Philippines turns to coco-biodiesel

MANILA: Starting from Sunday, motorists in the Philippines will get a 1 per cent coconut blend in their diesel, a cleaner fuel that at least for now will come at no extra charge.

Energy Secretary Raphael Lotilla said on Friday oil firms would keep prices steady when the Biofuels Law comes into effect, but industry officials say that eventually, consumers will end up paying more to improve the environment.

"We can assure our people that there will be no increase in the prices ... because of the introduction of the law," Lotilla told reporters.

But the cost of the cleaner fuel is higher, officials said.

The mandatory blending of 1 per cent coconut methyl ester in diesel also comes at a time when oil firms have yet to pass on to consumers under-recoveries from the rise in global crude and oil product prices in recent months, industry officials said.

The law envisages that gasoline will contain a 5 per cent mix of ethanol by 2009.

Besides helping the environment, the two blends will help the Philippines cut its oil import bill, which was $6.8 billion last year.

Mario Marasigan, director at the Department of Energy, said a 1 per cent blend of coconut methyl ester, locally known as coco-biodiesel, would displace 78 million litres of diesel a year used by motorists and industries.

He said the extra cost of blending the additive in diesel would mean a 15 to 20 centavos per litre increase at the pumps, about half a per cent higher than the average retail price of 33.45 pesos ($0.70) per barrel in Manila on Friday.

But industry officials see a higher cost of at least 30 centavos per litre.

"Taking care of the environment has a price," said Malou Espina, spokeswoman of the Philippine unit of French oil and gas giant Total.

Better Performance: The Philippines, the world's largest exporter of coconut oil, has said previous studies done by government researchers showed vehicles that use coco-biodiesel perform better.

Better engine performance also reduces smoke, officials have said.

"Initially, we will not pass on the additional cost of coconut methyl ester, but eventually consumers will have to pay the additional cost," Espina said.

The firm has 98 petrol stations owned by the company and its dealers all over the country.

The government said it hoped that oil firms would initially shoulder the minimal cost of the coco-diesel additive while promoting the product.

"While we look at the oil companies to possibly absorb the cost of biodiesel, the increase in international prices of diesel itself and crude will drive the increase in domestic prices," Marasigan said.

The average price of Dubai crude oil, the benchmark used by local refiners, rose nearly 24 per cent to $63.97 per barrel in April from $51.69 in January.

The average price of regular diesel in Singapore also jumped nearly 20 per cent to $81.96 per barrel from $68.45 in January, according to the Philippine Department of Energy.

Macky Lopez, spokesman of the Flying V petrol stations, said local firms have yet to fully pass on to consumers the increase in the costs of diesel.

He estimated that local oil firms have an average under-recovery of 3 pesos per litre on diesel and 4 pesos on gasoline.   

"Because of the increase in costs, price increases may be forthcoming on diesel and gasoline," Lopez said.

($1=47.50 pesos)