Philippine Scenario:Meeting the Challenges in the

Petroleum Industry

Philippine Scenario:Meeting the Challenges in the

Petroleum Industry

Zenaida Y. MonsadaDirector, Oil Industry Management Bureau

Department of Energy, Philippines

Zenaida Y. MonsadaDirector, Oil Industry Management Bureau

Department of Energy, Philippines

7th Asian Petroleum Technology Symposium, Japan Petroleum Energy CenterFebruary 18 – 20, 2009, World Trade Hotel, Ho Chi Mhin City, Vietnam

7th Asian Petroleum Technology Symposium, Japan Petroleum Energy CenterFebruary 18 – 20, 2009, World Trade Hotel, Ho Chi Mhin City, Vietnam

Challenges

Philippine Situation

• Regulatory Framework

• Oil Industry Situation

• Alternative Fuels

• Conventional Fuels

Government Plans and Programs

OutlineOutline

EnergySecurity

Accessibility

Sufficiency

Global ChallengesGlobal Challenges

reducing import dependence

reducing CO2 and other emissions

improving economic activity

EnvironmentCleaner Air

Climate Change Mitigation

Economics Reasonable Price

Affordable Price

Generate Income

Energy/Power MixEnergy/Power Mix

ENERGY MIX

POWER MIXOthers0.01%

Geothermal22.29%

Total Coal14.90%

Total Oil35.58%

Natgas7.70%

Hydro5.41%

Biomass14.11%

Oil8.6%

Hydro14.4%

SW0.1% Natgas

31.5%Coal

28.2%

Geothermal17.1%

Petroleum Supply vs. DemandPetroleum Supply vs. Demand

Sectoral Sectoral DemandDemand

SectorSector %%

TransportTransport 6363ResidentialResidential 88CommercialCommercial 55AgriculturalAgricultural 33IndustrialIndustrial 1414PowerPower 77

050

100150200250300350400450500

1990199119921993199419951996199719981999200020012002200320042005200620072008

Refining Cap. Demand Production Imports Exports

Upstream Number of Participants – 33 operators

Service Contracts (SC) – 33Geophysical Surveyand Exploration Contracts(GSEC)’s – 1 existing beingprocessed for SC conversion

Domestic Oil Production

Historical Producing Field1979 Record Oil Peak – 23.5 MBCDOil – 2.4 MBCDCondensate – 14.0 MBCD Gas – 342.2 mmscf

Downstream

Philippine Oil IndustryPhilippine Oil Industry

Number of Participants – 610 Cos.

Refiners – 2 (284) MBSDImporters – 15Marketers – 585Bunkering – 18Storage – 4

RA 7638 – DOE LawRA 8479 – Oil Deregulation ActRA 8749 – Clean Air ActRA 9367 – Biofuels Act

RA 8184 – Excise TaxRA 9337 – RVAT

EO 691 – Automatic Tariff Adjustment

EO 449 – Lower Tariff for Bioethanol for Fuel

DOE Circ 2006-08-011 – Importations of Ethanol for Fuel

BIR Rev Reg 8-2006 – Ethanol for Fuel

Regulatory FrameworkRegulatory Framework

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

Roles of the DOERoles of the DOE

Industrial Consumer /End User Tank Truck

Tank TruckTankers/Barges

Retail Outlet

Refinery

Depot/Terminal

White Oil Pipeline Black Oil Pipeline

Product ImportsProduct Exports

Refinery/Import/Export Terminal

CrudeImports

PRYCEPRYCE NATIONNATIONPETRONASPETRONAS

LPG Retail

Downstream Oil SectorDownstream Oil Sector

PRYCEPRYCE

FLYING VFLYING VEASTERNEASTERN

NATIONNATIONPETRONASPETRONAS

PTTPTT SEAOILSEAOIL

Philippine Oil Industry PlayersPhilippine Oil Industry Players

Liberalized entry of new players/importation/exportationLiberalized entry of new players/importation/exportation2 refiners2 refiners

Produce 60% of local demandProduce 60% of local demand70% market share (total oil)70% market share (total oil)58% market share (LPG)58% market share (LPG)

10 importers10 importersImports 40% ilocal demand Imports 40% ilocal demand

3700 gasoline stations (800 3700 gasoline stations (800 –– new players)new players)90 Independent LPG refillers90 Independent LPG refillers178 auto178 auto--LPG stations (66 garageLPG stations (66 garage--based)based)

Price Decontrol Price Decontrol Oil companies set local pricesOil companies set local pricesDOE monitors international and local pricesDOE monitors international and local prices

Platts: Dubai, WTI, Brent; gasoline, diesel, kero/jet, fuel oilPlatts: Dubai, WTI, Brent; gasoline, diesel, kero/jet, fuel oil

Philippine Oil IndustryPhilippine Oil Industry

Gasolinebioethanol(compound)purity

energy

oil (esp. transport)

alternative fuels

renewable indigenous

biofuels

•Finite resource•Pollution•High price

DieselBiodiesel(mixture)feedstock dependent

Challenges for the Petroleum Sector

Challenges for the Petroleum Sector

Fuel Quality ImprovementFuel Quality ImprovementShift to Alternative FuelsShift to Alternative FuelsSupply AvailabilitySupply Availability•• Local productionLocal production•• ImportsImports

Compatible FacilitiesCompatible Facilities•• Storage, handling, distributionStorage, handling, distribution•• VehiclesVehicles

WP 29 WP 29 –– vehicle/parts standardsvehicle/parts standardsEuro 4 Euro 4 –– 20102010

PricePriceInvestment Requirement & ClimateInvestment Requirement & Climate•• AccreditationAccreditation•• MonitoringMonitoring

Laws and RegulationsLaws and Regulations

Challenges for the Petroleum Sector

Challenges for the Petroleum Sector

DISPENSING CONVERSION/REGISTRATION EMISSION

ChallengesAlternative Fuels: Auto-LPG

ChallengesAlternative Fuels: Auto-LPG

Private (Garage-based)

Public

Metro Manila 34South Luzon 2Visayas 19Mindanao 11

66

Metro Manila 76North Luzon 1Visayas 23Mindanao 12

112

ChallengesAlternative Fuels: Auto-LPG

ChallengesAlternative Fuels: Auto-LPG

San Antonio Power Plant3 MW (1994)CVC

Malampaya Gas Field2.7 TCF (2001)

1,000 MW Sta. Rita1,000 MW Sta. RitaFirst Gen/ IPPFirst Gen/ IPP

560 MW San Lorenzo 560 MW San Lorenzo First Gen/ IPPFirst Gen/ IPP

1,200 MW Ilijan Power Plant1,200 MW Ilijan Power PlantNPC IPP(KEPCO)NPC IPP(KEPCO)

CNG Bus (2008)

Shell Refinery

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.

ChallengesAlternative Fuels : Natural Gas

ChallengesAlternative Fuels : Natural Gas

sources users

biodiesel

bioethanol

CoconutCoconutJatrophaJatropha

Corn Corn

Feedstocks

Potential Gasoline Displacement• 200 million liters per year @ 5% volume sales

Potential Diesel Displacement• 120 million liters per year @ 2%

Sugarcane Sugarcane Sweet sorghumSweet sorghum CassavaCassava

ChallengesAlternative Fuels: Biofuels

ChallengesAlternative Fuels: Biofuels

$/bbl P/$

ChallengesInternational Oil Price

ChallengesInternational Oil Price

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

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

10

15

20

25

30

35

40

45

50

55

60

Crude Forex P/1$

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

Meeting the ChallengesFuel Quality/Alternative Fuels

Meeting the ChallengesFuel Quality/Alternative Fuels

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

Meeting the ChallengesSupply Availability

Meeting the ChallengesSupply Availability

Fiscal / BOI IncentivesFiscal / BOI Incentives•• RA 8479RA 8479•• IPP (EO 226) Investment CodeIPP (EO 226) Investment Code

Regulatory FrameworkRegulatory Framework•• RA 8479 (Oil Deregulation Law)RA 8479 (Oil Deregulation Law)•• RA 9367 (Biofuels Law) RA 9367 (Biofuels Law) •• LPG/Natgas BillsLPG/Natgas Bills

Implementation InstrumentsImplementation Instruments•• PEPPEP•• ASEAN/ASCOPEASEAN/ASCOPE•• PNOCPNOC--ECEC

Enforcement Mechanisms Enforcement Mechanisms •• EO 655 EO 655

Meeting the ChallengesIncentives

Meeting the ChallengesIncentives

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

Meeting the ChallengesIncentives

Meeting the ChallengesIncentives

POLICY : ENSURE STABLE SUPPLY OF ENERGYGOALS:

• 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 PRICESGOALS:

• 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.

In Sumary –Energy Policies & Goals

In Sumary –Energy Policies & Goals

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

In Sumary –Coordination Efforts

In Sumary –Coordination Efforts

Thank you!Thank you!