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Philippines ethanol imports projected at multiyear high: USDA

Highlights

Market awaits blending mandate increase

US largest supplier of ethanol, followed closely by Brazil

Overall carbon dioxide emission reduction by biofuel at 1.4 mil mt in 2023

  • Author
  • Samyak Pandey
  • Editor
  • Nur syahirah Abdullah
  • Commodity
  • Agriculture Energy Transition Refined Products

The Philippines is set to witness a significant surge in fuel ethanol imports to meet skyrocketing domestic demand, the latest annual biofuels report by the US Department of Agriculture showed May 15, with overall import volume anticipated to reach almost a decade high of 475 million liters in 2024.

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Fuel ethanol inflows are expected to hit 208 million liters, a 14% increase on the year.

According to the report, biofuels consumption driven by economic growth led the increase in imports. The fuel forecasts indicated an 8% rise in fuel ethanol demand, reaching 682 million liters, while biodiesel consumption is expected to marginally increase 0.8% to 240 million liters.

Supply and demand projections

While challenges persist in domestic feedstock availability in the Philippines, an increase in imported ethanol is expected to mitigate the shortfall.

The anticipated growth is primarily fueled by expansions in the fuel pool, with the potential for even greater strides if higher blending standards are universally adopted.

USDA projections indicated a rise in ethanol production to 395 million liters.

However, the implementation of the discretionary E20 blend (20% ethanol for gasoline) and mandated B3 blend (3% biodiesel) hinges on the Department of Energy's decision to issue a Department Circular containing necessary guidelines for the rollouts.

According to the report, the production capacity of 677.9 million liters/year is a result of the industry's overexpansion in anticipation of the B5 blend, and is now more than enough to cover the required blending for 12 billion liters of diesel consumption.

Ethanol usage statistics (million liters)
Calendar year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (Est.)
Beginning stocks

N/A

N/A

N/A

N/A

25 14 14 10 18 22
Fuel begin stocks N/A N/A N/A N/A 25 14 14 10 18 22
Production N/A N/A N/A N/A 375 344 400 402 417 420
Fuel production 168 230 235 297 346 280 355 375 387 395
Imports

N/A

339 322 347 341 322 385 398 461 475
Fuel imports 311 260 276 285 257 241 225 277 246 280
Exports 0 0 0 0 0 2 4 0 0 0
Fuel exports 0 0 0 0 0 0 0 0 0 0
Consumption N/A N/A N/A N/A 727 664 785 792 874 902
Fuel consumption 479 490 511 557 614 521 584 644 629 682
Ending stocks N/A N/A N/A 25 14 14 10 18 22 15
Fuel ending stocks N/A N/A N/A 25 14 14 10 18 22 15

Source: USDA

In the Philippines, ethanol produced domestically primarily relies on sugarcane, predominantly molasses, as its feedstock, whereas biodiesel is sourced from coconut, where coconut oil is transformed into coco methyl ester.

The policy implementation currently emphasizes production and consumption without any specific policies in place to incentivize the reduction of carbon intensity in existing biofuels over time.

In 2024, local producers are estimated to cover approximately 58% of the bioethanol needed for gasoline blending. Domestic fuel oil companies are permitted to import ethanol only in cases of shortages, a scenario likely to persist given the ongoing challenge of inadequate feedstock supply.

According to the USDA report, however, in the current policy, imported ethanol does not directly compete with locally produced ethanol as local reserves must be depleted before imports are permitted.

Historically, the US has been the primary supplier of imported ethanol to the Philippines, but there has been heightened competition in recent years, notably from Brazil. The biodiesel trade remains minimal, with no importation permitted under the Biofuels Act.

In 2023, fuel ethanol used in the country resulted in a reduction of more than 843,000 mt of carbon dioxide emissions, while biodiesel emission reduction was pegged at 576,000 mt.

Policy push

According to the report, the Philippines Biodiesel Association advocated for a gradual increase from B2 to B3 to B5. The National Biofuel Board endorsed to increase the blend mandate gradually, starting with B3 implementation, with a target date of October 2024.

The DOE's Renewable Energy Management Bureau is currently drafting a roadmap for sustainable aviation fuel.

Initially, SAF derived from coconut oil was earmarked for adoption as aviation fuel. However, a downturn in fuel prices led to a redirection of the project toward bio-oil production from agricultural waste.

S&P Global Commodity Insights analysts forecast global SAF consumption to reach 349,000 b/d by 2030, with a further increase to 2.1 million b/d by 2050, displacing almost 24% of worldwide jet fuel demand, according to its latest SAF market outlook.

Platts, part of Commodity Insights, last assessed SAF production costs in Southeast Asia $7.05 higher on the day at $1,564.24/mt May 15.