BA affiliate willing to fund $3-B coal conversion plant

The United States Bank Corp. (USBC), an affiliate of the Bank of America (BA), has expressed interest in bankrolling the $3-billion coal-to-fuels conversion project in the country.

If the project pushes through, the Philippines will become the refinery hub for the expansion of coal to fuel sources in Southeast Asia.

"US Bank Corp. is the sister company of Bank of America. It gave us a strong indication that it is very interested to package the coal-to-fuel project in the Philippines. US Bank Corp.’s portfolio investment in the country is worth $5 million,"said Energy Undersecretary Peter Anthony Abaya.

The Department of Energy (DOE) is also holding discussions with other foreign funding agencies willing to finance the project.

The first phase study of coal conversion to crude oil, diesel and unleaded gasoline conducted by US technology firm Headwaters Technology Innovations Group (HTIG) was recently completed.

HTIG signed earlier this year a memorandum of understanding (MOU) with the DOE for the establishment of a 50,000 barrel per day coal-to-fuels conversion facility in the country.

HTIG will put up a 25-kilogram per day pilot plant to study and determine the feasibility of converting the country’s indigenous coal to liquid fuel.

If the project is viable, commercial operations will start with the construction of a 50,000 to 70,000 barrels per day fuel-producing plant. HTIG will invest about $2 billion for this project.

Abaya said the preliminary results of the first phase of the feasibility study appears promising. "The preliminary result shows very good sign that this project can take off."

The MOU aims at not only reducing the country’s dependence on rising imported fuel costs but also enhancing the use of abundant indigenous coal which have long been considered as low-grade for power plant use.

Estimates show that the country’s total coal reserves stand at 343.4 million metric tons (MMT). Local coal production hit an all-time high of 2.72 MMT last year, up by 34.3 percent from the previous year’s level of 2.03 MMT. In 2002, production was registered at 1.66 MMT.

The market supply outlook in 2005 from production and importation of coal is 8.03 MMT, of which some 2.55 MMT will come from local coal production. Power and other industrial sectors are the bulk users of coal, with the power sector traditionally accounting about 80 percent.

The thrust to pursue the coal-to-fuels project should also revive the local coal industry, which took a backseat when focus shifted on the development of new natural gas projects.

Over the years, coal’s share in the country’s fuel mix declined but there are now several coal mines under development, mainly on the southern island of Mindanao.

Other foreign financial institutions have expressed interest in several natural gas programs, such as the liquefied natural gas and the compressed natural gas which the DOE hopes to jumpstart in three years.

These include CitiBank Group, US Export-Import Bank, Overseas Private Investment Corp., and JP Morgan.

The investment requirements would be from $500 million to $1 billion for a liquefied natural gas terminal. The costs would be bigger with the installation of a gas pipeline.