Philippine Scenario: Meeting the Challenges in the Petroleum Industry

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1 Philippine Scenario: Meeting the Challenges in the Petroleum Industry Zenaida Y. Monsada Director, Oil Industry Management Bureau Department of Energy, Philippines 7th Asian Petroleum Technology Symposium, Japan Petroleum Energy Center February 18 20, 2009, World Trade Hotel, Ho Chi Mhin City, Vietnam

2 Outline Challenges Philippine Situation Regulatory Framework Oil Industry Situation Alternative Fuels Conventional Fuels Government Plans and Programs

3 Global Challenges Energy Security Accessibility Sufficiency reducing import dependence Environment Cleaner Air Climate Change Mitigation Economics Reasonable Price Affordable Price Generate Income reducing CO 2 and other emissions improving economic activity

4 Energy/Power Mix ENERGY MIX Total Coal 14.90% Biomass 14.11% Others 0.01% Total Oil 35.58% POWER MIX Coal 28.2% Oil SW 8.6% 0.1% Natgas 31.5% Geothermal 22.29% Hydro 5.41% Natgas 7.70% Geothermal 17.1% Hydro 14.4%

5 Petroleum Supply vs. Demand Refining Cap. Demand Production Imports Exports Sectoral Demand Sector % Transport 63 Residential 8 Commercial 5 Agricultural 3 Industrial 14 Power 7

6 Philippine Oil Industry Upstream Number of Participants 33 operators Service Contracts (SC) 33 Geophysical Survey and Exploration Contracts (GSEC) s 1 existing being processed for SC conversion Downstream Number of Participants 610 Cos. Refiners 2 (284) MBSD Importers 15 Marketers 585 Bunkering 18 Storage 4 Domestic Oil Production Historical Producing Field 1979 Record Oil Peak 23.5 MBCD Oil 2.4 MBCD Condensate 14.0 MBCD Gas mmscf

7 Regulatory Framework RA 7638 DOE Law RA 8479 Oil Deregulation Act RA 8749 Clean Air Act RA 9367 Biofuels Act RA 8184 Excise Tax RA 9337 RVAT EO 691 Automatic Tariff Adjustment EO 449 Lower Tariff for Bioethanol for Fuel DOE Circ Importations of Ethanol for Fuel BIR Rev Reg Ethanol for Fuel

8 Roles of the DOE DOE - OIMB Monitoring Fuel quality/quantity (RA 8479 / RA 9367) refining/marketing process, inventory, price (RA 8479) Additives Registration (RA 8479 / RA 8749) Fuel Quality Standard Setting (RA 8749 / RA 9367) Petroleum Facilities Standard Setting (MOA with BPS) Regulate as necessary (RA7638) DOE - EUMB (RA 9367) Accreditation Biofuels Manufacture Monitoring of Biofuels Manufacture/Marketing DOE-ERTLS conducts testing of samples, DOE-Legal processes violations

9 Downstream Oil Sector Crude Imports Refinery PRYCE PETRONAS NATION Refinery/Import/Export Terminal Product Imports Product Exports White Oil Pipeline Black Oil Pipeline Tankers/Barges Tank Truck Depot/Terminal Industrial Consumer / End User Tank Truck LPG Retail Retail Outlet

10 Philippine Oil Industry Players PTT SEAOIL EASTERN FLYING V PETRONAS PRYCE NATION

11 Philippine Oil Industry Liberalized entry of new players/importation/exportation 2 refiners Produce 60% of local demand 70% market share (total oil) 58% market share (LPG) 10 importers Imports 40% ilocal demand 3700 gasoline stations (800 new players) 90 Independent LPG refillers 178 auto-lpg stations (66 garage-based) Price Decontrol Oil companies set local prices DOE monitors international and local prices Platts: Dubai, WTI, Brent; gasoline, diesel, kero/jet, fuel oil

12 Challenges for the Petroleum Sector energy oil (esp. transport) Finite resource Pollution High price alternative fuels renewable indigenous biofuels Gasoline bioethanol (compound) purity Diesel Biodiesel (mixture) feedstock dependent

13 Fuel Quality Improvement Shift to Alternative Fuels Supply Availability Local production Imports Compatible Facilities Storage, handling, distribution Vehicles Challenges for the Petroleum Sector WP 29 vehicle/parts standards Euro Price Investment Requirement & Climate Accreditation Monitoring Laws and Regulations

14 Challenges Alternative Fuels: Auto-LPG DISPENSING CONVERSION/REGISTRATION EMISSION

15 Challenges Alternative Fuels: Auto-LPG Private (Garage-based) Metro Manila 34 South Luzon 2 Visayas 19 Mindanao Public Metro Manila 76 North Luzon 1 Visayas 23 Mindanao

16 Natural Gas Vehicles Program for Public Transport (NGVPPT) 200 buses in the Southern Luzon-Manila route serviced thru the South Expressway NGV Refueling Station at a fixed/discounted price for 7 yrs. San Antonio Power Plant 3 MW (1994)CVC Shell Refinery Challenges Alternative Fuels : Natural Gas sources users 560 MW San Lorenzo First Gen/ IPP 1,000 MW Sta. Rita First Gen/ IPP Malampaya Gas Field 2.7 TCF (2001) 1,200 MW Ilijan Power Plant NPC IPP(KEPCO) CNG Bus (2008)

17 Feedstocks biodiesel Challenges Alternative Fuels: Biofuels Potential Diesel Displacement 120 million liters per 2% Coconut Jatropha bioethanol Potential Gasoline Displacement 200 million liters per 5% volume sales Sugarcane Corn Sweet sorghum Cassava

18 Challenges International Oil Price $/bbl P/$ M-84 J-85 N-85 S-86 J-87 M-88 M-89 J-90 N-90 S-91 J-92 M-93 M-94 J-95 N-95 S-96 J-97 M-98 M-99 J-00 N-00 S-01 J-02 M-03 M-04 J-05 N-05 S-06 J-07 M-08 M-09 Crude Forex P/1$

19 Meeting the Challenges Fuel Quality/Alternative Fuels Standards for conventional fuels continuously updated Standards for biofuels (pure), blends and base gasoline/diesels formulated/promulgated Standards for facilities prepared Auto-LPG and CNG stations as stand-alone, or with other liquid petroleum products in petrol stations Compliance plan for biofuels mandate required Procedures for handling biofuels and blends discussed

20 Meeting the Challenges Supply Availability Refinery upgrading/expansion Desulfurization Petrochemicals/ feedstocks production Euro 4 preparation, e.g. compatibility with biofuels and blends studied seminar conducted Diversification of import sources Harmonization of regional/international standards

21 Meeting the Challenges Incentives Fiscal / BOI Incentives RA 8479 IPP (EO 226) Investment Code Regulatory Framework RA 8479 (Oil Deregulation Law) RA 9367 (Biofuels Law) LPG/Natgas Bills Implementation Instruments PEP ASEAN/ASCOPE PNOC-EC Enforcement Mechanisms EO 655

22 Meeting the Challenges Incentives Biofuels Act of 2006 Specific Tax = zero (0) per liter of volume capacity on local and imported biofuels Value Added Tax (VAT) = Exemption of sale of raw materials used in the production of biofuels Water effluents from biofuels production used as liquid fertilizer and other agricultural purposes which are considered reuse are exempted under by RA 9275 or Philippine Clean Water Act Government Financial Institutions loans high priority to Filipino entities Omnibus Investments Code of 1987 Investment Priority Project

23 In Sumary Energy Policies & Goals POLICY : ENSURE STABLE SUPPLY OF ENERGY GOALS: To ensure oil/gas supply security sufficient, stable, accessible & quality To conduct technical, economic and social assessment and studies to ensure continuous and stable supply of oil/gas. POLICY : RESPONDING TO HIGH OIL PRICES GOALS: To ensure oil prices reasonable To mitigate impact of high oil prices on consumers To minimize economic leakage on the oil and the public transport sectors To promote efficiency and safety in supply and distribution chain To reduce dependence on imported fuels To promote awareness on the downstream oil/gas industry initiatives and developments including pricing.

24 In Sumary Coordination Efforts Stakeholders meetings Oil industry participants Government agencies Consumers Media Cooperation with other agencies for more intensive monitoring (supply, price, quality, quantity) and enforcement DOF: imports/exports/production DTI: Supply and price monitoring at retail level PTF-SEFEELS: Continuous inspections for consumer safety and protection (underfilling, illegal refilling, illegal trading) DOJ: pursue cases filed against violators

25 Thank you!

Philippine Fuels Quality

Philippine Fuels Quality Standards and Thrusts ZENAIDA Y. MONSADA Director, Oil Industry Management Bureau Department of Energy National Workshop on Clean Fuels & Vehicles DOE/ CAI-Asia/ Partnership for