China, Ethanol, Philippines

Filipino and Chinese venture to build US$30 million ethanol plant

October 29, 2007 (BioPact) – US$ 30 million ethanol plant will be put up next year by independent oil player Eastern Petroleum and a Chinese partner in Sarangani province (→Flash Earth) in south-central Mindanao. Fernando Martinez, president of Eastern Petroleum, said the multi-million dollar ethanol plant would be a joint venture between his company and China’s Guangxi Estates.

The ethanol plant with construction expected to take place in the last quarter of 2008 and to be completed in 2009 will have a capacity of 150,000-200,000 metric tonnes per year (520,000 to 690,000 liters per day / 137,400 to 182,300 gallons US per day). The primary feedstock will be cassava.

At present, Martinez said the partners have already developed a 2,000 hectare cassava plantation in Sarangani province and they were encouraging other countries in the East Asian Growth Area (EAGA) to do the same.

We have to encourage other countries in EAGA particularly Indonesia and Cambodia [because these] are places where we can grow and expand, because if the locals are not fast in acting then we might as well go there. – Fernando Martinez, president of Eastern Petroleum

Cassava is a low-input tuber crop that thrives in poor soils. In Asia it is mainly used for the production of industrial starch even though it also remains a major staple food. When converted into ethanol, a fuel with a relatively strong energy balance can be obtained (previous post).

Experts from leading agricultural organisations, like the Cassava Office for Asia of the International Center for Tropical Agriculture (CIAT), think the crop offers a major opportunity for poor farmers to prosper as a ‘Green Cassava Revolution’ is currently sweeping most Southeast Asian countries. With a combined effort from the science and policy community, cassava can bring a rural renaissance and benefit the poorest (previous post).

The Philippines, which has a large cassava potential, has been listed by Ernst & Young as one of the most attractive developing countries for investments in first generation biofuels (see Q1 report and Q2 report). Its geographical location at the center of the rapidly growing South East and East Asian region, its biofuels legislation and incentives, and its relative abundance of natural resources are key factors determining this attractiveness.

The Philippines’ biofuels sector got a fresh impetus earlier this year after President Gloria Macapagal Arroyo passed the much-awaited Biofuels Act. The new act mandates minimum 1% biodiesel blending into all diesel from May this year and minimum 2% biodiesel blending from mid-2009. It calls for minimum 5% ethanol blending in gasoline from mid-2009, rising to 10% from around mid-2011. The Act also set up mechanisms to encourage investments in the local biofuels industry:
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Currently, the mandate for ethanol translates into the need for 60 million liters today and 300 million liters of ethanol from 2009 onwards. “So we will just need filling around 20-percent or less of the market. We have to put it there, everything including the ethanol plant. It does not make sense that we just import the feedstock,” Martinez said. He added they expected the US$ 30 million ethanol plant to be commercially operational in the first quarter of 2010.

The biofuels act provides incentives for the production, distribution and use of locally-produced biofuels, such as specific tax and value added tax exemptions and financial assistance from government financial institutions.

Because of this, the Philippines have attracted major investments. Earlier, PNOC-Alternative Fuels Corp, the alternative fuels subsidiary of state-owned Philippine National Oil Co., signed a memorandum of understanding with UK-based Natural Resources Group Chemical Engineering under which the latter will pump $1.3 billion into the Philippines’ biofuels sector.

The companies are looking at building a 3.5 million mt/year biodiesel and a 350,000 mt/year ethanol plant in the country and will also invest in jatropha plantations (earlier post). PNOC-AFC also signed an agreement with South Korea’s Samsung in September 2006 to set up an integrated jatropha plantation and biofuels project.

US firm E-Cane Fuel Corp. announced it will invest €111/US$150 million to put up a fully integrated ethanol processing facility in Central Luzon, with sugarcane as the main feedstock (previous post).

Japan’s Marubeni has also announced plans to set up five ethanol plants in the Philippines and local firm San Carlos Bioenergy is already building a 120,000 liters/day ethanol plant in the country.

The Philippine Department of Agriculture also sealed an agreement with India-based bioenergy company Praj Industries to help develop the country’s nascent biofuels industry. Under a Memorandum of Understanding both parties will team up for feedstock development and setting up biofuel production plants (more here).

According to the Philippine Coconut Authority (PCA) Japanese firm Toyo Engineering Corp. recently announced it is about to complete a feasibility study on an integrated coco methyl-ester (CME) manufacturing plant that it plans to put up in the Philippines’ northern region of Ilocos. It is further looking at 600,000 hectares of coconut plantation (earlier post).

Existing coco-biodiesel production capacity in the country is 140 million liters/year from two major companies alone – Chemrez and Senbel Fine Chemicals. At least 10 other smaller producers are said to have registered with the DOE for accreditation.

Finally, Brazil has agreed to intensify cooperation in energy security, particularly in the development and use of biofuels, with the Philippines. The countries agreed to boost cooperation in the development and use of ethanol, biodiesel and biomass energy (more here).


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