vis other comparative shipping industry in the region as its direct impact to the industry.

The PIP generally expresses the potential impacts of this international maritime regulation to the downstream oil and shipping industries, and specifically the freight costs for all sea-borne imports and exports of crude and petroleum products. Significant price increases in low sulfur fuel oil shall impact on shipping costs which eventually will be reflected in petroleum product prices which in turn shall impact on prices of commodities which will induce higher headline inflation. The shipping association estimates of a 2-4% increase in freight for every P1/increase in fuel cost, is considered to be a conservative estimate.

In view of the foregoing, the PIP communicated to DFA through MARINA the following recommendations:

The Philippine Government has the exclusive decision whether this regulation will move forward in 2020 or may consider possible deferment subject to due consultation with various stakeholders without prejudice to the country’s commitment or global obligations on the matter;
To better guide the Government in making its decision, the industry recommends to the Philippine Government to conduct study to: (i) assess the sources and nature of air pollutants in local/domestic waterways and (ii) assess the oil industry readiness to supply domestic demand by 2020 and the shipping industry’s ability to utilize low sulfur fuel readily;
In relation to the extension/adoption of the 0.5% sulfur cap to inland/local marine fuels for domestic vessel dedicated to local/territorial water shipping, the downstream oil and shipping industries request for a thorough review of this local application amongst the different local stakeholders in the country;
Revisit implementation best practices/models of other countries specifically those adopting the Emission Control Areas (ECA) designated under MARPOL Annex VI to provide a global perspective of the implementation of this IMO regulation.

MARINA in coordination with the PCG- Maritime and Ocean Affairs Office (PCG-MOAO) organized the country’s participation in the 75^th Session of the Marine Environment Protection Committee (MEPC75) to be held from March 30 to April 3, 2020 at the IMO Headquarters in London, United Kingdom. However, this international event might be pushed forward considering the enhanced community quarantine declaration amidst the covid-19 crisis in the world. MEPC is the international maritime committee regulating, monitoring and evaluating relevant policy issuance and country performance for marine pollution agenda as provided in Annex VI of IMO 2020.

The PIP together with its six member-companies acknowledge the IMO MARPOL Annex VI provision of low sulfur content for international marine fuels effective January 2020 and fully support its compliance subject to the Implementing Rules and Regulations to be developed by the concerned state regulator (MARINA).

Posted on: August 11, 2020 by pip_admin

The Philippine government through the Department of Finance (DOF) launched the Fuel Marking Program in August 2019 in aim to combat oil smuggling in the country thereby generate revenues to finance various infrastructure programs and social investments throughout the nation.

The Fuel Marking Program is the process of marking imported and refined petroleum products such as gasoline, diesel and kerosene using a sophisticated, un-replicable marker after taxes and duties have been paid. This program, forms part of the Tax Reform for Acceleration and Inclusion (TRAIN Act), enacted into Law on 19 December 2017 and took effect on 01 January 2018.

The DOF mandates its two attached agencies, the Bureau of Customs (BOC) and Bureau of Internal Revenue (BIR) as the lead implementing agencies to execute and oversee the fuel marking in depots, vessels, tank trucks and other fuel-transporting vehicles; and the fuel testing in refineries and its attached depots, retail stations, respectively. The Consortium of SGS Philippines, Inc and SICPA SA, a Switzerland-based company was commissioned to implement the project under a five-year contract which kicked off in 2019. The marking cost is P0.06884 per liter, which will be shouldered by the government during its first year of implementation or until the utilization of the approved budget (P1.96 billion), whichever comes first.

Reports from the government, NGO initiated studies, including that of an independent study commissioned by local oil players estimates forgone revenues in the form of excise taxes and value-added taxes (VAT) to be around P26.9 billion by the DOF (2016), P37.5 billion by an Asian Development Bank study and P43.8 from the oil industry.

In 2019, the DOF estimated to have marked a total volume of 15.2 billion liters, with about 6.8 billion liters for the BOC, and 8.4 billion liters for the BIR. The government expects that all fuel products covered under the fuel marking program will be marked by 03 February 2020, showing proof that customs duties (for imported petroleum products) and pertinent taxes (for locally refined or manufactured petroleum products) have been paid.

The Philippine Institute of Petroleum (PIP) fully supports the government’s initiative to curb smuggling from both outright physical and technical smuggling through the (a) implementation of the fuel marking program, (b) strengthening of the VAT monitoring system, and (c) marine vessel traffic monitoring system. Similarly, the PIP advocates that these programs should be conducted in a safe and efficient manner to ensures unhampered operations and safety within the oil companies’ facilities and personnel. Furthermore, we believe that the success of this program will depend largely on the equitable and level implementation across all downstream oil players with prioritization on vulnerable trading areas with significant price variations.

Posted on: August 11, 2020 by pip_admin

The Philippine Institute of Petroleum (PIP) changes leadership as its Board of Trustees acknowledge the dedication and service of its incumbent Executive Director, Mr. Teodoro M. Reyes and welcome his successor, Mr. Raphael C. Capinpin during the Board’s Q4 2019 Board Meeting, held at Manila Golf and Country Club, in Makati City on 05 December 2019.

Mr. Teddy Reyes has served PIP since 1998 taking the role of Assistant to the Executive Director (1998-2015) and Executive Director (2016-2019). Mr. Raffy Capinpin, a retiree from Shell brings with him 30 years of experience in downstream oil sales and marketing, in leading PIP to its greater heights effective 01 January 2020.

The PIP Board, Advisory Board, Individual Members, Committee Members and Secretariat also welcome Mr. Jean-Pierre Battermann as the incoming President and Managing Director of Total (Philippines) Corporation and Country Chair of TOTAL Group effective 01 January 2020. Mr. Battermann succeeds Mr. Laurent Stouffe who served TPC and PIP for almost 2 years, and shall also sit as Trustee-President of PIP.

Posted on: August 11, 2020 by pip_admin

WORLD OIL PRICES (July 27-31, 2020 trading days)
Source: Department of Energy Website

Dubai crude has decreased week-on-week by almost US$0.50/bbl. Both MOPS gasoline and diesel have also decreased by around US$0.75 and US$0.70 per barrel, respectively.

Reasons for the Adjustment

The weak US economic data put demand recovery outlooks in doubt amid rising global supply forecasts, and thus had affected on oil prices during the week.
The US reportedly had the largest-ever single-quarter GDP contraction in its history, as its GDP, estimated by US Department of Commerce, plunged by 32.9% in the second quarter this year. The US Department of Labor data also showed that weekly initial unemployment claims climbed to 1.43 million in the week ended July 25, putting the advance unemployment rate at 11.8%.
Nonetheless, even as demand outlooks dim, the market is bracing for a surge of new output as OPEC and allies officially began easing off their record production cuts starting August 01. The OPEC+ alliance relaxed its quotas by about 2 million b/d (MMB/D) from August through the rest of the year. The coalition appears eager to reclaim some of its lost market share, while not allowing the market to overtighten and unlock a wave of supplies from the US and other producers outside the group.
Some market analysts believe that increasing oil supply as OPEC did, during this time of continued weak demand, signals going back to supply surplus as has been observed in the second quarter. “OPEC’s experiment to increase production from August could backfire as we are still nowhere near out of the woods yet in terms of oil demand”, Bjornar Tonhaugen of Rystad Energy quoted.¹
Demand from top buyer China also softened due to weak margins, prolonged port congestion, severe flood and limited crude import quotas set by the government.²
Saudi Aramco is scheduled to announce its official selling price (OSPs) for September crude loadings to customers in Asia next week. The M1/M3 Dubai time spread is currently in a contango of minus 66 cents/b as compares to a backwardation of 65 cents/b this time last month³. The slide into backwardation over the past few weeks will be a concern for Aramco ahead of higher OPEC+ production starting August 01. A survey of market participants by S&P Global Platts news expects to see Aramco cut prices by between 30 cents and $1/bbl.
Gasoline remained bearish on slowing demand in the US and fresh coronavirus fears in Asia. In the US, demand was said to be almost flat since end-June, a period where it typically rises, due largely to rising COVID-19 infections in major states such as Texas, California, and Florida. Gasoline demand is facing both high infection numbers and end-of-peak summer demand next month. Thus, demand for gasoline is seen to weaken further in the coming weeks.
The emergence of new infections in Australia, Vietnam, and Hong Kong has coincided with a decline in mobility over the past two weeks. The continued surge of infections in India has also stalled the demand recovery, with mobility levels flat in recent weeks. The overall regional mobility index continues to trend upwards, but the slowing of the recovery is a bearish indicator of demand
going forwards.
Inventory of gasoil/diesel in Singapore was relatively stable in the past two weeks. However, Platts noted on the latest data indicator, which shows that exports from North Asia in the next two months will be down, i.e. by 70% year-on-year from Japan and by 30% year-on-year from Korea. Exports from Taiwan will also dip as Formosa reduces CDU and RFCC operations at its Mailiao refinery following a recent fire incident. However Chinese exports are set to rise in August on high inventories and lower domestic margins. China’s gasoil export is expected to average over 480,000 b/d through the rest of the year. The disparity between refining operations in China vs. the rest of Asia will remain a key driver for gasoil market through the second half of the year.

¹ Reuters.com
² Reuters.com
³ Contango: a situation where future price is high than the current spot.
Backwardation: a situation where future price is low than the current spot.

FOREX:

Philippine peso appreciated week-on-week against the US dollar by P0.18 to P49.19 from P49.37 in previous week.

DOMESTIC OIL PRICES

Effective 04 August 2020, the oil companies implemented a price decrease of P0.25-P0.30 per liter for gasoline, diesel by P0.25-P0.30/liter and P0.15/liter for kerosene.

This brings the total year-to-date adjustments to stand at a net decrease of P5.02/liter for gasoline, P8.59/liter for diesel and P12.69/liter for kerosene.

For the updated prevailing retail pump price, please browse this link: https://www.doe.gov.ph/price-monitoring-charts?q=retail-pump-prices-metro-manila.

For more information, call the

Department of Energy
Pricing: 840-2187
LPG: 840-2130
Fuels: 840-5669
SMS: (0915) 4469421
Email: oilmonitor@doe.gov.ph
Website: https://www.doe.gov.ph

Posted on: August 11, 2020 by pip_admin

In 2006, Republic Act 9357 or the BIO FUELS ACT OF 2006 was enacted to “Direct the use of Bio Fuels, and establishing the Philippine Bio Fuels Program.” This act essentially mandates the use of biofuels as a measure to:

develop and utilize indigenous renewable and sustainably-sourced clean energy sources to reduce dependence on imported oil;
mitigate toxic and greenhouse gas (GHG) emissions;
increase rural employment and income; and
ensure the availability of alternative and renewable clean energy without any detriment to the natural ecosystem, biodiversity and food reserves of the country.

Pursuant to Section 15 of the said Act and its Implementing Rules and Regulations (DC 2007-05-0006), the Department of Energy in consultation with National Biofuels Board are granted authority to promulgate, adopt and implement regulations pertaining to the state policy of “reducing dependence on imported fuels consistent with the country’s sustainable economic growth” that would enhance livelihood opportunities for agriculture in the countryside.

Furthermore, Section 5 of the Act, mandates all liquid fuels for motors and engines sold in the Philippines to contain locally-sourced biofuels components – currently at least 10% of bioethanol blend for gasoline fuel (E10) and 2% biodiesel for diesel fuel (B2). The blending component for bioethanol is ethanol while biodiesel is coco methyl ester (CME).

While members of the Philippine Institute of Petroleum have supported its implementation and has complied with all mandates related to it, we have expressed the following concerns to the Department of Energy.

PIP Position on Bioethanol (E10)

The cost of local ethanol continues to be high vis-a-vis price of imported ethanol. The widening price disparity can be further affected by the heightened demand for ethanol for use in the manufacture of alcohol for food and medical industry;
While price of local ethanol has been escalating, some producers are arbitrarily charging additional price premium citing feedstocks price and liens as reason. Note that all these are already included in the current local ethanol pricing formula;
The need for immediate review of the Bioethanol Pricing Formula since this has long been reviewed in 2015. Specifically, PIP recommends the removal of the “Conversion Cost’ in the computation of local ethanol price since Conversion Cost is composed of manufacturing and financing costs as well as an assured profit margin of 15%. This further rationalizes that other business expenses should not form part of the pricing formula and the inclusion of this cost discourages efficiency and competition in the local ethanol industry;
The coverage of Local Monthly Allocation (LMA) participants in the accreditation process should include all oil players including white stations in the spirit of level-playing field. Producers not yet accredited or with suspended/revoked accreditation with ethanol production and inventory should not be part LMA when the Producer gets accredited;
Commensurate allocation of LMA share of each oil company to their compliance performance (i.e. Oil companies with lower compliance performance in the previous quarter should be allocated a bigger LMA in the next quarter);
Compliance with production commitment of Ethanol Producers remains a concern among the oil companies in supply planning. Timely notice of issuance for non-production or plant breakdown is extremely important. Oil player would immediately need to source replacement volume (imported) to sustain continuous fuel supply as a result of ethanol producer’s inefficiency.
Producers’ production and logistical capacity remain a concern among oil players. This includes limitations in storage capacity and lifting capability from production areas to end-users including coverage for future expansion;
Logistical capabilities of ethanol production facilities must be included as a parameter for accreditation i.e. loading capability for trucks and isotanks, ratable towards plant operations, and loading capability for barges (marine transport).
Compliance to industry Product Quality and Health, Safety and Environment Standards of Ethanol Producers to ensure product quality and safe operations remain a concern;
Provision of allowance for ethanol importation should only be allowed to accredited oil players. Allowance to the allowed volume for importation should be available (up to a rolling 3 months’ worth of consumption) to account for operational constraint and unexpected ethanol supply disruption;
The government must have a long-term program to address high price of molasses. Gasoline demand is expected to increase to support economic growth of the country. Demand for ethanol will consequently increase and the tight supply of feedstock will continue to cause high ethanol prices – feedstock sustainability versus future production facilities;

PIP Position on Molasses Importation:

The National Biofuels Program of the government generally aims to achieve “sustainable economic growth that would expand opportunities for livelihood”. This was conceived as a measure, among others to “develop and utilize indigenous renewable and sustainably-sourced clean energy sources to reduce dependence on imported oil”. With this governing policy direction, importation of molasses to optimize local bio-ethanol production in the country runs counter to the principal tenets of the Act where this Program was rationalized;
The Biofuels Law indicates that in the event of supply shortage of locally-produced bioethanol (during the four-year period), “oil companies shall be allowed to import bioethanol subject to the extent of the shortage as may be determined by the National Biofuels Board (NBB) and the issuance of DOE Certification to the effect that the bioethanol to be imported shall be used for the National Biofuels Program”. The aforementioned specific provision of the Law mandates the downstream oil industry to import bioethanol subject to the specific criteria and time period and not the bioethanol industry;
The PIP however expresses reservation on whether the foregoing provision covers importation of feedstocks by non-downstream oil industry sector, e.g. bioethanol or biodiesel producers.
In the event that molasses importation is allowed and eventually institutionalized, the Sugar Regulatory Authority (SRA) may face a great challenge in developing a mechanism to monitor the cyclical utilization of molasses importation vis-à-vis its uses either for biofuels production, food, alcohol, among others where molasses is used as feedstocks.
The SRA in collaboration with the National Biofuels Board (NBB) should take the lead in monitoring the drivers of molasses prices and in assessing the viability of molasses importation vis-à-vis its impact on local bioethanol and sugar prices;
The importation of lower priced molasses when used as feedstocks is expected to reduce the price of locally produced ethanol considering its impact on increasing efficiency (economies of scale) which expectedly should redound to the lower-priced locally produced bioethanol, competitive enough to be exported;
Any incremental bioethanol production resulting from increased feedstocks volume should not be added to the regular LMA.

PIP Position on Increasing the Biodiesel blend (currently at B2)

The Philippine Institute of Petroleum (PIP) positions that the increase in the biodiesel blend will have the following implications on fuel price, technical issues, and local CME supply that needs to be considered to minimize its potential impact to the motorists and consuming public:

At the current 2% blend, there are confirmed reports of retails stations still selling below the mandated blend of 2% (0.1 to 0.3% only) resulting in an uneven playing field and putting compliant and responsible industry players to a disadvantage;
The proposed increase from 2% to 5% and consequently to 8% will incur additional costs in biodiesel blend which may create a considerable impact to pump prices at the retail stations.
Inspite of the CME producers’ expressed compliance with the specifications under the PNS, some crucial quality issues continue to exist which needs to be addressed:

Potential flakes formation in the blend which could affect vehicle engine’s performance due to fuel filter clogging;
Microbial contamination;
Difficult water separation can lead to engine malfunctioning even at 2% blend (B2) which will be more evident with increased blend level;
Incidence of low methyl laurate content in biodiesel which indicates substitution/blending with palm-oil based biodiesel (PME) instead of CME. The illegal use of PME promotes an uneven playing field within the oil industry and/or the CME producers;

Effect on vehicle performance and maintenance particularly in the more sensitive common rail direct injection engine has not been established. Majority of vehicles in the Philippines are diesel-fed. To increase the blend percentage will require further evaluation to ensure that no adverse impact to the engine performance is overlooked;
For a proposed much higher blend of 5% and or 8% biodiesel (CME), the assurance of adequate and sustainable local CME supply should be established (constrained by the insufficient coconut oil feedstocks) so as not to repeat the inadequate supply concerns in anhydrous bioethanol.