Firms not complying with 10% ethanol blend to be penalized

MANILA, Philippines - The Department of Energy (DOE) will start penalizing companies that will not comply with the mandated 10 percent ethanol blend this quarter, a top energy official said.

Energy Undersecretary Jay Layug told reporters that there is a law that needs to be complied with by the oil firms, and non-compliance will lead to penalties.

 “The local oil companies must ensure that they purchase first from local ethanol producers. They are given priority, and the DOE will issue a circular to that effect. The law mandates oil companies that local ethanol production must be prioritized. What we propose to do is slap penalties if they do not comply,” he said.

He said they would ensure that all local ethanol production for this purpose will be utilized by the oil industry.

“Some of them will import, but we have to make sure that they purchase from local ethanol producers first before they import. And so far all of local production is being tapped,” he said.

He emphasized that the oil firms have no choice but to comply with the requirements of the Biofuels Act.

“It’s mandatory, in fact that’s the job of the National Biofuels Board,” he said.

But he said there is an ongoing public consultation on the required 10 percent ethanol blend on gasoline.

“We will make a determination whether we will recommend to the DOE the mandate to E10. We are not there yet and we’re still conducting public consultation,” he said.

He recognized that while there is not enough supply of ethanol available in the market, there is a need to comply with the existing law.

“Though there is no local supply, but certainly they can import,” he said.

 “We also need to emphasize that although we advocate for cleaner fuel, we have to ensure that it would not push pump prices to increase as well. We cannot afford pushing for this [increase ethanol blend to 10 percent] and then it will increase local oil prices,” he said.

He said there is still no compromise on the indexed price for ethanol.

“We are discussing it until now. We are trying to come with a win-win solution for everybody. We cannot mandate a price, the biofuels law does not give us that mandate. What we can do is for everybody to come up with a consensus,” he said.

He said should they decide to come up with an indexed price for ethanol, all concerned parties must agree to it.

“They [oil companies and ethanol producers] need to sign a contract that they have agreed to a certain index,” he said.

The DOE earlier said it may ask Congress to come up with a resolution that would allow importation of bioethanol to meet the requirement of a 10 percent blend by February 2011 under the Biofuels Act of 2006.

Optimizing the use of locally produced alternative fuels/biofuels is part of the draft short-term energy reform agenda for the downstream oil sector.

In 2011, the DOE expects an additional 68 million liters of ethanol to be sourced locally, on top of the present supply of 49 million liters.

Given the 10 percent bioethanol blend requirement for 2011, the market would need 480 million liters. With only 107 million liters available this year, this means that the country would need to import some 373 million liters more of bioethanol.