top of page

Philippine oil firms seek ethanol mandate suspension

Philippine oil companies are pushing the government to suspend its 10pc ethanol blending mandate in transport fuel (E10) as they fight the Covid-19 pandemic.

The Independent Philippine Petroleum Companies Association wants more ethanol to be diverted to the production of rubbing alcohol to help combat the spread of the coronavirus, especially with crude prices at low levels and fuel demand cut by lockdown measures.

It is currently more economical to use 100pc gasoline instead of blending 10pc ethanol into gasoline for transport fuel, and storage tanks in the country are filled to the brim with backed-up ethanol supplies as a result of lower fuel use. 

The situation has been exacerbated by Shell's move to temporarily shut operations at its 110,000 b/d Tabangao refinery from mid-May.

Domestic ethanol producers owned by Philippine integrated sugar company Roxas have donated 54,314 litres of ethyl alcohol to government units, hospitals and schools. The country's department of energy has expressed hope that other manufacturers will follow suit in allocating a proportion of their output to 70pc ethyl alcohol production to boost disinfectant supplies. Roxas also has two subsidiaries — ethanol producer Roxol Bioenergy and bioethanol producer San Carlos Bioenergy.

But it will not be easy to switch production from fuel-grade ethanol to ethyl alcohol or to suspend the country's ethanol blending mandate, traders said.


The 10pc ethanol blending mandate is enshrined in law under the Biofuels Act, which also states that ethanol should primarily be used for fuel blending. The department of energy has shown a willingness to suspend the mandate, but it cannot make that decision unilaterally.

"There needs to be co-ordination among and within ministries, which I will put at a 5pc probability," said one trader.

Producers also pointed out that it would be a technical challenge to convert fuel-grade ethanol into hand sanitizers as they would need to remove the carcinogenic acetaldehydes in fuel-grade ethanol for it to be safe. It is unclear how many suppliers are able to do that, they said.

Domestic ethanol output totalled 296mn l/yr last year, fulfilling around half of the country's E10 requirement. The Philippines turned to US ethanol imports for the rest, taking 207,000t (263,000m³) last year.

Refineries have to meet local monthly allocations (LMAs) from domestic producers before importing, which totalled 90,950m³ in the second quarter. 

But domestic product is much more expensive than US imports. The domestic reference price was set at 61.76 pesos/l ($1,218/m³) in the first half of April compared with average import prices of $367/m³ cfr during the same period.

Refineries are currently still required to comply with the LMAs. Even if the mandate is suspended, it will be just a temporary measure until demand and oil prices recover, according to domestic oil companies. But it could take between six and 12 months for ethanol to return to being competitive, depending on how long the outbreak and its after-effects last. 

Market participants are waiting for the government to make a decision. It may be a boon for US exporters if blending mandates remain in place and domestic ethanol producers are allowed to focus on hand sanitizer production. But a suspension of the mandate may put the brakes on import liquidity, which has already been hit by low crude prices and a fall in fuel demand.

By Amandeep Parmar

bottom of page