DoE explores ethanol blend pricing
July 29, 2011
DoE explores ethanol blend pricing
As the E10 rollout goes full blast at domestic gas pumps this August, the Department of Energy (DoE) is sifting through options on how to viably price the ethanol that would be blended into gasoline products.
“There are ERB-patterned formulas that we are studying … what we’re trying to capture in the pricing mechanism is for the ethanol to reflect local and international pricing,” Energy Undersecretary Jay Layug said.
The energy official refers to the old pricing formula as reference for the then Energy Regulatory Board (a precursor entity of the Energy Regulatory Commission) which was the approving body for petroleum product pricing when the industry was still under a regulated regime.
The department is preparing a Circular that shall guide players in the oil industry on the full implementation of the E10 blend. This should have been enforced as early as February this year but due to some concerns raised by affected stakeholders, the energy department bowed to a six-month deferment.
“We are consulting with the oil companies,” the energy official added, primarily relating to exemptions as there are still some fleets that cannot take in E10 (or gasoline with 10-percent ethanol blend) due to warranty concerns (i.e. those vehicles with Euro standards and 98 RON gasoline grade) or technical incompatibility (such as those used for farm machineries, small fishing boats and motorcycles with 87RON).
As the local ethanol industry would not be able to support the domestic market’s requirement yet, the oil companies indicated that their only resort would be importation at this point.
The energy department had to rationalize then the level of importation vis-à-vis the volume of ethanol supply that must be sourced domestically.
Although there are some ethanol facilities which are already into commercial production, some opted to cease operations, such as the San Carlos Bionergy plant, due to operational losses.
When asked about their readiness on the full market introduction of E10, Petron chairman Ramon S. Ang said “we will comply… I don’t think we have any problems with logistics, we are ready.”
Petron president Eric O. Recto added that they will import part of their ethanol supply, although the company is also encouraging domestic ethanol producers to go to them for off-take offers on their ethanol production.
Many prospective projects on ethanol production have backpedaled on their investment plans, citing reasons as unviable tariff protection and the reluctance of banks to lend unless their projects are backed by contracts with the off-taker oil companies.
The ethanol producers batted for 20-percent tariff shield so the market would not be unduly swamped with ethanol imports, but this has not been given a green light by the government until this time.
by Myrna Velasco, Manila Bulletin