Philippines: Gov’t Urged to Nationalize Oil to Solve Crisis

by Aubrey SC Makilan
Experts urged the government to scrap the oil deregulation law and nationalize the oil industry to solve the oil crisis in the country, instead of merely paying “lip service” to the development and propagation of alternative energy sources and resorting to “political solutions.”

Experts urged the government to scrap the oil deregulation law and nationalize the oil industry to solve the oil crisis in the country, instead of merely paying “lip service” to the development and propagation of alternatives energy sources and resorting to “political solutions.”

Nationalize oil industry

Carmelito Tatlonghari, a climate change expert and former Energy Program Manager of the United States Agency for International Development (USAID), and Giovanni Tapang, PhD, chairperson of the Samahan ng Nagtataguyod ng Agham at Teknolohiya Para sa Sambayanan (Agham or Advocates of Science and Technology for the People) both said that nationalizing the oil industry will solve the oil crisis in the country.

Tatlonghari believes that prices could be lower if oil is traded between governments and not through private companies. “Service contracts for supplying oil usually involve private companies. And these companies profit from it,” he said.

Meanwhile, Tapang said that the oil crisis requires a comprehensive solution. “A local oil industry encompassing regular as well as alternative sources should be developed. The country should also be manufacturing machines suited for locally-produced oil and other energy sources. Agricultural production should also be geared for supplying local industry with the needed raw materials including biofuels,” he said

“Since we do not have these, the immediate answer is to scrap the oil deregulation law, which makes us vulnerable to oil price spikes, and to nationalize the oil industry,” Tapang said.

Recently, Bolivian president Evo Morales ordered the nationalization of natural gas fields and oil refineries within Bolivia. Morales also threatened to evict foreign companies unless they cede control over production within six months.

Paying lip service

“Every time there are oil price spikes, the government hypes on the need to shift to alternative fuels. But where are the sources?” asked Tatlonghari.

“It’s just an empty hole, leaving hope,” he said. “But what’s the reality?”

Recently the government announced another possible source of biofuel. Philippine National Oil Corporation (PNOC) president Paul Aquino said three kilos of jehtropa seeds, locally known as tuba-tuba, can produce one liter of oil, one of the main ingredients in the production of bio-diesel.

Tatlonghari said that since this is still at an exploratory stage, tuba-tuba is not yet being produced at a quantity sufficient for commercial biofuel production. And this cannot be done immediately, Tatlonghari said, since tuba-tuba can only be harvested and utilized after two years.

Although Tatlonghari said that the technology exists, he questioned the capacity of processing plants to produce these biofuels.

Tapang said that the government is merely paying lip service when it announced that it is working towards making biofuel alternatives commercially available.

Tapang admitted that the there is a good possibility that biofuels can be developed and used in the country. The problem, he said, is in the lack of government support for the development of sources.

He said that unless the agrarian system is restructured, “biofuel plantations would remain under the ownership of big landlords who could control the development, production and distribution of biofuel.”

A related problem, Tapang said, is that agricultural production and processing methods in the country are still backward. “Coconut oil is expensive, costing P30-40 ($0.58- $0.77 at $1: P 51.61) per liter, because methods for harvesting and processing coconut are very slow, not mechanized and are labor-intensive. The coconut industry is still in a backward state because landlords who own and control the production and processing of coconuts are not interested in developing it,” he lamented.

He added that the current coconut industry is geared towards exporting copra and not for processing its byproducts for local use. Because of this, he said, the production of coco diesel is not enough to supply the needs of the transport sector.

The Department of Energy (DOE) said in a press release that in 2004 the country‘s demand for diesel reached 5.4 billion liters a year. Given the increased mileage made possible by coco diesel, the country would need 4.86 billion liters of coco diesel per year.

The DOE said that the country produces at least 50 million liters of coco biodiesel a year. More than half of these are produced by two private manufacturers authorized by the DOE. Senbel Fine Chemicals, Inc. generates 25 million liters of coco diesel while RI Chemicals Corp. produces the other 10 million liters. The public sector is supposedly producing the remaining 15 million liters.

On May 5, the DOE accredited Chemrez Inc., which has an existing capacity of 15 million liters per annum. Chemrez can produce 60 million liters of coco bio-diesel a year to contribute to the government’s target of achieving 60 percent energy self-sufficiency by 2010.

Tapang also noted that a complete shift to biofuel use would entail modification and conversion of engines. The problem, he said, is that engines are imported and are not designed for these kinds of fuels. But if the natural gas that the Malampaya Deep Water Natural Gas Project produces would be used, less modification will have to be made on current engines, he said.

Based on data from the National Statistics Office, households use LPG and kerosene the most compared to the two other conventional fuels namely, gas and diesel.

Tapang said “LPG could be sourced directly and at a cheaper price from Malampaya.” At present, Shell and Chevron Texaco equally own 45 percent of Malampaya while Korea Electric Power Corp (KEPCO) expressed its interest to buy the remaining 10 percent.

“Unless the government gives these biofuels an edge, it could hardly compete with the Big 3 (Shell, Caltex, and Petron),” he added.

“In order to propagate its use, the government should really exert efforts in the production and distribution of biofuels,” Tapang said. “Otherwise, these would all remain as lip service.”

Political solutions

In the midst of the oil crisis, DOE secretary Raphael Lotilla suggested the possible reduction of tariff duties on oil products while Malacañang proposed exempting petroleum products from the 12 percent expanded value added tax (EVAT).

Tatlonghari said, “Both proposals show that the government is again resorting to political solutions. These could make some people happy but has nothing to do with the strict standards regarding supply, extraction and refinery of oil products.”

On the other hand, Tapang said these are just “knee-jerk approaches that could not be sustained.”

Agham records reveal that prices of diesel increased seven times while gasoline six times from January to the first week of April this year. “This is equivalent to the average oil price increases in 2004,” Tapang said.

He added that oil prices increased 52 times in eight years under deregulation, as compared to 23 times in 24 years of “allegedly regulated local oil industry.”

Another mitigating measure the government implemented was the energy conservation program or Administrative Order No. 126. This measure aimed to limit the use of petroleum product supplies to essential activities to reduce their fuel consumption by 10 percent of the average monthly consumption, and to reduce the electricity consumption as well.

“This can help but it has a finite limit,” said Tatlonghari. “It can go only this far.” Bulatlat