Rising oil prices to fuel auto-LPG market growth

BY MARIA KRISTINA C. CONTI/BUSINESSWORLD BETTING that the market will go for cheaper car fuels, the local auto-liquefied petroleum gas (LPG) industry expects to expand ten-fold in the next 10 years. World LPG Association President James Rockall told industry players at the First Philippine Auto-LPG Summit yesterday that the country’s potential demand can easily hit one million tons a year. “With a population of 80 million, the potential is very high. There is the price differential with other fuels. As the price of fuels goes up, auto-LPG becomes more attractive," he explained. Auto-LPG is a variety of LPG that can be used for properly-outfitted vehicles. Zenaida Y. Monsada, director for Oil Industry Management Bureau of the Energy department, said auto-LPG will always be at least 20%-30% cheaper than liquid fuels because it is not charged import or excise taxes by virtue of the value-added tax law. “First, LPG is used as cooking gas, and lower costs will help the general public, and the poor. And as a car fuel, it’s clean; so the government sacrifices revenues," she told BusinessWorld. Gasoline is charged P4.35 per liter in excise taxes. But Mario C. Marasigan, director for Energy Utilization Management Bureau of the Energy department, tagged the lack of infrastructure as a key obstacle to the industry’s development. “Our distribution network is small and we need more [investments] from the private sector," he said. In agreement, Mr. Rockall said global optimism is reflected in the global infrastructure. The Philippine LPG industry is currently dominated by six bulk suppliers. Two of those, Petron and Shell, are also refiners but they now meet only a little over 20% of domestic demand. But while cooking gas has a distribution network composed of 80 refillers, 90 marketers, and 1,000 dealers, the auto-LPG network now consists of just 94 public and 64 private or garage-based stations nationwide. “The auto-LPG industry in the country is slowly emerging and is industry-driven," said Ms. Monsada. “But there is growing interest especially for taxi fleets — also for tricycles — and some programs are even endorsed by local governments," she noted. Data from the Energy depart-ment showed that auto-LPG sales for the first half this year hit 35.33 million barrels, accounting for about 3.85% of total LPG sales in volume. LPG Industry Association President Pete V. Jayme opined that the fuel has met with luke-warm reception because Filipinos are still apprehensive about using auto-LPG. “They want to be sure it’s safe to use," he said, while highlighting that the gas produces less pollution and about 20% less greenhouse gas emissions. Mr. Rockall added that dirtier fuels are currently costing the Philippines a total of $2.5 billion annually. Switching to auto-LPG and cleaner fuels could save about 2% of the country’s gross domestic product, he said. To date, there are a little more than 4,000 auto-LPG vehicles nationwide. The costs of conversion depends on the size of the engine, and ranges from P24,500 to P37,000. However, Bureau of Product Standards (BPS) Director Jesus L. Motoomull warned the audience that the Trade department has licensed only seven auto-LPG converters: Naiadss Corp.; Macro Liquid Petroleum Gas Co., Inc.; Ferrotech Steel Corp.; Gasumu Marketing; Black Prince Communication, Inc.; Durasales, Inc.; and Lovely Home, Inc. But the department is now processing the applications of 10 other converters. Those that do not comply with the standards hurt the industry, by aggravating misconceptions about the safety and benefits of the fuel, he stressed. In a presentation to LPG dealers, Mr. Motoomull outlined the Trade department’s 463 standards for road vehicles. Two of those are specifically for vehicles using automotive LPG. The Energy department, meanwhile, has issued Department Circular No. 2007-02-2002 which strictly sets guidelines and standards to institute safety codes in the auto-LPG industry. Mr. Rockall said the Philippines already has the appropriate policies. “That’s an important criteria for growth," he said. Last year, total auto-LPG consumption worldwide reached 219 million tons, as the number of vehicles adapted to the fuel rose 8.5% to 12.4 million. “Since 2000, auto-LPG has grown from 6.6% to 8.8% of total world LPG consumption. This has meant a 34% increase in global auto-LPG consumption over the last six years," said Mr. Rockall. In closing, Mr. Marasigan said the Energy department has a technical working group already drafting a program and guidelines for several fuel-economy test runs to spur local adoption of this global trend.