Chemrez cheers coming hike in biodiesel blend

Chemrez Technologies Inc., a wholly owned subsidiary of D&L Industries and the country’s pioneer in green chemistry, is bullish after the publication of the Department of Energy's (DOE) draft circular which lays down the guidelines on the increase in biofuel blend implementation.

In a disclosure to the Philippine Stock Exchange (PSE), D&L said that with this draft circular, the increase in the country's biodiesel or Coco Methyl Ester (CME) blend is finally likely to happen this year after more than a decade of delayed implementation. 

Dean Lao Jr..png
Chemrez President and CEO Dean A. Lao Jr.

Chemrez said it sees this development as a big win to benefit the planet, consumers, and the industry.

The said circular mandates an increase in biodiesel blend from two percent (B2) to three percent (B3) effective July 01, 2024, four percent (B4) effective July 01, 2025, and five percent (B5) effective July 01, 2026.

“This directive from the DOE is a huge step towards progress and the development of the biodiesel and coconut industry in general,” said Chemrez President and CEO Dean A. Lao Jr. 

He added that, “This should pave the way for a greater energy self-sufficiency while collectively reducing our CO2 footprint on the planet.”

Chemrez is the country’s largest biodiesel manufacturer and is the country’s earliest advocate of harnessing the power of coconut oil to make higher value added and sustainable chemicals (collectively called oleochemicals). 

chemrez biodiesel plant.jpg

The company has been manufacturing oleochemicals since the 1980s. In 2006, Chemrez constructed the first purpose-built and continuous-process CME plant in Asia.

A higher biodiesel blend means displacing imported petrochemical fuel with locally produced, environmentally-friendly, and sustainable fuel. 

With an annual diesel consumption of the Philippines at around 15 billion liters, an eventual hike to B5 from B2 means a three percent reduction in diesel volume which translates to about 450 million liters of diesel displaced by biodiesel annually.

With cars being one of the biggest contributors to global warming, the greater use of a more environmentally friendly biodiesel will result in a significant reduction in the Philippines’ greenhouse gas (GHG) emissions. 

It is estimated that the implementation of B5 will result in about 1.1 million metric tons reduction in Carbon dioxide equivalent (CO2e) annually, which is a massive reduction equivalent to 13 times the annual GHG emissions of D&L as a whole. The biodiesel industry has effectively created a giant carbon sink for the Philippines.

In addition, tests done by the DOE showed that a hike to B5 from B2 will result in a mileage improvement of around 10 percent which will further add up to the previously mentioned CO2e reduction. 

This comes along with fresher air as CME improves the fuel quality which in turn allows it to burn completely and emit less black smoke. 

“And the best part of it all, is that all these significant benefits to the environment come without an equivalent drastic change in people’s lifestyle and habits. All it takes is just the coming together of industry stakeholders in choosing a more sustainable path,” said Chemrez.

The price effect of the higher CME blend will depend on the prevailing prices prior to the effectiveness of B3. 

If the price of CME is lower than diesel, the higher blend will make the pump price lower. Conversely, if the price of CME is higher than diesel, the higher blend will make the pump price higher. 

However, in either event, the attainable mileage improvement will far offset the cost of fuel on a net basis. The savings can be very significant for the motorist.

For over a decade already, the biodiesel industry has been operating in an oversupply situation with industry utilization just around 40 percent. This has resulted in a highly competitive landscape and depressed margins for the industry players. 

With the proposed increase in blend, the industry expects a better utilization and overall profitability which is expected to trickle down to the various segments of the local economy. 

For the country, the greater use of indigenous fuel means less imported diesel and lower foreign currency requirements.

“This progress would not have been possible without the hard work, dedication, and cooperative efforts of the various government bodies, industry players, and other stakeholders. Acknowledgement should be given to DOE Secretary Raphael Lotilla, DOE Undersecretary Alessandro Sales, and DOE-Oil Industry Management Bureau Director Rino Abad, for bringing this together and laying the groundwork for the biodiesel industry’s next level of development,” Lao said.