Philippines in US$1.3 billion biofuel project with UK's NRG

The Philippines signed a US$1.3 billion (€966 million) deal with UK-based NRG Chemical Engineering today to build biofuel refineries and plantations, in one of the biggest foreign investments into the Southeast Asian country. The news comes at a time when another British biofuel company, D1 Oils, is expanding its plantation base in the Mindanao region.

State-owned Philippine National Oil Co. (PNOC) said its biofuels unit would form a joint venture with NRG, whose billion dollar investment, spread over five years, is a big boost for Manila's ambitions to become a major source of alternative fuels.

Chris de Lavigne, corporate adviser of NRG Chemical, said the company decided to invest in the Philippines because of its location, climate and the government's pro-active efforts in promoting biofuels. Peter Abaya, president of PNOC-Alternative Fuels (PNOC-AFC), told reporters he had been in negotiations with the company, which also has offices in Singapore, for 9 months.

The two groups have made the following plans:

• to build a large 3.5 million metric tonne biorefinery, at a cost of around US$450 million, within three years. The refinery will initially use coconut and vegetable oil as feedstock until the planned jatropha plantation can start commercial production.
  
• to create a jatropha plantation larger than 1 million hectares (2.471 million acres) to grow the biodiesel feedstock. The plantation will cost US$600 million (€446 million).
  
• to build two 300,000 metric tonne bioethanol plants, at a cost of $200 million each; feedstock will be sweet sorghum.
  

The 3.5 million ton biorefinery would become one of South East Asia's largest plants. Jatropha, known locally as 'tuba tuba' yields anywhere between 1 and 2 tons of inedible oil seeds per hectare. At average processing efficiencies, from each ton around 200 liters of biodiesel can be extracted. A 1 million hectare plantation would thus represent a 'biofuel reserve' of between 1.25 and 2.5 million barrels of oil equivalent energy per annum (between 3440 - 6900 boe/day; the island state's daily oil consumption stands at 342,000 bpd, so the jatropha plantation could cover between 1 and 2% of this demand). The productive life of jatropha shrubs is between 30 and 50 years.

Interestingly, the ethanol plants will rely on sweet sorghum for their feedstock. It is not clear whether the joint venture will be planting or sourcing the new high yield and drought tolerant hybrids that contain higher levels of sugar in their stalks, as they were developed by the ICRISAT (earlier post). This is likely, since the Philippine government has expressed interest in these new varieties.

The joint venture between PNOC and NRG would be 70 percent owned by the latter:
bioenergy :: biofuels :: energy :: sustainability :: ethanol :: sorghum ::biodiesel :: jatropha :: biomass :: Philippines ::

President Gloria Macapagal Arroyo is determined to reduce the Philippines' dependence on imported crude oil in favour of alternative fuels produced from locally grown crops, such as sugar cane, coconut and jatropha.

A new law requiring a mandatory 1 percent coconut blend in diesel was introduced earlier this month and by 2009 gasoline will contain a 5 percent mix of ethanol to reduce the Philippines' US$6 billion plus oil import bill.

The government has courted foreign investment to boost biofuel local production and earlier this year signed agreements for five possible ethanol projects with China.

But NRG's investment is the biggest yet into the biofuels sector and a boost for the country's low levels of foreign direct investment, which have failed to match buoyant portfolio inflows from overseas amid high power costs and concerns over corruption. Manila is hoping its English-speaking workforce and abundant natural resources will attract more FDI.

D1 Oils expands
The news of the joint venture comes at a time when British AIM-listed D1 Oils expands its jatropha plantations in the Philippines. The company is going around Mindanao to entice farmers to cultivate tuba tuba with the hope to plant 10,000 hectares in the near term.

Recto Doctor, country agronomist of D1 Oils Asia Pacific Inc., a subsidiary of D1 Oils UK, said the company would provide planting materials, technical assistance and a marketing agreement to farmers willing to grow the crop.

"Farmers can pay us upon harvest," he said. Doctor said the firm is aggressive in its jatropha project now that the country is implementing the Biofuels Act, which was signed into law only last January 17.

He noted that the firm prefers unutilized lands than converting existing farmlands grown with crops like corn and rice to jatropha plantations. Jatropha, Doctor pointed out, would help alleviate poverty in the countryside and can help in the protection of the environment since it can prevent soil erosion.

The crop could be harvested seven months from planting and has a life span of 30 years, he said, adding that for the first year, a hectare could yield between P15,000 to P20,000 and grows bigger to P30,000 as the plant matures. D1 Oils Asia is working out a financing window for farmers through the Land Bank of the Philippines, he disclosed, details of which Doctor did not discussed.

The firm has plans to establish a refinery in the country but only after the desired number of hectares will be planted with jatropha, Doctor said. With 500 to 1,000 hectares, it would be enough to put up an extracting plant, he added.

More information:
Sun Star (Manila): British firm lures Minda farmers to grow jatropha - May 21, 2007
Sun Star (Manila): RP, NRG Chemical of Britain sign US$1.3 billion biodiesel project - May 22, 2007.