The Biofuels Act, which was signed into law by President Gloria Macapagal Arroyo on January 12, 2007, specifies that a minimum of 1% biodiesel by volume should be blended into all diesel engine fuels sold in the country. The law also states that a 2% increase should take place next year, subject to study and consultations with the affected sectors.
Peter Anthony Abaya, the president of the Philippine National Oil Company - Alternative Fuels Corporation (PNOC-AFC), told OBG, "The 1% mandated biodiesel blend translates to a demand of 78m litres. If the country guns for 20%, within 10 years it will increase to more than 500m litres."
Biodiesel refers to fuels derived from vegetable oils or animal fats and other biomass-derived oils. As oil prices continue to surge, biodiesel becomes an increasingly attractive energy source, though due to its low efficiency it cannot totally replace traditional fuels. Biodiesel is especially attractive for low oil-producing countries such as the Philippines.
The Philippines' supply is currently derived from coconut oil and is known as coconut methyl ester (CME), colloquially called coco-biodiesel. Nine companies supply the local economy with 286.9m tonnes.
According to officials at Chemrez, one of the major manufacturers of CME in the Philippines, the country is fully prepared to handle a 2% blend, but any further increases would leave the Philippines in short supply.
Both the private and public sectors have taken measures to increase output capacity of CME, but face many challenges including high costs, limited availability of land and the possibility of rising food prices if coconuts are processed for fuel rather than consumption. In order for biodiesel production to be commercially viable, large commercial holdings spanning many hectares are required. Following land reform in the Philippines, many agricultural holdings are too small to see a significant profit from coconut cultivation for CME. The government's role in organising cooperatives and encouraging production will be crucial to a successful biodiesel scheme for the country.
"The greatest challenge is to be able to give incentives to the coconut farmers to increase production through fertilization and massive replanting," Melot Santos, the president and CEO of Senbel Fine Chemicals, a CME producer in Malaysia, told OBG.
Therefore, the PNOC-AFC, a government-owned corporation that has been mandated to explore, develop and promote the utilisation and commercialisation of alternative fuel, has decided to invest in the development of an alternative source for biodiesel.
Jatropha curcas or "Tuba tuba", as it is known in the Philippines, is a non-edible plant that grows primarily in tropical countries. The jatropha plant, depending on the quality of the soil, can yield an annual equivalent of 0.75 to 2 tonnes of biodiesel per hectare (ha).
"It does not threaten food security. It grows in idle marginal unproductive land, which we have a lot of in the Philippines. Jatropha does not require the clearing of forest or fruit plantations mainly because it is a consistent, tough crop that grows anywhere. We can also produce it at a lower cost, which is what matters most to the industry," Abaya told OBG.
By next year, PNOC-AFC intends to plant over 140,000 ha of jatropha, with the ambition of reaching 700,000 ha by 2010, resulting in over 1mn tonnes of biodiesel - roughly 2.1bn litres. While finding appropriate land is a crucial issue for coconut crops, the government does not foresee a similar problem with the less demanding jatropha plant. Angelo T Reyes, the secretary of energy, told local media that with 5m ha of "plantable, cleared areas" available and with evenly distributed rainfall, there should be no barrier to a good harvest.
PNOC-AFC's goal of 700,000 ha will not only meet domestic demand, but also exceed it. The agency intends to position the Philippines as a global supplier of biodiesel.
"The fact that we passed both European and American standards has opened a large market. Knowing that the European market is the largest in the world and will continue to expand because of its mandates, and knowing that the US market is expanding aggressively, we feel that the opportunities are boundless," Abaya told OBG.
According to the International Energy Association, global demand for biodiesel is expected to reach 10.5bn litres by 2010.
Abaya also cited the positive effect jatropha cultivation would have on the local economy. The PNOC-AFC estimates that more than 350,000 new jobs will be created in harvesting, planting and refining the crop by 2012.