University of Southern Philippines Foundation

College of Engineering and Architecture

Salinas Drive, Lahug, Cebu City

The Present Status of the Non-renewable Energy in the Philippines

Submitted by:

CHAPTER 1 INTRODUCTION

This chapter is about the current situation analysis and pertaining

background information that includes a synopsis of the relevant information

from the case analysis.

CHAPTER 1.1 EXECUTIVE SUMMARY

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 Non-renewable energy in the Philippines is scarce. With oil and

petroleum products constantly experiencing a series of fluctuation of the

prices in the market, these energy resources are used and consumed faster

than nature produces them. It has been reported in BBC news way back

2014 that these non-renewable energy resources are expected to decrease

in number for the following years. From the year 2014, oil is predicted to run

out in 40 years, gas in 50 years and coal in 250 years and that makes it 36

years for oil, 46 years for gas and 246 years for coal respectively. No one

can predict the future nor can one assure that it will happen now or in a few

years, but for sure, non-renewable energy will eventually run out.

There are four types of non-renewable energy and three of them are

fossil fuels, they take billions of years to form and they are usually made

from carbon origin from the remains by plants, algae, and plankton or

sediments accumulated and buried underneath creating pressure and heat.

Oil and Petroleum products are found between rocks, which can be pumped

through pipes easily. Once oil is taken out of the ground, it is gone forever.

The Earth can replenish oil in geological time spans. Meanwhile, natural gas

is used for heating and electricity for buildings. A variety of other products

need natural gas for production, like fertilizers and plastic. Coal is a solid

form of the three fossil fuels and it must be mined to remove from the Earth.

And lastly, Uranium is a common metal that is used in nuclear energy and it

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is the only non-renewable energy that is not a fossil fuel. The current

situation of non-renewable energy in the Philippines will be further discussed

in the proceeding chapter of this case study.

When fossil fuels burn, they release carbon monoxide, nitrogen oxides,

hydrocarbons, and sulfur oxides into the Earth’s atmosphere and that

severely damages the ozone layer. Air pollution is a serious health concern

leading to heart attacks, worsens existing respiratory and heart conditions,

asthma and pulmonary inflammation. Infant, children and elderly are

particularly at risk. It also leads to the increase rate of acid rain, nutrient

pollution affecting air, water and land. Nuclear energy is expensive and its

waste disposal is a problem that has resulted in catastrophes in the past

making its use unsustainable.

In the recent years, consumer attitudes towards the use of non-

renewable energy have been undergoing a significant shift. Legislation

passed by the Congress of the Philippines to support the use of renewable

energy include the Electric Power Reform Act of 2001, the Biofuels Act of

2006, the Renewable Act of 2008, and the Climate Change Act of 2009,

which provides a legal basis for addressing climate change through

sustainable development.

Renewable energy implementation is important to the Philippines for

several reasons. The geographic characteristics of the country make it

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vulnerable to the adverse effects of climate change. Rising sea levels are a

threat becausethe Philippines is an archipelago with many cities located

along the coastal areas. As the coastline recedes due to rising seas, coastal

cities become vulnerable to flooding. Although the use of fossil fuels is still

undeniably a great obstacle to shift from non-renewable energy to

renewable energy, we should utilize our natural resources and start relying

on hydropower sites and geothermal sites.

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CHAPTER 1.2 INTRODUCTION

Philippines is significantly an archipelagic country and in line with its

beauty and magnificence of its natural resources, it has been branded as one

of the fastest growing economy in Southeast Asia. The country is

experiencing a great surge of investment in developing and building more

infrastructures for the support of benefit to comfort Filipino citizens. To par

up with its growth and its success as a country, Philippines has been trying

to shift and encourages Filipinos a higher rate of use of renewable energy.

This phenomenal growth has been powered by fossil fuel, making the

country among developing nations that registered what experts dubbed as

“high-carbon” growth, or an expansion that has fueled increasing

greenhouse gas emissions (GHGs), the main cause of global warming.

Filipino citizens are fond of using coal, butane, and other non-

renewable energy resources as a part of their daily lives. They are usually

used for cooking homemade meals, barbeque, and the like or these fossil

fuels are distributed in the market as a source of income.

Philippines imports most coal, oil and gas as if it is dependent on

foreign suppliers for its needs, especially jeepneys, its number one means of

transportation solely needs diesel as a fuel. Although the government has

been doing its best, Michael Guarin, an alternative energy consultant by

Amsterdam based KPMG Global Energy Institute said that shifting to

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renewable energy is expensive and yet is does not offer as much bang for

the buck as fossil fuel does. In short, shifting to renewable resources is

really an expensive treat for the country. Power plants that use renewable

energy cost more to build than those that burn coal, oil, or natural gas. And

as a result, the cost of electricity in the Philippines is the 6 th highest in the

world.

Burning fossil fuels emit gases that harm the environment and weaken

the ozone layer. The continual use of fossil fuels at the current rate is

believed to increase global warming and cause more severe climate change.

How can we actually protect the current and the future generation when

earth is already becoming damaged? What should we do to prevent earth

from further damage? Is it really not too late to correct ourselves and

become resilient enough to change for a better future?

This research aims to raise awareness for the Filipino citizens that the

non-renewable energy resources are limited. We should conserve and

protect our resources and not depend on it. We should think of other

alternatives or other ideas that we can use to sustain our daily needs.

Through this research, Filipino citizens should be aware of the consequences

and that natural gas, petroleum products and fossil fuels are limited and that

shifting to renewable energy is a good start for change.

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CHAPTER 2 THEORETICAL BACKGROUND

The chapter is focused on why non-renewable energy resources are

commonly used as a form of energy consumption in the Philippines and

theories and impacts of using non-renewable resources.

CHAPTER 2.1 FOSSIL FUELS FOR ELECTRICITY IN THE PHILIPPINES

Non-renewable energy most especially, fossil fuels are used because it

is cheap and the technology that we use to harness them is well developed.

They are also used to power not only the country but the whole world for

many decades.

According to Department of Energy (DOE), the country’s total installed

capacity remained dominated by coal at 35% or 7,568 MW, followed by

renewable energy at 32, oil-based at 17%, and natural gas at 16%. Newly

operational plants from January-June 2017 are mainly coal and solar power

plants which added 150 megawatts and 78 megawatts to the total installed

capacity. “We cannot do away with fossil fuels, at least not in our lifetime.

The demand for energy is still increasing. That’s why we still need to

accommodate coal,” (Dancel, R., 2015)

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CHAPTER 2.2 GLOBAL IMPACTS OF USING NON RENEWABLE ENERGY

RESOURCES

It is widely understood that the burning of fossil fuels has harmful

consequences to the environment and contributes to global warming and

climate change. There are also risks associated with nuclear material, since

its radioactive nature makes it toxic, and it must be handled properly.

Climate change has been brought to the forefront of international talks in

recent years, and the countries involved have made pledges to significantly

reduce carbon dioxide emissions and pollution.

Besides the environmental impact of burning fossil fuels, the economic

impact of non-renewable resources can also be damaging. Following the

basic premise of supply and demand, as non-renewable resources become

scarcer, the cost to obtain them will continue to rise. Supply for many of

these fuels is in danger of running out completely. Eventually, the price will

hit a point that end users cannot afford, forcing a move toward alternative

energy sources. However, many of these alternative sources require ample

time to be put into place, which means their development should begin as

early as possible in order to enable a smooth transition to sustainable

energy.

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CHAPTER 3 METHODOLOGY

This study is a descriptive type of research which deals in collecting

and analyzing the data gathered. This research will not be completed without

the use of the internet and other research materials.

The study is conducted at the University of Southern Philippines-

Foundation Lahug Campus Library situated in Sanjercasville Street, Cebu

City. The school is managed in accordance with the policies and standards

set by the Department of Education (DepEd) and the Commission on Higher

Education (CHED).

The researchers were involved in many phases of referring to several

books, news and articles about how non-renewable energy is commonly

used in the Philippines and how it greatly affects the environment. Most

researches were done inside the university’s library. After that, they

discovered and came across with several articles regarding the topic and a

file report made by the Department of Energy (DOE) and Electric Power

Industry Management Bureau (EPIMB) named DOE- EPIMB January – June

2017 Power Situation Highlights, the report was all about the Electric Sales

and Consumption of the country for the first six months of the year 2017.

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CHAPTER 4 PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

This chapter contains the presentation and analysis of data gathered by the

researchers for the demand and supply and its consumption related to non-

renewable energy in the Philippines.

CRUDE OIL IMPORTS

June 2017 actual crudes and petroleum products inventory closed at

24,854 thousand barrels (MB) and 56-day supply equivalent; 37 days for

crude oil and products in country stocks and 19 days in-transit. This was

higher by 24.6 percent from June 2016 level of 19,953 MB. 1H 2017 average

inventory was recorded at 47 days, 38 days in country stock and 9 days in-

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transit. The government continued to enforce the Minimum Inventory

Requirement (MIR) given the continuing risks faced by the downstream oil

industry sector such as geopolitical instability and supply delivery problems

to areas affected by calamities (e.g. typhoon, flood, earthquake, etc.).

Current MIR for refiners is in-country stocks equivalent to 30 days

while an equivalent of 15 days stock is required for the bulk marketers and 7

days for the LPG players. As such, the status of oil supply and facilities in

Surigao and Batangas which was hit by more than 5.0-magnitude

earthquake was monitored and reported to ensure continuous supply.

Crude Oil Supply

The country imported various types of crude oil in the first half of 2017

which reached 35,759 MB, a decrease of 5.7 percent from 37,940 MB of last

year’s level. Around eighty six percent of the total crude mix (30,909 MB)

was sourced from the Middle East, of which 34.9 percent (12,463MB) came

from Saudi Arabia, the top supplier of crude oil into the country. Next is

Kuwait with a 28.4 percent share of the total crude mix, followed by UAE

with a 15.6 percent share. On the other hand, 9.8 percent (3,504 MB) of

crude oil was imported from Russia and Japan, while 2.8 percent (1,000 MB)

was from Australia. The remaining 1.0 percent was sourced from the ASEAN

(286 MB) and from local production (60 MB) (Fig. 1).

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Petroleum Product / Ethanol Imports

First half 2017 petroleum product imports totaled 48,592 MB, an

increase of 9.6 percent from 1H 2016’s 44,352 MB.

The top imported product for the period was diesel oil which grew by

3.9 percent from last year’s level. LPG import also rose by 24.7 percent.

Likewise, kerosene/avturbo and gasoline increased by 21.3 and 7.1 percent,

respectively. However, fuel oil import went down by 9.5 percent compared

with 1H 2016 import.

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 The other industry players accounted for majority of the product

imports with 72.5 percent of the total imports volume, up by 11.7 percent to

35,230 MB from 1H 2016’s 31,544 MB. The oil majors (Petron, Chevron and

Pilipinas Shell) accounted for the remaining 27.5 percent which increased by

4.3 percent from last year’s 12,808 MB to 13,361 MB.

The local refiners (Petron and Pilipinas Shell) accounted for 18.0

percent of the total product imports, which included blending stocks, as

against 82.0 percent share by direct importers. Product import mix

comprised mostly of diesel oil at 40.4 percent, gasoline at 17.9 percent, LPG

at 13.9 percent, kerosene/avturbo at 10.2 percent, fuel oil at 6.8 percent

and other products at 10.8 percent share in the total product mix.

Total gasoline import reached 45.8 percent of gasoline demand while

diesel oil import was 58.9 percent of diesel demand. LPG import on the

other hand, was 76.2 percent of LPG demand. Total product import was

59.9 percent of the total products demand. The oil majors’ import share in

the total demand was 16.5 percent while the other players’ import share was

at 43.5 percent. As for the refiners, their import share in the total demand

was 10.8 percent, while 49.1 percent was attributed to direct importers.

Meanwhile, a total of 788 MB ethanol was imported for fuel use during

the first half of the year which grew by 7.5 percent from 733 MB of 1H

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2016. Republic Act No. 9367 of 2006 mandated that all gasoline to be sold

in the country should be E-10 (gasoline with 10% bioethanol content).

Moreover, butane in canisters (90.1 MT) was also imported during the first

half of 2017.

Crude Run and Refinery Production

Total crude processed as of 1H 2017 was down by 7.6 percent from

39,580 MB of 1H 2016 to 36,578 MB. Refinery utilization during the period

also decreased from last year’s 76.3 percent to 70.5 percent this quarter.

The drop may be due to the extended maintenance shutdown and turn

around schedule of the local refineries, sometime during the first half of the

year.

Consequently, local petroleum refinery production output also went

down by 7.1 percent from 39,036 MB to 36,246 MB. 1H 2017 average

refining output was at 200.3 MB per day. Diesel oil output went down by 9.9

percent while kerosene/avturbo output drop by 8.9 percent. Similarly,

gasoline and LPG output decreased by 4.4 and 0.7 percent, respectively; fuel

oil also declined by 26.3 percent. On the other hand, petrochemical products

outputs increased during the same period.Diesel oil continued to dominate

the production mix with a share of 36.8 percent, followed by gasoline and

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kerosene/avturbo with 24.9 and 10.3 percent shares, respectively.

Meanwhile, LPG and fuel oil got 7.0 and 6.1 shares, respectively (Fig. 2)

MARKET SHARE OF TOTAL PETROLEUM PRODUCTS

Petroleum Product Demand

Total demand of petroleum products for the first half of 2017 totaled 81,061

MB, an increase of 2.6 percent from 78,989 MB of first half 2016. This can

be translated to an average daily requirement of 447.9 MB compared with

last year’s level of 434 MB. Compared with YTD June of 2016 figures,

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Kerosene/avturbo demand posted an increase of 18.6 percent. LPG and

gasoline demand were also up by 14.2 and 5.3 percent, respectively.

However, fuel oil and diesel demand decreased by 31.3 and 0.9 percent,

respectively.

Product demand mix comprised mostly of diesel oil at 41.2 percent,

gasoline at 23.4 percent, kerosene/avturbo at 11.3 percent, LPG at 11.0

percent, fuel oil at 6.5 percent and other products at 6.8 percent share in

the total product mix.

Petroleum Product Exports

Total country’s petroleum products export as of 1H 2017 grew by 79.9

percent from 3,291 MB of 1H 2016 to 5,920 MB.Vis-à-vis last year,

condensate was the top exported products for the period, with a growth of

78.5 percent. Naphtha also rose by more than 200 percent. Likewise, other

petrochem products such as propylene, mixed xylene, toluene and benzene

export increased which may be due to higher international demand. On the

other hand, gasoline export went down by 26.9 percent.

The total export mix comprised of condensate (24.7 percent); naphtha

(15.5 percent); propylene (15.1 percent); pygas (14.1 percent); gasoline

(10.1 percent); mixed C4 (7.9 percent); mixed xylene (7.5 percent); toluene

(2.9 percent); benzene (1.8 percent) and LPG (0.38 percent).

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 The oil refiners’ exports accounted for 53.3 percent of the total export

mix while the remaining 46.7 percent was accounted to export of other

players.

Crude Oil Exports

A total of 704 MB crude oil from Galoc (Palawan Light) was exported

during the first half of 2017 which decreased by 37.0 percent from first half

of 2016’s 1,117 MB.

Total Petroleum Products

The major oil companies (Petron Corp., Chevron Phils. and Pilipinas

Shell Petroleum Corp.) got 56.0 percent market share of the total demand

while the other industry players which include PTT Philippine Corp. (PTTPC),

Total Phils., Seaoil Phil. Inc., TWA Inc. , Phoenix, Liquigaz, Petronas,

Prycegas, Micro Dragon, Unioil, Isla Gas, Jetti, Eastern Petroleum, JS Union,

JS Phils. Corp., Petrotrade, South Pacific, Marubeni, SL Harbour, Perdido and

Filoil Logistics Corp., as well as the end users who imported directly most of

their requirement captured 44.0 percent of the market (Fig. 3). Meanwhile,

the local refiners (Petron Corp. and Pilipinas Shell) captured 49.3 percent of

the total market demand while 50.7 percent was credited to direct

importers/end-users.

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LPG MARKET SHARE

LPG

The other players’ market share, with the inclusion of South Pacific last

year, increased to 68.3 percent. The remaining 31.7 percent was credited to

the oil refiners.Among the other LPG players, Liquigaz got the biggest

market share with a 23.6 percent share, followed by Pryce Gases with a

share of 12.8 percent. Next were South Pacific, Inc. (SPI) and Isla Gas with

equal share of 12.1 percent, respectively (Fig. 4).

OIL IMPORT BILL

1H 2017 estimated total oil import bill amounting to $4,689.6 million

was up by 37.1 percent from 1H 2016’s $3,421.1 million. This was

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attributed to the combined effects of higher import cost and higher volume

of imports.

Total oil import cost was made up of 60.1 percent finished products

and 39.9 percent crude oil. Total import of crude oil amounted to $1,871.3

million, grew by 30.3 percent from $1,435.6 million of 1H 2016 due to

higher CIF price per barrel from 1H 2016’s $37.838/bbl to $52.330/bbl.

Meanwhile, total product import cost was up by 41.9 percent to

$2,818.4 million at an average CIF cost of $58.001/bbl vis-à-vis 1H 2016’s

$1,985.5 million at an average CIF cost of $44.768/bbl. The increase was

attributed to higher import cost this year and increased in the volume of

product imports. Average dollar rate for 1H 2017 is $49.93 compared to 1H

2016’s average rate of $46.90.

On the other hand, the country’s petroleum exports earnings for the

period rose by 31.6 percent from $317.2 million of 1H 2016 to $417.4

million this year. This was due to increased FOB per barrel vis-à-vis 2016

figures from $38.460/bbl to $55.753/bbl.

Overall, the country’s 1H 2017 net oil import bill amounting to

$4,272.2 million was up by 37.6 percent from 1H 2016’s $3,103.9 million.

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 The Philippines for the past years has been the fastest growing

economy in Asia. And this phenomenal growth has been powered by fossil

fuel, making the country among developing nations that registered what

experts dubbed as “high-carbon” growth, or an expansion that has fuelled

increasing greenhouse gas emissions (GHGs), the main cause of global

warming.

The Philippines’ 7.2% economic growth in 2013 was the fastest in

Southeast Asia and second only to China’s 7.7% for the entire Asia. It was

even higher than the previous year’s 6.8%, which made the Philippines the

sixth fastest growing in the world, according to the 2012 World Wealth

Report. If this growth is sustained, then the Philippines, according to HSBC,

will be the world’s 16th largest economy by 2050.

But alongside this phenomenal growth, the Philippines has also gained

the reputation of being the only other country in the Association of

Southeast Asian Nations (ASEAN) — the other being Brunei — that is going

the fossils way, instead of taking advantage of its vast renewable energy

(RE) sources to power progress.

Fossils power 72% of the Philippines’ electricity requirement, with the

remaining 28% sourced from RE.The International Energy Agency (IEA) said

43% of carbon dioxide emissions from fuel combustion in 2010 were

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produced from coal, whereas oil and gas emitted 36% and 20% of CO2,

respectively.

Like other developing countries, the Philippines plays a very minor role

in total global carbon emissions yet suffers an inordinately higher cost. The

country emits just 0.9 metric tons of carbon per capita, compared to the

United States’ 17.6 metric tons.

The case for utilizing non-renewable energy sources is favored by

some and disfavoured by environmentalists who plead for the need of

renewable energy sources such as solar power and wind power. Lifestyle and

mindset seem to play a role as well. According to the Reuben H. Fleet

Science Centre, the economic implications of future energy policy are also a

factor. Those who are for continued development of non-renewable energy

sources may have high stakes as far as profits. Those against it face the

challenge of changing the mindset that non-renewable energy sources are,

indeed, bad for the environment and continue to contribute to global

warming.

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