Gov’t stockpiling fuel

MANILA, Philippines—The government will start stockpiling fuel to build up a strategic oil reserve for use in times of “extraordinary need,” President Aquino said Friday.

The continuing turmoil in the Middle East and North Africa has exposed the country’s vulnerability to the volatile world oil market and possible disruptions in supply, Aquino said in a speech Friday at the 35th anniversary of the Philippine National Oil Co.-Exploration Corp. (PNOC-EC).

“We are a country where a large portion of our oil requirements are imported, making us vulnerable to forces we have no control over. As we have seen, if something happens in Libya, Bahrain or Egypt, we pay the price—in the form of higher fuel costs. Consumers end up spending more for fuel and have less money for other necessities,” he said.

The President said the government is taking steps to protect the people, citing as an example the P450-million fuel subsidy for bus, jeepney and tricycle drivers.

But more than this, Aquino said there was a need to boost the country’s energy and fuel security, and he said that here the PNOC-EC, the oil and coal arm of state-run Philippine National Oil Co. (PNOC), was a key player.

He said the PNOC-EC has been given a new mandate to build up a strategic diesel reserve not just to ensure the country’s energy security but also to help provide competitively priced fuel for the local market.

Aquino himself disclosed that the company’s first shipment of 50 million liters of diesel was due to arrive by May.

The 50 million liters of diesel are to be stored in two tank farms, to be leased by PNOC-EC.

One of these tank farms would probably be in Subic, Zambales province, and the other in Sariaya, Quezon province, said Joseph Omar A. Castillo, PNOC-EC vice president for the business operations division.

Castillo said the PNOC-EC’s first shipment may cost around P2.1 billion, or around P43 a liter, according to current global diesel prices of $138 a barrel and based on the Mean of Platts Singapore benchmark for refined petroleum products.

But since the company expects to get a discount from bulk buying, it can sell the diesel at much lower prices, he said.

The PNOC-EC tentatively plans to price its diesel products lower by about P2 to P3 a liter than current local pump prices.

Jumpstarting stockpile

Castillo stressed that the fuel products would be priced in a way that would cover costs to enable PNOC-EC to continue operating the strategic oil reserve.

He said that PNOC-EC was in talks with several independent oil players to buy fuel from it.

Castillo clarified that PNOC-EC was not out to compete with existing oil players but rather, is only jumpstarting the establishment of a strategic oil stockpile, aimed at shielding the country from price volatility in the world oil market.

He said PNOC-EC is also looking to put up its own tank farm with a 50-million liter capacity in Mabini, Batangas province, where it currently operates its Energy Supply Base, a private commercial port that offers berthing, cargo handling, storage and warehousing facilities.

The Department of Energy (DoE) has long been planning to put up a strategic oil reserve to ensure both price and oil supply security amid spiraling global prices and fears of supply disruptions. In 2009, the DoE said it was looking at Subic and Batangas as possible areas for the establishment of a regional petroleum stockpile.

Long-term solution

The President said the long-term solution to the volatile oil market was the energy department’s Philippine Energy Efficiency Project, but which he acknowledged would take years to implement.

The multi-year plan is aimed at weaning public utility vehicles from the use of gasoline and diesel, and encouraging them to shift to alternative fuels like natural gas, electricity and hybrid engines.

“I would like to see the day when nearly all public utility vehicles—jeepneys, buses and tricycles—run on alternative fuel, freeing the public transport sector and commuters from the threat of unreasonably high oil prices and unhealthy levels of air pollution,” he said.

Earlier this week, Aquino led the launch of 20 electricity-powered tricycles in Mandaluyong City, which he said were the first in a batch of 20,000 that the government will be turning over to tricycle drivers in Metro Manila and around the country.

Diversified fuel sources

Aquino said that in the past 20 years, the country has diversified its sources of electricity “to prevent possible supply disruptions from impacting our power supply.”

“We now produce a significant amount of geothermal power, and with the Malampaya field, we are increasingly using natural gas for our power plants. PNOC-EC, which owns 10 percent of Malampaya, is a big part of this,” he said.

The President expressed hopes that the PNOC-EC’s eight petroleum service contracts would eventually yield commercial quantities of natural gas or oil “that can allow us to reduce our dependence on imported fuel.”

“But it is not just electricity. Through the PNOC-EC’s downstream LNG distribution project, Malampaya natural gas can soon fuel public buses plying our streets,” he said.

P3-billion remittance

He paid tribute to the PNOC-EC for its efforts in improving the country’s energy and fuel security.

“And I am happy to note that your role is underpinned by a strong financial position, as shown by the P3 billion you are remitting to the national government today. This money will fund much-needed projects that we are undertaking for our people,” he said.