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HKU718

ARI LUIS C. HALOS

THE PHILIPPINES RISING BIOETHANOL


INDUSTRY
It was February 2007, and the Philippine Department of Agriculture needed to prepare a
strategy for implementing the recently passed biofuels law. The law required all gasoline sold
in the country to be blended with bioethanol1 within two years and all diesel to be blended
with biodiesel within three months. Although it was not the lead agency in the laws
implementation, the Department of Agriculture played a crucial role because its policies
affected the availability and the cost of the feedstock used in producing both bioethanol and
biodiesel. The department was responsible for promoting the cultivation of biofuel feedstock
and balancing food and fuel requirements.
The Philippines required about 500 million litres of ethanol annually for the production of
E10,2 the fuel necessitated by the Philippine government. This meant that the country needed
at least 25 ethanol plants, each with an annual output of 20 million litres. 3 San Carlos
Bioenergy Inc. in San Carlos City was building the countrys first ethanol plant with that
production capacity.4 Meanwhile, it was up to the Department of Agriculture to propose a
strategy to complement this new biofuels law and ensure its successful administration.

The Philippines
The Philippines [see Exhibit 1] was an archipelago of more than 7,100 islands located in
South-East Asia. Strategically located as the gateway to Asia from the Pacific Ocean, it had a
land area of 298,170 square kilometres and was bordered by the South China Sea to the west
and north and the Pacific Ocean to the east and south. As an archipelago, it had a long
coastline of 334,539 kilometres. The country had a tropical climate, with an average yearround temperature of 32 C.

Bioethanol is a term applied to ethanol derived from biomass.


E10 is a mixture of 10% ethanol and 90% gasoline.
3
Manila Times (16 August 2006) Pending Bio-Fuel Bill Stalls Investments in RPs Ethanol Plants.
4
Manila Times (13 September 2006) Energy Department Issues Guidelines for Bioethanol Program.
2

Ari Luis Halos of the University of the Philippines Los Baos prepared this case for class discussion. This case is not intended
to serve as an endorsement, source of primary data, or to show effective or ineffective handling of decision or business processes.
2008 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or
transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwise (including the
internet)without the permission of The University of Hong Kong.
Ref. 08/370C

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Imported oil comprised the largest portion of the Philippines energy mix. In 2004, the
country imported 100 million barrels of oil, satisfying 36.6% of its energy requirement.
Unless biofuels were adopted, the countrys oil import requirements were expected to reach
120 million barrels in 2013. Oil was used for transportation, industry and even power
generation, as electricity on several of the smaller islands was generated using fuel oil. The
Philippines also used biomass, geothermal, coal, natural gas and hydroelectricity to meet its
energy needs,5 but because of its primary dependence upon imported oil, the countrys energy
sector was highly susceptible to price fluctuations in the international market.

The Philippines Biofuel Law of 2006


The Biofuel Law of 2006 (RA9367) was signed on 17 January 2007, mandating the blending
of 5% bioethanol with gasoline and 1% biodiesel with diesel fuel within four years of its
enactment, after which the proportions were to be increased by 5% in 2009 to 10% for
bioethanol and by 1% to 2%in 2008 for biodiesel. During its infancy, the implementing rules
and regulations of the law were still being formulated.
The main thrust of the biofuels act was to reduce Philippine dependence on imported fuel by
providing a local supply of alternative and renewable energy. The specific objectives of the
law were:
To develop and use local, clean and renewable energy sources
To reduce greenhouse gas (GHG) emissions
To increase rural employment and income
To ensure availability of clean energy.
As stated in the Biofuel Law, the country was required to use liquid fuel that was blended
with locally sourced products. The law also provided incentives to encourage investors to go
into the production, distribution and use of locally produced biofuel. Some of the incentives
contained in the law included exemption from water affluent fines and financial assistance to
those who engaged in the biofuel business.
The law also created the National Biofuels Board (NBB) of the Philippines. The NBB was
composed of a chairman who was either the secretary of the Department of Energy or his
assigned undersecretary. Members of the board were secretaries or undersecretaries of various
government agencies such as the Department of Trade and Industry, the Department of
Science and Technology, the Department of Agriculture, the Department of Finance, the
Department of Labor and Employment and line agencies such as the Philippine Coconut
Authority and the Sugar Regulatory Administration, both of which fell under the Department
of Agriculture.
In addition to the Department of Agriculture, government agencies such as the Department of
Finance and the Department of Science and Technology were mandated to develop,
implement and monitor the governments biofuel production and utilisation technology
programs.

Tamang, J.T. (2530 August 2004) Philippines Case Study, Presentation to the 3rd Workshop of the Petroleum Policy and
Management Project, Baguio City, The Philippines.

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Bioethanol
Ethanol (CH3CH2OH) was a flammable, colourless, slightly toxic chemical compound
commonly found in alcoholic beverages. It had a specific gravity of 0.789.6 Because it could
be made from plant material or synthetically from petroleum, ethanol derived from crops was
distinguished as bioethanol.
Crops that were used for bioethanol production were rich in either sugar or starch. It was
considered a renewable fuel and as such was eligible to receive such incentives as zero valueadded tax rating under Philippine laws.
Different countries used different feedstock in ethanol production. Corn was used in the
United States because it was abundant and relatively cheap. Corn grains were liquefied and
saccharised into fermentable sugar, which was then fermented with yeast into ethanol. Many
other countries used sugarcane and sugar beets for ethanol production. Brazil was the worlds
largest ethanol producer and made most of its ethanol from sugarcane, whereas France used
sugar beets.
Ethanol was used as an additive or alternative fuel for cars and other spark-ignited engines.
Anhydrous ethanol, or that which has at most 5% water, was blended with gasoline in varying
quantities to reduce consumption of petroleum fuels and reduce air pollution. According to a
study sponsored by the Food and Agricultural Organization (FAO), blending ethanol with
gasoline at 0.1% increased its power by about 0.1%. Ethanol was an oxygenate and thus
reduced soot formation, as well as NOx (nitrogen oxides) emissions. Ethanol-gasoline blends
led to smooth engine operation due to the wider flammability limits of ethanol.7 Because of its
lower pollution emission properties, the production of ethanol earned carbon credits.
Most engines that were available on the market accepted gasoline blended with up to 10%
ethanol, based on the World Wide Fuel Charter. The charter contained fuel standards that
were jointly produced by car and engine manufacturers associations in the EU, the US and
Japan.8
The Philippines Department of Energy, in conjunction with the Bureau of Product Standards,
promulgated the Philippine bioethanol standard, PNS DOE QS 008 [see Exhibit 2 for a
comparison of the specifications of bioethanol sold locally with the American standard].
The Local and Worldwide Bioethanol Markets
In an optimistic scenario, petroleum companies would depend mainly on imports for the first
two to five years as bioethanol distilleries established themselves in the country. Seaoil (one
of the independent oil players) and Shell Philippines (one of the big three oil companies)
were currently importing bioethanol from Brazil at US$0.504 per litre 9 and Australia at
US$0.550 per litre.10

Specific gravity is the ratio of the density of a material to the density of water. The density of water is about one kilogram per
litre.
7
Liu R., Lu N., Liu Q., Liu S., and Gao A. (1994) Alcohol and cotton oil as alternative fuels for internal combustion engines in
Lu Nan (ed.) Best, G. (ed.) Carvalho Neto, C.C. de (ed.), Integrated Energy Systems in China: the Cold Northeastern Region
Experience FAO: Rome, Italy, 111-151.
8
European Automobile Manufacturers Association, Alliance of Automobile Manufacturers, Engine Manufacturers Association
and the Japan Automobile Manufacturers Association (December 2002) World Wide Fuel Charter.
9
US$1 = PhP 48.381 in February 2007.
10
Business Mirror (15 May 2007) Better Biotechnology to Cut Cost of Local Bioethanol.

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Thirteen distilleries, each with a capacity of 100 kilolitres per day,11 were needed to meet the
countrys 2009 bioethanol requirement of 223 million litres [see Exhibit 3 for local
bioethanol demand projections]. More distilleries would be needed to keep up with growing
requirements and higher mandated blends, raising the number to 30 distilleries by 2011 for
the country to be self-sufficient in ethanol production. This would depend on the
governments ability to attract investors. The investment required for a distillery ranged from
US$8.27 million for a distillery producing 40 kilolitres per day to US$41.34 million for a
distillery producing 100 kilolitres per day. The final investment cost varied a bit, depending
on location and the type of feedstock used.
Annual ethanol production worldwide was expected to reach 49 billion litres in 2007 and
increase further to 65 billion litres by 2012.12 The majority of production was expected to be
concentrated in Brazil, the US, the EU and Australia, accounting for 84% of total world
production [see Exhibit 4]. The US granted its petroleum companies an incentive of US$0.51
per gallon to use bioethanol and charged the same amount for imported bioethanol. Brazil and
Australia were expected to dominate the export trade due to competitive advantage. These
countries had large tracts of land that could be devoted to feedstock production, giving them
economies of scale. Brazil was already the top ethanol producing country, accounting for 46%
of worldwide production in 2004.
While Brazil was set to be the major exporter of bioethanol, there was still enough room for
other countries to participate in the global market for the product. The Philippines in
particular was in a position to becom13e a major exporter to Japan, Korea and China due to its
proximity. It had sufficient production areas to meet local and export needs. In fact, Japanese
and other foreign investors had visited the Philippines to explore bioethanol ventures.14

Ethanol Logistics and Distillery Location Considerations


The logistical flow of bioethanol from plant to pump is illustrated in Figure 1. First, feedstock
was harvested and hauled to a distillery where it was processed into bioethanol. The
bioethanol was then brought by lorry from the distillery to either an ethanol depot or an oil
depot. The cost of transport by lorry was around US$0.00413 per litre per 20 kilometres. The
containers on most lorries in the Philippines were 40 feet long, with a carrying capacity of
20,000 litres. The bioethanol was brought to an ethanol depot if it was to be used on another
island within the country or exported; otherwise, it was transported directly to an oil depot
where it was blended with gasoline. There were two such depots being planned, one in Subic,
which was on the main island of Luzon, 66 nautical miles northwest of Manila, and the other
in San Carlos City, on the island of Negros. Transfers from one ethanol depot to another were
done with the use of tankers. From an ethanol depot or distillery, the bioethanol was brought
to an oil depot where it was to be mixed with unleaded gasoline for eventual sale in a gasoline
station.

11

One kilolitre equals 1,000 litres.


Berg, C. and Litch, F.O. (April 2004) World Fuel Ethanol Analysis and Outlook, Japan Ministry of Energy Trade and
Industry, http://www.meti.go.jp/report/downloadfiles/g30819b40j.pdf. (accessed 12 February 2007).
13
Interview with a former vice president of Pilipinas Shell.
14
Philippine Daily Inquirer (13 June 2007) Japan Firm Eyes $150M Worth of Biofuel Plants in Leyte.
12

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Figure 1: Bioethanol Logistics

By early 2007, San Carlos Bioenergy, Inc. was constructing the first bioethanol distillery in
the country. Their facility would be capable of producing 100 kilolitres per day, or 20 million
litres per year, and was to be located in San Carlos City at Negros Occidental in Region VI.
Sugarcane was to be brought by farmers to the distillery, as was the practice with sugar mills.
The ethanol produced from the sugarcane was to be piped to the nearby port where it would
be loaded into a tanker. The tanker would then bring the product to Subic Bay Metropolitan
Authority, a special economic zone. From there, it would be transported by lorry to Pandacan,
Manila, 130 kilometres away. San Carlos Bioenergy had contracted their product to Petron
Corporation, the Philippines largest refiner and distributor of petroleum products.
Ideally, a distillery had to be strategically located relative to the production areas and the
depots of the oil companies because the depots were to serve as blending facilities for the
production of E515 and E10. Other factors to consider were the presence and adequacy of
utilities (ie, water and electricity), logistics (ie, road infrastructure, a port and handling facility,
appropriate transport and storage) and site size.
Because a lot of feedstock was required to produce bioethanol, proximity to farm production
areas took precedence over access to the oil depot. This reduced the inbound logistics costs of
the feedstock. Furthermore, this would facilitate delivery schedules important in addressing
ethanol yield reduction resulting from transport delays. The availability of large tracts of
sugarcane land in San Carlos City was the reason why it became the host of the countrys first
fuel ethanol plant.
After a site had been identified, other factors needed to be considered in final site selection for
a bioethanol distillery plant. It had to have access to electric substations because the distillery
used a number of pumps and motors that required a reliable three-phase power source for
operation. The availability of water was yet another factor in site selection, which was why
distilleries in the Philippines were usually located near rivers.
Because bioethanol was hygroscopic, or absorbed moisture easily, it could not be handled by
the current petroleum infrastructure without some modifications. The current petroleum
transport infrastructure, including ships and pipelines, relied on water to move petroleum
products. Mixing ethanol into gasoline modified gasoline characteristics, making it difficult to
remove moisture. Too much moisture in the fuel affected engine performance and service life.

15

E5 is a mixture of 5% ethanol and 95% gasoline.

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Big oil companies in the Philippines had plans to blend ethanol in line. This meant that
ethanol and gasoline were to be stored separately at the depot and, as gasoline was being
loaded into a lorry, ethanol would be pumped in at the same time such that mixing occurred in
the loading pipe, thereby minimising moisture absorption.
Of particular importance was the Pandacan depot in Manila because this was where 40% of
the countrys unleaded gas was trans-shipped and eventually sold. Distilleries located on the
main island of Luzon therefore had a distinct advantage over those on other islands, who had
to trans-ship their bioethanol via Subic because the port in Luzon had the infrastructure to
handle it [see Exhibit 5 for a map of the Philippines showing the general locations of Petrons
depots and the distribution of demand].
The Luzon mainland was therefore the preferred location for serving the local market,
especially considering that this was where most unleaded gasoline was consumed. Also,
compared to distilleries based in the Visayas and Mindanao, there were fewer constraints on
transshipment. Prospective distillery investors, however, also had to consider exporting their
produce, especially if they were located outside the Luzon mainland.

Ports and Shipping


Being an archipelago, the Philippines relied heavily on inter-island shipping for its logistical
needs. The country had 2,456 ports, most of which were small. Depots, which were owned by
the oil companies, had their own ports.
Classification of Existing Ports, November 2003
Total Number of Ports

2456

Private Ports

17%

Fishing Ports

17%

Public Ports

65%

Others

1%
Figure 2: Ports in the Philippines16

The domestic shipping industry was deregulated in 1994, resulting in improved shipping
services. The number of shipping companies also increased from 223 in 1997 to 585 in 2001.
Some industrial firms owned and operated their own vessels to carry specialised cargo, such
as liquid petroleum gas, chemicals and petroleum. Nevertheless, the shipping industry
continued to be dominated by a shipping oligopoly; thus, inter-island cargo rates remained
quite expensive [see Exhibit 6].

Ethanol Feedstock Considerations


The productivity and price of feedstock were sensitive issues because most farms in the
Philippines were small, with an average size of two hectares. Sugarcane was being promoted
16

The World Bank (2005), "Transport in the Philippines", http://go.worldbank.org/WQ5TPR6HQ0 (accessed: February 3, 2008).

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as the main feedstock for the bioethanol program, and the local sugar industry had lobbied
strongly for the passage of the Biofuels Act.17 The choice of sugarcane was based on the
experience of Brazil, which was the lowest-cost producer of ethanol in the world, with a
production cost of US$0.23 per litre. They used sugarcane as feedstock, with a productivity of
6,000 litres per hectare per year18 [see Exhibit 7 for the comparative ethanol yields of sweet
sorghum, corn, cassava and sugarcane in the Philippines].
The Philippines had a sizeable sugar industry with a long industry of export. Sugarcane was
grown mainly on the islands of Negros, Luzon, Panay and Mindanao. Despite increasing local
demand for sugar, the Sugar Regulatory Administration (SRA) said that there was still a lot
of suitable land available for ethanol production. This may have been due to declining exports
of sugar.
The local sugar industry had a number of quirks. For one, the SRA prohibited sugar mills to
be located within 100 kilometres of each other in order to discourage price competition.
Another was the requirement that sugar farmers have a share in the production. So, when
farmers delivered cane to sugar mills, they were paid in terms of sucrose content. Still another
quirk, farmers were entitled to a share of the by-products of the sugar production process.
One of these by-products was molasses, the main raw material traditionally used for ethanol
production in the country. The yield of molasses was approximately
3.5% of the cane weight, and around 280 litres of ethanol were produced for every tonne of
Philippine molasses. There were environmental concerns about its use in fuel ethanol
production because the wastewater from molasses ethanol production had a dark colour and
foul smell. There were also supply concerns because Philippine molasses was not only in high
demand in the local potable ethanol and livestock feeds production industries, but also in the
export market.
Cassava was currently being used by the countrys largest distiller, Distilleria Bago, Inc., as a
raw material for Extra Neutral Alcohol19 production in one of their columns. They constructed
the countrys first cassava milk production facility in Bago City at Negros Occidental.
Cassava had long been cultivated in the Philippines. Unfortunately, the yields for the years
20012005 were quite low at around 8 tonnes per hectare per year20. Tests done at the Leyte
State University, however, showed that yields of 35 tonnes per hectare per year could be
attained with the use of new varieties, resulting in ethanol yields of 4,9006,545 litres per
hectare per year. The figure used in this study was based on the estimated yield of NSIC CV22,21 which showed that its ethanol yield was comparable to other feedstocks.
Unfortunately, the ethanol productivity of cassava was greatly dependent on its post-harvest
handling. Studies by the FAO showed that the starch content of cassava dropped dramatically
after harvest. As such, it was strongly recommended that cassava be processed within 48
hours of its harvest. Cassava chips had dramatically reduced starch content, which accounted
for their low ethanol productivity in industry. The FAO recommended that mini-distilleries be
set up in order to process cassava into ethanol. However, this concept had yet to be tested.
In the US, corn producers were considering ethanol production as an alternative business
because it was the predominant ethanol feedstock. Unfortunately, the low productivity of
17

Philippine Daily Inquirer (27 April 2007) Energy from Agriculture.


Assis, V., Elstrodt, H. and Silva, C.F.C. (2007) Positioning Brazil for Biofuels Success, McKinsey Quarterly, 2007 Special
Edition: Shaping a New Agenda for Latin America.
19
Extra Neutral Alcohol is food grade bioethanol used in making spirits.
20
Philippines' Bureau of Agricultural Statistics, http://www.bas.gov.ph/ (accessed 12 February 2007).
21
NSIC CV-22 is a cassava variety approved by the Philippines National Seed Industry Council
18

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local corn production, coupled with high demand in the feeds industry, discouraged the US
Department of Agriculture from seriously considering it as a primary ethanol feedstock. Thus,
the opportunity for using corn in local ethanol production would only arise if corn yields
became high enough to cause a surplus. The yields were expected to increase dramatically if
Bt corn 22 was used. The Philippines was one of the few developing countries that had
established a genetically modified crop review and approval process and Bt corn had already
been commercialised since 2002, despite the protests of the local office of Greenpeace.23
Sweet sorghum also held great promise as an ethanol feedstock because both its grain and its
sweet stalk juice could be used. Furthermore, with advances in cellulosic ethanol production,
even its bagasse held potential for ethanol production.
Initial tests had been conducted at the Mariano Marcos State University from 2006 to 2007
using parent lines provided by the International Crops Research Institute for the Semi-Arid
Tropics. The tests showed that the crop could be harvested three to four times a year with
grain yields ranging from 3.28 to 4.4 tonnes per hectare and stalk yields ranging from 43 to 65
tonnes per hectare. The crop experiment also prevailed in spite of a typhoon that had caused it
to be waterlogged for seven days. A multi-location trial was underway in the hopes that sweet
sorghum varieties would gain approval for commercial production.
Aside from productivity, another major consideration was feedstock cost, which made up the
biggest proportion of ethanol production cost [see Exhibit 7]. The average cost of feedstock
per litre of ethanol of sweet sorghum was comparable to that of sugarcane. While cassava had
the potential to have the lowest cost of production, its price was too unstable, varying widely
across regions from as low as US$0.031 per kilogram to as high as US$0.434 per kilogram.
The cost of feedstock per litre of ethanol from molasses and corn were high and thus more
appropriate for use in beverages than in fuel ethanol.
Another concern of a potential distillery owner was the availability of raw material. This
depended a great deal on the willingness of farmers to plant the crop. This, in turn, was
dependent on the potential earnings that the farmer could realise [see Exhibit 7]. While
sugarcane was favourable to the distillery, it produced less revenue per hectare per year for
farmers than Bt corn or sweet sorghum. The revenue per hectare from Bt corn was
comparable to an open pollinated variety of sweet sorghum. In other words, the farmers
revenue from an improved variety of corn was comparable to a regular variety of sweet
sorghum. This meant that the farmer had the potential to earn even more without increasing
the distillerys feedstock cost, given a slight improvement in sweet sorghum productivity
through hybridisation.
A challenge for the use of sweet sorghum was the availability of seeds and approval for its
widespread planting because it was only just being introduced. This was addressed by the
Department of Agricultures Bureau of Agricultural Research, which initiated the planting of
sweet sorghum on 500 hectares around the country and intended to make planting material
available by the year 2009. High-yielding varieties of corn were already being sold by private
companies, while those of sugarcane were being distributed by the Sugar Regulatory
Administration in areas where sugar was already being produced. The planting material for
regular cassava was readily available, but the seed pieces of high-yielding varieties of cassava
were not expected to be available for another three years.

22

Bt corn is a genetically modified corn variety that contains a gene from the bacterium Bacillus thuringiensis to kill stem borers,
a pest of corn.
23
Manila Times (17 July 2006) Sustained agriculture to boost food security.

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The cost of using sugar-based feedstock such as sugarcane or sweet sorghum stalk was said to
be lower than that of using starch-based ones such as corn, sweet sorghum grain or cassava.
Although molasses was sugar-based, it had a slightly higher production cost due to the
increased pollution control measures required. Distilleries using sugar-based feedstock could
not be used for starch-based feedstock, and the capital investment in distilleries dedicated to a
certain feedstock were said to vary only slightly on a per-litre basis.

Food versus Fuel Debate


Various groups, both in the Philippines and abroad, were raising the issue of the apparent
conflict between food and biofuel. This was in light of developments in the US where more
and more corn was being used for ethanol production, tightening world demand, despite being
the bumper crop of the US for the previous two years. Also, rising ethanol and sugar prices
were resulting in higher prices for Brazilian sugarcane as ethanol and sugar marketers
competed for supplies.
However, there were a lot of idle lands and new agricultural production technologies being
introduced that promised to increase total yields. What agriculturists argued was that, until
then, there hadnt been enough incentive for farmers to use more land or to employ advanced
technologies, nor for capitalists to invest in agriculture [see Exhibits 8 and 9].
In the Philippines, it was typically the farmers responsibility to bring produce to the buyer,
and they usually sold their produce to traders. In the case of the bioethanol industry, however,
most investors planned to deal directly with farmers to minimise costs.

Labour Availability
The Philippines had a large pool of manpower that could be tapped by the ethanol industry.
Every year, 400,000 individuals in the country graduated from college, around 10% of whom
were engineers. Graduates in agriculture, microbiology, chemistry and other related subjects
essential to the ethanol industry were also available.
Furthermore, there were a lot of distilleries already in operation in the country. The
Philippines had a sizable alcohol industry, and some of the countrys top corporations were
involved in alcohol production and the sale of beverage alcohol. Also, a number of private
and public institutions, including academic institutions, were continually developing
technologies and manpower in support of the alcohol industry.

The Role of the Department of Agriculture


The Philippines Board of Investments granted fiscal and non-fiscal incentives to priority
projects such as those in the biofuels industry. The Biofuels Law granted additional incentives
to biofuels investors in addition to the existing investment incentives [see Exhibit 12].
Officials of the Department of Agriculture, however, were wondering if these incentives were
enough. They wanted to formulate a strategy that would maximise the programs chances of
succeeding. With the call for budget proposals for the 2008 General Appropriations Act just
around the corner, the Department of Agriculture had to act quickly if it wanted to
complement the investors package with infrastructure and other support.

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EXHIBIT 1: THE PHILIPPINES AT A GLANCE

Source: National Mapping and Resource Information Authority.

Population, Labour and Employment


Population
: 78.42 million (as of December 2000)
: 2.14% annually
Population growth
: 32.57 million (as of July 2001)
Total labour force
: 89.9% of total labour force
Employed
: 17.7% of total labour force
Underemployed
: 10.1% of total labour force
Unemployed
Sources: National Statistical Coordination Board and Department of Labor and Employment.

10

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EXHIBIT 2: PHILIPPINE STANDARDS AND ASTM D 4806 STANDARDS FOR


BIOETHANOL

PROPERTY
Appearance

Acidity/Alkalinity
Maximum copper, as Cu, milligrams
per kilogram
Minimum ethanol content, percent by
volume

ETHANOL
PNS DOE QS 008 ASTM D 4806
Clear and bright,
Clear and bright,
visibly free of
visibly free of
suspended or
suspended or
precipitated
precipitated
contaminants
contaminants
6.59.0
6.59.0
0.1

Denaturant, percent by volume


Maximum inorganic chloride content,
parts per million by mass
Maximum ethanol, percent by volume
Maximum total acids (as ascetic acid),
percent by weight
Maximum water content, percent by
volume
Solvent-washed gum
*2% by volume at the point of denaturing

Source: Bureau of Products Standards, Philippines, 2006.

11

0.1

96.9
(unleaded
gasoline)
1.962.44*

1.964.76

40

40

0.5

0.5

0.007

0.007

0.5

none

5mg/100ml

92.1

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EXHIBIT 3: PROJECTED DEMAND FOR BIOETHANOL IN THE PHILIPPINES

Year
A
2007
2008
2009
2010
2011
2012
2013
2014
2015

Projected
Gasoline
Demand
(In Million
Litres)
B
4,845
5,102
5,370
5,650
5,939
6,239
6,549
6,872
7,210

Mandated
Blend
C
0
0
5%
5%
10%
10%
10%
10%
10%

Source: Department of Energy (DOE), Philippines, 2005.

12

Bioethanol
Requirement
(In Million Liters)
D=BxC

269
283
594
624
655
687
721

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EXHIBIT 4: WORLD BIOETHANOL PRODUCTION IN MILLION LITRES, 19752012


70000
60000
50000
40000
30000
20000
10000
0
1975
Beverage

1980

1985
Brazil (Fuel)

1990

1995

US (Fuel)

2000
EU (Fuel)

2005

2010

Other Countries

Source: Berg, C. (April 2004) World Fuel Ethanol Analysis and Outlook, http://www.distill.com/WorldFuel-Ethanol-A&O-2004.html (accessed 12 January 2007).

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EXHIBIT 5: PETRONS DEPOTS AND THE DISTRIBUTION OF DEMAND

Distribution of Demand
Cluster
Northern Luzon Cluster (area north of Manila)
Greater Manila Area
Southern Luzon Cluster (area in Luzon mainland south of
Manila)
Visayas Cluster (islands aside from Luzon or Mindanao)
Mindanao Cluster
Source: http://www.bioethanol.com.ph/ (accessed 12 January 2007).

14

Demand (% of country)
18%
40%
12%
18%
12%

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EXHIBIT 6: FREIGHT RATES OF DOMESTIC VESSELS FOR EXPORT CARGOES

Breakdown of Route Chargesa per Two Twenty-Foot Equivalent Units or One


Forty-Foot Container

Route

Sea
Distance
Transport
Total
Sea
Auxiliary Charges from
in
Freight
Charges
b Transport
Charges Repositioning
Nautical
per
(US$)
Freight
Miles
Nautical
Mile (US$)

Manila
Cebu

392

553.94

30.12

144.23

212

0.54

Manila
Cagayan de
Oro

504

680.34

30.91

166.61

310

0.61

Manila
Zamboanga

512

689.37

30.91

166.61

310

0.61

Manila
Gen.
Santos

723

927.50

30.91

166.61

310

0.43

Manila
Davao

829

1,047.14

30.91

166.61

310

0.97

Includes local arrastre at ports of origin and destination, wharfage and


documentation stamps.
b
Freight of empty containers.
SOURCE: DOMESTIC SHIPOWNERS ASSOCIATION.

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EXHIBIT 7: FEEDSTOCK COMPARISONS

Sources: GAIN Report on RP sugar industry, GAIN Report on Thai sugar industry, Leyte State
University Report on cassava, Biotechnology Coalition of the Philippines Speech, MMSU field tests,
FAO and ICRISAT.

Monocrop Farmer's Annual Revenue


140
High

High

Low

Low

BT Corn

Sweet Sorghum

T PhP/ha/year

120
100
80

High

60
40

Low

20
0
Sugarcane

Sources: GAIN Report on RP sugar industry, bas.gov.ph, Biotechnology Coalition of the


Philippines Speech, MMSU field tests, FAO and ICRISAT.

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Feedstock Cost Comparison

Price (US$ per


Metric Tonne )

Metric
Tonnes
per
Hectare

Litres
per
Metric
Tonne

Crops
per
Year

Feedstock

Min

Max

Sugarcane

20.67

22.74

65

70

Cassava

31.00

119.88

180

175.69

206.69

Corn

Litres
per
Hectare
per Year

Feedstock
Cost per
Litre
Min

Max

4,550

0.295

0.325

1,440

0.172

0.666

400

4,000

0.439

0.517

Sweet Sorghum
Stalk

11.37

12.40

50

50

5,000

0.227

0.248

Grain

124.02

144.68

375

2,250

0.331

0.386

Source: Department of Agriculture Agribusiness Center.

Feedstock Planting Cycles


Feedstock

Days to Harvest

Sugarcane
Cassava
Corn

300330 days
270 days
120 days
100110 (from seed)
8590 days (ratoon*)

Sweet Sorghum

*Ratoon is the shoot sprouting from the base of the sweet sorghum crop after the stalk has been harvested.

Sources: SRA, MMSU field tests, LSU, FAO and ICRISAT.

Indicative Bioethanol Production Costs for Various Feedstock (US$ per Litre)
Feedstock

Production
Cost

Days Used as
Feedstock per
Year

Average
Production Cost

Sugarcane

0.459

150

Molasses

0.605

150

Cassava

0.642

300

0.642

Corn
Sweet
Sorghum

0.650

300

0.650

0.437

300

0.437

Sources: Rusni Distilleries.

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EXHIBIT 8: CORN AND SUGAR SUPPLY AND DEMAND IN THE PHILIPPINES

Corn Supply and Demand Projections (20052007)


2007
Total Supply (thousands of metric tonnes)

2006

2005

6,916

6,682

6,394

200

204

192

6,318

5,933

5,253

Imports

398

545

949

Corn

398

250

65

295

884

Total Usage (thousands of metric tonnes)

6,716

6,482

6,190

Food

1,005

986

967

52

52

49

Feed

4,395

4,257

4,123

Others*

1,264

1,181

1,051

200

200

204

Beginning stock
Production

Cassava & feed substitute

Seeds

Remainder (thousands of metric tonnes)


* Comprised of wastage and material used for industrial purposes.

Source: Department of Agriculture-GMA Corn.

Domestic Raw Sugar: Long-Term Projections of Demand


Item
Total Demand (Thousands
of Tonnes)
Low
High
Average Annual Growth
Rate (%)
Low
High

2005

2010

2015

2.19
2.21

2.53
2.90

2.85
3.02

3.5
3.7

2.90
3.20

2.80
3.10

Source: University of Asia and the Pacific (2002) Philippine Sugar Industry, Analysis and Projections of
Domestic Demand.

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EXHIBIT 9: CORN AGRIBUSINESS IN THE PHILIPPINES


Year
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

Harvested Area
Production
Yield
(thousands of hectares) (thousands of metric tons) (kilograms per hectare)
3,510.910
3,862.810
1,100
3,594.970
4,090.730
1,138
3,682.650
4,278.120
1,162
3,745.070
4,427.950
1,182
3,689.240
4,522.200
1,226
3,819.560
4,853.890
1,271
3,589.460
4,655.030
1,297
3,331.410
4,618.850
1,386
3,149.340
4,797.980
1,523
3,005.820
4,519.250
1,503
2,692.330
4,128.510
1,533
2,735.720
4,151.330
1,517
2,725.880
4,332.420
1,589
2,354.210
3,823.180
1,624
2,642.210
4,584.590
1,735
2,510.340
4,511.100
1,797
2,486.590
4,525.010
1,820
2,395.456
4,319.262
1,803
2,409.828
4,615.625
1,915
2,527.135
5,413.386
2,142
2,441.788
5,253.160
2,151

Source: ASEAN Food Security Information System, afsis.oae.go.th (accessed 12 April 2007).

Corn Productivity per Region, 2005


Region/Province

Production
(metric
tonnes)

Cordillera Administrative Region


Region I (Ilocos Region)
Region II (Cagayan Valley)
Region III (Central Luzon)
Region IV-A (Calabarzon)
Region IV-B (Mimaropa)
Region V (BICOL Region)
Region VI (Western Visayas)
Region VII (Central Visayas)
Region VIII (Eastern Visayas)
Region IX (Zamboanga Peninsula)
Region X (Northern Mindanao)
Region XI (Davao Region)
Region XII (SocCSKSarGen)
Caraga Administrative Region
Autonomous Region of Muslim Mindanao
Philippines

130,464
300,184
769,506
182,333
64,102
94,161
118,115
193,736
188,525
68,416
223,208
938,227
293,413
959,286
98,595
630,889
5,253,160

Harvest Area
(hectares)
42,010
67,298
258,180
44,500
36,365
36,407
80,237
107,030
246,463
58,589
163,365
381,499
200,409
398,343
55,765
265,328
2,441,788

Productivity
(metric
tonnes per
hectare)
3.11
4.46
2.98
4.10
1.76
2.59
1.47
1.81
0.76
1.17
1.37
2.46
1.46
2.41
1.77
2.38
2.15

Source: Bureau of Agricultural Statistics, http://www.bas.gov.ph/ (accessed 12 April 2007).

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Corn Monthly Production, 2005


Year
2005

Month
January
February
March
April
May
June
July
August
September
October
November
December

Production
294,919
353,653
604,217
373,791
199,633
147,050
274,880
1,051,408
876,435
255,440
293,504
528,230

Percent
5.61
6.73
11.50
7.12
3.80
2.80
5.23
20.01
16.68
4.86
5.59
10.06

Source: ASEAN Food Security Information System, afsis.oae.go.th (accessed 12 April 2007).

Source: Bureau of Agricultural Statistics, http://www.bas.gov.ph/ (accessed 12 April 2007).

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Sugarcane Planted Area, Harvested Area, Production and Yield in the Philippines
Year
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

Harvested Area
Production
Yield
(thousands of hectares) (thousands of metric tonnes) (kilograms per hectare)
368.560
17,542.100
47,596
300.130
14,831.100
49,416
269.270
13,797.000
51,239
215.650
17,423.100
80,793
261.750
21,424.800
81,852
235.270
18,666.900
79,343
271.500
21,824.500
80,386
266.980
21,005.600
78,679
384.009
22,915.065
59,673
401.635
24,695.188
61,487
302.005
17,774.401
58,855
395.640
23,142.220
58,493
375.181
22,273.095
59,366
307.173
17,333.372
56,429
404.065
23,777.828
58,847
383.824
21,223.438
55,295
373.705
21,708.722
58,091
359.866
21,417.288
59,515
383.901
23,978.373
62,460
388.627
25,579.214
65,819
368.944
22,917.674
62,117

Source: ASEAN Food Security Information System, afsis.oae.go.th (accessed 12 April 2007).

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Sugarcane Productivity per Region, 2005


Region/Province

Production
(metric
tonnes)

Cordillera Administrative
Region
Region I (Ilocos Region)
Region II (Cagayan Valley)
Region III (Central Luzon)
Region IV-A (Calabarzon)
Region IV-B (Mimaropa)
Region V (BICOL Region)
Region VI (Western Visayas)
Region VII (Central Visayas)
Region VIII (Eastern Visayas)
Region IX (Zamboanga
Peninsula)
Region X (Northern Mind.)
Region XI (Davao Region)
Region XII (SocCSKSarGen)
Caraga Administrative Region
Autonomous Region of Muslim
Mindanao
Philippines

Harvest
Area
(hectares)

Productivity
(metric
tonnes per
hectare)

Estimated
Sucrose
Content
(kilograms
per metric
tonne)

9,315
18,534
222,029
1,202,298
1,765,611
284,065
13,072,226
2,079,900
499,595

149
439
6,295
18,656
29,019
6,560
187,152
37,867
9,531

62.52
42.22
35.27
64.45
60.84
43.30
69.85
54.93
52.42

97.50
91.00
97.50
83.90
97.00
95.00
87.75
82.50
98.50

609
2,875,321
358,907
495,563
21

145
52,531
9,837
9,635
4

4.20
54.74
36.49
51.43
5.25

99.83
103.50
97.00
101.00

33,681
22,917,675

1,124
368,944

29.97
62.12

97.00
93.00

Source: Bureau of Agricultural Statistics, http://www.bas.gov.ph/ (accessed 12 April 2007);


Philippine Sugar Millers Association, www.psma.com.ph (accessed 15 April 2007).

Sugarcane Food Balance, 2003, in Thousands of Metric Tonnes


Year
Domestic
Supply

2003
Domestic
Utilisation

Item
Total
Production
Imports
Exports
Change in stock
Total
Feed
Seed
Processing
Waste
Other uses
Food

2,138.00
2,237.00
188.00
152.00
-135.00
2,138.00
0.00
0.00
0.00
0.00
0.00
2,138.00

Source: ASEAN Food Security Information System, afsis.oae.go.th (accessed 12 April 2007)

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Cassava Planted Area, Harvested Area, Production and Yield in the Philippines

Year
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

Harvested Area
Production
Yield
(thousands of hectares) (thousands of metric tonnes) (kilograms per hectare)
204.567
1,686.716
8,245
211.383
1,724.142
8,156
209.686
1,784.264
8,509
217.083
1,865.918
8,595
213.108
1,846.861
8,666
213.653
1,853.385
8,675
210.908
1,714.880
8,605
204.175
1,783.733
8,736
211.263
1,843.055
8,724
212.877
1,890.509
8,881
225.751
1,905.903
8,443
228.343
1,910.775
8,368
230.522
1,958.004
8,494
215.263
1,733.821
8,054
223.622
1,890.315
8,453
210.208
1,765.712
8,400
208.183
1,652.036
7,935
207.620
1,625.740
7,830
209.210
1,622.240
7,754
205.755
1,640.520
7,973
204.784
1,677.563
8,192

Source: ASEAN Food Security Information System, afsis.oae.go.th (accessed 12 April 2007).

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Cassava Productivity per Region, 2005


Region/Province

Cordillera Administrative Region


Region I (Ilocos Region)
Region II (Cagayan Valley)
Region III (Central Luzon)
Region IV-A (Calabarzon)
Region IV-B (Mimaropa)
Region V (Bicol Region)
Region VI (Western Visayas)
Region VII (Central Visayas)
Region VIII (Eastern Visayas)
Region IX (Zamboanga Peninsula)
Region X (Northern Mindanao)
Region XI (Davao Region)
Region XII (SocCSKSarGen)
Caraga Administrative Region
Autonomous
Region
of
Muslim
Mindanao
Philippines

1,730
13,576
31,975
9,395
71,505
8,909
122,197
57,508
67,145
70,623
26,861
150,484
15,584
30,071
49,234
950,765

327
2,071
2,642
1,188
9,404
2,226
24,915
6,467
10,595
23,152
6,326
10,428
2,295
1,966
8,390
92,392

Productivity
(metric
tonnes per
hectare)
5.29
6.56
12.10
7.91
7.60
4.00
4.90
8.89
6.34
3.05
4.25
14.43
6.79
15.30
5.87
10.29

1,677,562

204,784

8.19

Production
(metric
tonnes)

Harvest
Area
(hectares)

Source: Bureau of Agricultural Statistics, http://www.bas.gov.ph/ (accessed 12 April 2007).

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EXHIBIT 10: EXPERIMENTAL YIELD OF SWEET SORGHUM

Variety
NTJ 2
SPV 422
ICSV 700
ICSV 93046
ICSR 93034

Stripped Stalked
Yield (metric tonnes per
hectare)
Main Crop
Ratoon
Crop
4550
4855
5660
5765
4348
4550
4752
4855
4652
4753

Grain Yield
(metric tonnes per
hectare)
Main Crop
Ratoon
Crop
3.62
4.40
3.28
3.92
3.46
4.11
3.40
4.08
3.46
4.25

Percentage
Sugar by
Brix
18.5
19.0
18.0
15.0
18.0

Source: Raola, RE Jr., Layaoen, HL, Costales C, Halos, AC and Baracol, LA (2007) Feasibility Study of

the Production of Anhydrous Ethanol from Sweet Sorghum, Bureau of Agricultural Research:
Quezon City, Philippines, p. 60.

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EXHIBIT 11: 2005 AVERAGE FARM PRICES (IN US$) BY REGION

Region
Cordillera Administrative Region
Region I (Ilocos Region)
Region II (Cagayan Valley)
Region III (Central Luzon)
Region IV-A (Calabarzon)
Region IV-B (Mimaropa)
Region V (Bicol Region)
Region VI (Western Visayas)
Region VII (Central Visayas)
Region VIII (Eastern Visayas)
Region IX (Zamboanga Peninsula)
Region X (Northern Mindanao)
Region XI (Davao Region)
Region XII (SocCSKSarGen)
Caraga Administrative Region
Autonomous Region of Muslim Mindanao

Corn
(per metric
tonne)
152.13
160.81
157.71
167.01
168.87
142.20
154.19
161.43
176.52
N/A
160.81
152.75
144.89
154.19
152.95
171.14

Sugarcane
(per metric
tonne
sucrose)
N/A
N/A
338.15
354.27
250.92
N/A
N/A
355.92
367.29
365.85
N/A
344.14
344.56
305.49
N/A
N/A

Cassava
(per
metric
tonne)
209.59
141.79
96.94
89.91
91.77
126.50
79.99
62.21
52.09
109.55
83.30
32.86
64.07
68.42
69.66
108.31

Source: Bureau of Agricultural Statistics, http://www.bas.gov.ph/ (accessed 12 April 2007).

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EXHIBIT 12: BIOFUEL INVESTMENT INCENTIVES

Incentives Granted by the Philippines Board of Investments


1. Income tax holiday or additional deductions from taxable income
2. Tax credit on raw materials, supplies and semi-manufactured products
3. Exemption from wharfage dues and export tax, duty, impost and fees
4. Minimal or no duty on machinery, equipment, spare parts and accessories imports
5. Employment of foreign nationals
6. Guaranteed repatriation of foreign investments and earnings thereon
7. Tax-free importation of consigned equipment for an unlimited period.
Additional Incentives for Biofuels Production
1. Zero specific tax on local or imported biofuels components
2. Exemption of biofuels feedstock from the value-added tax
3. Exemption of distillery slops from wastewater charges if reused as fertiliser
4. Financial assistance from government financing institutions.
Source: Raola, RE Jr., Layaoen, HL, Costales C, Halos, AC and Baracol, LA (2007) Feasibility
Study of the Production of Anhydrous Ethanol from Sweet Sorghum, Bureau of Agricultural
Research: Quezon City, Philippines, p. 10-12.

27