Biofuels blend hike to drive up industry growth

D&L Industries Inc. expects its subsidiary, Chemrez Technologies Inc., to see significant growth in volumes and margins once the government-mandated increase in the coco-biodiesel blend takes effect next year.

Alvin D. Lao, president of D&L, asserted in a press briefing on Wednesday that the two percent or B2 coco methyl ester or CME blend on diesel increased to three percent or B3 will positively impact its unit.

"The increase would mean the demand would go up automatically by 50 percent from two to three percent (B2 to B3 blend). So the effect on volume and margin, we expect that it will be substantial," Lao told reporters.

"Everyone in the industry expected a planned increase to 5 percent to proceed as scheduled but the blend was frozen at 2 percent from 2009 until today. However, biodiesel manufacturers like us had already increased capacity in preparation for the B5 blend."

In addition, Lao noted that the industry is prepared for the expected increase in demand once the mandate is implemented.

"If you look at the biodiesel industry, we're actually ready to provide even up to a 5 percent blend. What that means is the capacity to supply is the 5 percent blend, but the actual demand is only 2 percent. So you have roughly 40 percent utilization," he said.

"(This) low utilization means margin is low and everyone is under-utilized, operating at very low capacity. We think that when that increase comes, it will likely be gradual."

In a text message, Oil Industry Management Bureau Director Rino Abad confirmed that a Department Circular governing the CME blend increase will be released in January 2024.

Additionally, he disclosed that the current 10 percent ethanol blend, also known as E10, in gasoline will be voluntarily increased to 20 percent or E20, which could significantly cut gasoline prices by around P1.28 to P1.50.

Under Republic Act 9367 or the "Biofuels Act of 2006," a one percent CME blend was added to local diesel; it was last increased to 2 percent in 2007. It also mandates that only locally sourced biofuel components should be used in the biodiesel blend.

The Biofuels Act intends to create a sustainable future by decreasing the importation of refined fuel, such as diesel and gasoline, while also boosting farmers' incomes.