Petron seeks more ethanol suppliers for higher blending

MANILA, Philippines - Oil giant Petron Corp. said it would tap additional local suppliers of ethanol to prepare for the higher blending requirements mandated by the Biofuels Act.

Ethanol is a high-octane, water-free alcohol produced from sugar cane and other crops. It is used as a blending component at five to 10 percent concentration in gasoline. 

Petron chairman Ramon Ang said that they would continue to draw from existing ethanol suppliers, and at the same time, go to the market for new domestic suppliers.

By tapping and enlarging domestic ethanol off-take agreements, Ang said they hope to indirectly encourage the entry of more investments into the ethanol industry.

“This affirms our support for the local production of ethanol since it will drive capital investments in rural areas, create jobs and more importantly, lessen the country’s dependence on imported fuel,” he added.

For 2010, the company estimates it will have to import about 60 percent of its ethanol requirements to meet the five-percent ethanol-blend mandate set in the biofuels law. 

With inadequate local supply, it is estimated that Petron and other oil firms will need to source more imported ethanol next year when they will be mandated to have a 10-percent blend in all gasoline products.

Ethanol is trading in the vicinity of $80 per barrel in the world market. That could result in further depleting dollar reserves if the oil companies are forced to rely on the world market for its ethanol requirements.

“The essence of the law is to encourage more investments in the local biofuels industry but so far supply hasn’t caught up with demand,” Ang said. “By going into supply agreements with local producers, we aim to address this imbalance and give the country a more stable and reliable supply of locally-produced ethanol.”

Petron is the only oil company in the country with an existing supply agreement with a local ethanol producer — San Carlos Bioenergy Inc. (SCBI).

SCBI owns the country’s first integrated ethanol and cogeneration plant with a capacity to produce 125,000 liters of ethanol daily. The company was also the first to purchase the first locally-produced fuel grade ethanol from Leyte Agri Corp. in August 2008.

Petron supplies nearly 40 percent of the country’s fuel requirements. It likewise operates a 180,000 barrel-per-day oil refinery which produces a full range of petroleum products. It sells gasoline, diesel and kerosene on its 1,500 service stations nationwide.