Philippine Biofuels Program from the Point of View of the Private Sector Major Oil Companies

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1 Philippine Biofuels Program from the Point of View of the Private Sector Major Oil Companies Teodoro Masangkay Reyes Philippine Institute of Petroleum (PIP)

2 Presented to the Fifth Asian Petroleum Technology Symposium 23 to 25 January 2007 Jakarta, Indonesia

3 Outline of Presentation 1. The Philippine Institute of Petroleum (PIP) What is PIP Member companies Role of PIP 2. The Philippine Biofuels Law Main Features Effectivity

4 Outline of Presentation 3. Bio-Ethanol Program Current Volume Propects 4. Bio-Diesel Program Current Volume Projected Volume 5. PIP Issues on the Biofuels Program Readiness of the required Infrastructure/Logistics Product Performance Transport Groups Position 6. Conclusions/Recommendations

5 What is the PIP Philippine Institute of Petroleum (PIP) is a non-stock, non profit Securities and Exchange Commission (SEC) registered grouping of businesses operating in the downstream oil industry in the Philippines. An independent body representing the common interests of its members with different publics.

6 Current Oil Company Members Petron Corporation Pilipinas Shell Petroleum Corporation Chevron Philippines Inc. Total (Phils( Phils.) Corp. PTT Philippines Corp. Liquigaz Philippines Corp.

7 Principal Roles of PIP Creating a venue/forum for the sharing/preservation and refinement of best practices in the field of HSEQ. Acting as an industry oversight group for concerns in the areas of product quality standards, transport and handling practices; and compliance with relevant Government regulations

8 Principal Roles of PIP Providing a central data source and research base that will assist interested investors, researchers and other parties in understanding the industry. Keeping pace with developments abroad by establishing working linkages with counterpart institutes; and

9 Principal Roles of PIP Assisting Government in policy planning for downstream oil sector and acting as an advocate for the development and establishment of such policies.

10 The Biofuels Act of Gradual phase out of the use of gasoline additives such as but not limited to, methyl tertiary butyl ether (MTBE) i.e. within 6 months from the effectivity of this Act. 2. Mandatory Use of Biofuels BIOETHANOL Within 2 years from effectivity of the law minimum 5% blend of bioethanol Within 4 years from effectivity minimum 10% blend of biodiesel the level of blend to be determined by the National Biofuels Blend (NBB)

11 The Biofuels Act of 2006 BIODIESEL Immediately within 3 months upon signing of the law, minimum of 1% biodiesel by volume to be blended in all diesel engine fuels sale in the country. Within two (2) years from effectivity,, the National Biofuels Board empowered to determine feasibility and thereafter recommend to DOE to mandate a total of 2% blend of biodiesel by volume.

12 Estimate of Biofuels Volume Bioethanol (in million liters/year) 5% blend 10% blend Ethanol Kiloliters/day Biodiesel (in million liters/year) 1% blend 2% blend Fatty Acid Methyl Ester (FAME)¹ ¹In the case of the Philippines, initially Coco Methyl Ester (CME).

13 PIP member companies Issues on Biodiesel 1. Mandated sale of 1% blend biodiesel within (3) months from approval of the act, considering complex logistical requirements of major oil companies. 2. Need for suppliers to do studies storage and handling bulk storage of the biodiesel blend for a longer period of time to establish long-term effect. 3. Life cycle engine performance tests still needs to be done. 4. Concern on pricing.

14 TECHNICAL ISSUES SUMMARY RELATED TO BIODIESEL USE IN ENGINES

15 Compatibility with current engines and systems Potential corrosion of fuel injection system parts Potential for elastomer,, hose and seal failures Can damage automotive paint if not wiped quickly Higher viscosity can cause injection pump failure (fuel starvation) Higher surface tension and viscosity can change fuel atomization More fuel injector deposits (particularly if glycerin is not completely removed) Blockage of low-pressure side of fuel system Filter blocking at low temperatures Poorer low temperature properties (contributes to other problems) Water pick up (aggravated if glycerin and methanol are not completely removed) Storage stability problems with some biodiesels

16 Comparison to Petroleum Diesel Similar cetane number Very narrow boiling range Near zero sulfur and aromatics Higher flash point Lower heating value (~( ~ 9-11% 9 oxygen content) Higher density at comparable T90T Lower emissions of PM, CO and SOX Higher emissions of NOX and HC

17 Advantages over diesel Lower PM, CO, polynuclear aromatic hydrocarbon and SOX emissions Blends easily with petroleum diesel, providing good lubricity if needed Has generally similar characteristics to petroleum diesel Zero sulfur and zero aromatics improve catalyst operation and reduced particulates Higher flash point

18 Disadvantages over diesel Higher emissions of NOX and HC Differences in fuel injection characteristics Fuel economy reduced lower heating value (~( ~ 9-11% 9 oxygen content) Potential incompatibility with current system components (corrosion and elastomers) Nozzle deposit potential is higher Poorer oxidation stability could cause oxidation products harmful l to engine components Biodegradability and affinity for water can encourage biological growth Low temperature properties could cause filter blocking and pump failure Additives do not always work in biodiesel Automatic engine optimization systems to adjust for fuel-type are not likely to be available, but could improve emissions and performance of biodiesel fuel Increased dilution and polymerization of engine oil Engine cold-start performance may be a problem, and could cause higher particulate emissions during cold operation

19 PIP Position & Recommendations PIP support the government s alternative fuels program; to ensure success in implementation however: Expresses desire to help ensure its commercial viability and sustainable implementation, PIP requests government to 1. Industry need a nationwide transition period (minimum of one year) to prepare logistics requirements for receiving, storing homogenous blending and distributing biodiesel blend noting that the law provides enough transition mechanism (at least 2 years) for bioethanol. 2. For stakeholders, to conduct tests on storage and handling to ensure no problems arise from bulk storage of the pre-blended biodiesel over a long period 3. Conduct more product developments involving coconut methyl ester (CME) 4. Finalize additives that can be blended into diesel to ensure no engine performance problems will arise due to CME-blend

20 Thank You!

Mercedes-Benz Biodiesel Brochure

Mercedes-Benz Biodiesel Brochure Contents Definitions of Bio-Based Diesel Fuel Main Quality Characteristics of Straight Biodiesel Risks from the use of Diesel Fuel Containing Biodiesel Impacts of Biodiesel