Biodiesel at PHIVIDEC ?

 

Biodiesel at PHIVIDEC?

By Abdel Aziz Dimapunong

(Abdel Azizh Dimapunung)

Biodix biodiesel consultant

I had been asked last month to locate for an industrial site for ERA’s Biodix in the Philippines. Biodix is a brand of biodiesel products that will be produced from pure vegetable oil (PVO). It also refers to a joint venture between ERA Petroleum and the Amanah Islamic Bank that is pushing for biodiesel production using a specific technology and a dispersed strategic production and processing. I understand that Biodix has also a European component that employs biodiesel technology. The group has developed an innovative process technique with which biodiesel easily can be made out of PVOs such as coconut and palm oils.

With the group’s technology biodiesel can be used as a 100% substitute for mineral fuel. That is internationally known as B-100. It can also be blended in any ratio with fossil diesel in all diesel engines, without hardly any adjustments to the fuel system.

Biodix can come up to the expectation of the Philippine government as enunciated under the Biofuels Act of 2000. Under Section 3 of this law are the following definitions, among others that relate to Philippine National Standards on biofuels.

– Biodiesel shall refer to Fatty Acid Methyl Ester (FAME) or mono-alkyl esters derived from vegetable oils or animal fats and other biomass-derived oils that shall be technically proven and approved by the DOE for use in diesel engines, with quality specifications in accordance with the Philippine National Standards (PNS);

– Biofuel shall refer to bioethanol and biodiesel and other fuels made from biomass and primarily used for motive, thermal and power generation, with quality specifications in accordance with the PNS;

– Diesel shall refer to refined petroleum distillate, which may contain small amount of hydrocarbon or non-hydrocarbon additives to improve ignition quality or other characteristics, suitable for compression ignition engine and other suitable types of engine with quality specifications in accordance with the PNS;

– Feedstock shall refer to organic sources such as molasses, sugarcane, cassava, coconut, jatropha, sweet sorghum or other biomass used in the production of biofuels;

– Motor fuel shall refer to all volatile and inflammable liquids and gas produced, blended or compounded for the purpose of, or which are suitable or practicable for, operating motor vehicles;

– Oil Company shall refer to any entity that distributes and sells petroleum fuel products;

– PNS – shall refer to the Philippine National Standards; consistent with Section 26 of R.A. No. 8749, otherwise known as the “Philippine Clean Air Act of 1999”;

– Renewable Energy Sources shall refer to energy sources that do not have an upper limit on the total quantity to be used. Such resources are renewable on a regular basis.

The Philippine’s Biofuels Act of 2006 has been signed into law during the recently concluded Asean Summit that was held in the city of Cebu, Philippines. The law is now in effect. With this law, the Philippines is now committed to reduce dependence on imported fuels. Under Section 5, it is now mandatory that all liquid fuels for motors and engines sold in the Philippines shall contain locally-sourced biofuels components. All diesel fuels in the local market shall contain at least one percent biodiesel. This will gradually increase as per the schedule under the law. By 2010, the local market for biofuels could reach about US$420 million.

The Philippines imported 91.471 million barrels of crude oil last 2003 and 37.04 million of oil products. The country’s oil import bill last 2005 amounts to US$ 4.1 billion. According to Index Mundi the oil imports of the Philippines in year 2003 were recorded at 312,000 bbl/day. The target of the Biofuels Act is to replace these oil imports in Toto at a certain point in time.

Last January 14, 2007, the Asian and Pacific leaders also signed in Cebu City, Philippines an agreement to promote the use of biofuels. The Cebu Declaration on East Asian Energy Security was signed by leaders from Southeast Asia, Australia, New Zealand, India, Japan, China and South Korea after a three-hour summit in Cebu. The agreement aims for reliable, adequate and affordable alternative energy. The declaration calls for improved energy efficiency that will reduce dependence on traditional fossil fuels. It is urging countries to expand renewable energy systems and biofuel production.

On the Biofuels Act of 2006, the salient features are (1) the mandatory use of biofuels under Section 5, and (2) the provisions of a number of incentives under Section 6.

Under its mandatory provisions, all liquid fuels for motors and engines sold in the Philippines shall contain locally-sourced biofuels components in accordance with a schedule under Section 6. The incentives also include exemption from specific tax on local or imported biofuels component. On financing, the Biofuels Act also provides that government financial institutions shall accord high priority to extend financing to Filipino citizens or entities that shall engage in activities involving production, storage, handling and transport of biofuel and biofuel feedstock.

The Musfil Chamber of Agriculture

In the production of biofuels, the Philippines envisions to use renewable raw materials from the agricultural sector such as but not limited to, coconut, jatropha, sugarcane, cassava, corn, and sweet sorghum. Under the Ten Point Agenda of the Macapagal Arroyo administration, the development of 2 million hectares of agricultural land has been given emphasis. It is on this matter that the Musfil Chamber of Agriculture and Fisheries, Inc. comes into the picture of Biodix. According to the Chairman of the Chamber, Mr. Muamar Badio, it is only their chamber that can readily provide such a wide tract of land from the private sector. “The members of the Chamber can easily produce that much from the Autonomous Region in Muslim Mindanao”, he said.

In accordance with the primary purposes of the Chamber of Agriculture as stated in its registered Articles of Incorporation, the chamber has already organized a landholding estate of 1 million hectares of which it now holds Land Titles, under various “Trust Instruments”, constituting of some 500,000 hectares.

The Muslim Filipino Chamber of Agriculture and Fisheries, Inc., the MUSFIL Chamber for short, is a non-governmental organization duly organized and registered with the Securities and Exchange Commission in the Philippines on March 22, 1988 with registration no. 149706.

When it was organized, the Chamber was initially composed of few farmers and landowners headed by Datu Muamar Badio and Solaiman Malambut of Lanao Del Sur. Soon the membership expanded to the provinces of Lanao Del Norte, Maguindanao and Cotabato. By 1990 membership to the chamber counted more than a hundred. In 1995, the chamber expanded its member qualifications to include not only individuals but institutions such as duly organized cooperatives and foundations. By the year 2000, the Chamber counted members from civic groups, cooperatives, associations, foundations and private voluntary organizations.

The members who actually hold land titles that are transferred to or managed by the Chamber of Agriculture under Trust Instruments have now reached five thousand. The areas of landholdings of the Chamber, in the name and on behalf of the members, have now reached 500,000 hectares. That is an average of 100 hectares per individual/cooperative members. The Chamber now focuses its development in the areas of renewable energy, more particularly biofuels from biodiesel.

PHIVIDEC

About my recommendation for the location, I did not think twice. I have submitted last month our recommendation for PHIVIDEC Industrial Authority as the site for Biodix facilities. When Ashroff Gaffoor, President of ERA Petroleum, called me last week, I was told that my earlier recommendation for PIA was accepted by their Board of Directors.

My engagement with ERA Petroleum gives me the opportunity to revisit the PHIVIDEC Industrial Estate. It was an opportunity for me to go and stroll down memory lane. In my younger days as a junior executive, I was connected as an officer of the PHIVIDEC group which used to be composed of many corporate entities under the umbrella of the Philippine Veterans Investments Development Corporation. It was in this mother company where I was appointed back in 1980 as Manager and Assistant Vice President, Loans and Investments. I left PHIVIDEC in 1983 when I went abroad for a greener pasture.

The Phividec group in our days was composed of high caliber personalities (don’t count me in). To name just a few, our vice chairman then was a general by the name of Fidel V. Ramos. Years later General Fidel V. Ramos became the President of the Republic of the Philippines. Our legal counsel was ACCRA Law Office, composing of lawyers Angara, Abello, Conception, Regala and Cruz. Representing ACCRA who frequents PHIVIDEC was simply known then as Atty. Edgardo Angara. Years later, he became President of the University of the Philippines, and later twice Senator of the Philippines. Our president then was known to his peers in PHIVIDEC as “the man in a hurry”, Mr. Jorge Salazar. He has become a successful entrepreneur. About me as then manager and assistant vice president for loans and investments; well I became more of me.

PHIVIDEC was organized under Presidential Decree No. 243, as amended by P.D. Nos. 353 and 918 on December 26, 1973 in line with the Philippine Government’s objective of effecting the desired changes and reforms in the social economic structures of Philippine society through the full utilization of the productive capacities of veterans and retirees of the Armed Forces of the Philippines. Under the law, PHIVIDEC is exempt from payments of any and all taxes, duties, charges, fees and assessment of whatever nature and description imposed by any authority, whether national or local.

The PHIVIDEC Industrial Authority (PIA) was among the many subsidiaries of the Philippine veterans Investments and Development Corporation. The others were the Veterans Electronics Communications Inc. and PHIVIDEC Electronic Components and the PHIVIDEV Construction and Development Corporation.

As for the PHIVIDEC Industrial Authority, it has been 33 years since its inception. It was created by Presidential Decree No. 538 on August 13, 1974, making it a subsidiary agency of PHIVIDEC. PIA is a government corporation vested with special powers to establish, develop, administer and operate industrial areas and the ports and utilities inside such areas. The objective has been aimed at faster development in Northern Mindanao and to pursue the Government’s policy to disperse industries.

The Phividec Industrial Authority (PIA) is fully-owned and controlled by the Government of the Republic of the Philippines. In 1985, Executive Order No. 1031 provided for the constitution of a PIA Board of Directors separate and independent from the PHIVIDEC.

As mandated by its Charter, PD 538, the PIA identifies and develops sites in the country as prospective industrial areas. The PIA equips these areas with the necessary infrastructures to encourage the inflow of domestic and foreign investments. The PIA is empowered to assess and collect real property taxes and port fees; collect lease rentals; issue permits and licenses.

 

In 1994, the Philippines Government designated the PIE-MO as the showcase of its industrial flagship program in Northern Mindanao, the Cagayan de Oro Iligan Special Development Project.

The Northern Mindanao region heavily relies on PIE-MO for its capital infusion. In 1996 alone, for instance, 98 percent of new industrial capital flowing into the province of Misamis Oriental came by way of the PIE-MO, easily surpassing investments approved by the Board of Investments for the province and that infused in the entire Cagayan de Oro-Iligan Corridor. Thus it comes as no surprises that the Philippine Government continues to look at PIE-MO as the entity which shall spearhead sustained industrial development in Northern Mindanao.

The Physical layout of the estate. The PIE-MO is divided into five industrial parks, as follows

 

Industrial Park I. This is now fully occupied by renowned companies including the Ferrochrome Philippines, Inc., Pacific Activated Carbon Co., and Lina Holdings Oleochemicals Inc. The Mindanao Container Terminal Project (MCTP) is also located in this park.

 

Industrial Park II. Park II is available for clean, general, light and special industries. Major industries that are in this park include Metro Paper and Packaging Products, Inc., Southern Industrial Gases, Inc., and Boom Marine Corporation.

 

Industrial Park III. This site covers 200 hectares of flat land. This is the site of Itochu Corporation’s Coresteel Industries Philipinas, Inc., and Pryce Gases, Inc. Park III is also approved for clean, general, and light industries.

Industrial Park IV. This Park is situated along the three plateaus of Kiamo and Kirahon. It is the site of the 200-hectare First Cagayan De Oro Business Park which can accommodate clean, general and light industries.

Industrial Park V. This Park is the site of the 150-hectare Philippines Sinter Corporation, a subsidiary of the Kawasaki Steel of Japan and the Proposed 475-hectare Philippine Integrated Steel Project of the Jacinto Metals Corporation.

The industries which might be brought inside the PIA estate are generally classified as follows:

CLEAN INDUSTRIES. These are Industries whereby the processes employed do not result in noise vibration, smell, fumes, smoke, soot, ash, and other effects detrimental to residential areas.

LIGHT INDUSTRIES. These are similar to clean industries, except that distance between these industries and residential areas must be at least 50 meters. These include research and development entities involving small quantities of chemicals.

GENERAL INDUSTRIES. These are industries whereby processes and the use of machineries can be carried out within an approved 100-meter buffer between industrial and residential areas. These include metal stamping, manufacturers of metal drums, containers, dry cells and batteries, and detergents

SPECIAL INDUSTRIES. These are industries that give rise to excessive air, water and noise pollution and solid waste problems which are offensive and dangerous. They require environmental clearances and must be located at distances of 0.5 to 1 km from residential areas. These include refineries for oil and sugar, brewery, iron, and steel manufacturing/fabrication plants. It is in this category that the Biodix group is coming in.

In terms of classifications, PIE-MO considers as large those which are capitalized at over Pesos 60 million; Medium if the capital is Pesos 50 million up to Pesos 60 million; and light if the capital falls within the range of Pesos 1.5 million to Pesos 15 million. By this classification, Biodix is coming in as among those in the scale of large industries.

The first industrial area administered by PIA is the 3,000-hectare PHIVIDEC Industrial Estate in Misamis Oriental (PIE-MO). In 1994, the Philippine Government under the administration of President Fidel V. Ramos, former vice chairman of PHIVIDEC designated PIE-MO as the hub and showcase of its flagship program for industrialization in Northern Mindanao.

Coming back to ERA Petroleum Company and the Amanah Islamic Bank. The two companies have already inked a joint venture agreement that is known as Biodix Biodiesel J.V. Would its biodiesel refinery rise at PHIVIDEC?