PNOC unit to import cheap diesel

The government will fulfill its promise of providing cheaper diesel to motorists by importing diesel that complies with the 22-year-old Euro 2 standard as well as requiring oil firms to provide the same, according to Energy Secretary Alfonso Cusi.

Cusi, who also sits as chair of PNOC Exploration Corp., said the state firm would import low-priced fuel as a means of helping address volatile oil prices and rising inflation.

Also, the Department of Energy has “issued a memorandum order requiring oil companies to provide Euro-2 compliant automotive diesel oil to help reduce fuel prices.”

Through an order issued by the Department of Environment and Natural Resources in 2015 and pursuant to the provisions of the Clean Air Act of 1999, local oil firms have been required to sell fuels that adhere to at least the Euro 4 standard starting Jan. 1, 2016.

According to the DENR, which issued Department Administrative Order No. 2015-05, Euro 2 diesel and gasoline contain 10 times more sulphur (at 500 parts per million or 500 milligrams per liter) compared to Euro 5 diesel and gasoline (50 ppm or 50 mg per liter).

Compliance with the Euro 2 standard—defining the maximum allowable emissions of certain pollutants by new vehicles, specifically passenger cars and light commercial vehicles —first became mandatory in Europe in 1996.

The Euro 6 standard—which prescribes a maximum sulphur content of 10 ppm—has been in effect in Europe since 2014 In Asia, Singapore has adopted Euro 6 for new vehicles starting September 2017.

In 2015, then Environment Secretary Ramon Paje said the DOE was “enjoined to ensure the availability of Euro 4 fuels to comply with the new [Euro 4] emissions standards.”

According industry sources, the refineries of Petron and Pilipinas Shell have been upgraded to comply with the requirement. Also, oil firms that don’t have refineries here in the Philippines have been importing and selling Euro 4 fuels.

Also, sources said the price difference for Euro 4 diesel and Euro 2 diesel was “marginal” and “insignificant.”

Last month, PNOC EC had called for tenders on an initial shipment of 50,000 metric tons of Euro 4 diesel, and for an option for four more such shipments. For still unclear reasons, the bidding did not prosper.

When asked whether the DOE’s latest move was not in conflict with DENR-initiated policy, Energy Undersecretary Felix William Fuentebella said: “It will not go against [any] directive from the other departments or agencies, because this effort is an interdepartmental/inter-agency approach to address inflation and other concerns (environment, quality of fuel).”

“The EMB (Environmental Management Bureau] of DENR and the DENR were present in the inter-agency meeting yesterday (Thursday),” Fuentebella told the Inquirer.

In a statement, Cusi said the importation of Euro 2 diesel was expected “to have a ripple effect on taming the prices of basic commodities, thus controlling inflation.”

He said the acquisition of low-priced fuel will mainly come from state deals. Energy officials earlier said they were looking at supplies from “non-Opec (Organization of Petroleum Exporting Countries) suppliers like Russia.”

Cusi said the PNOC-EC board was drafting the trading procedure and policy safeguards for the public on the proposed importation.

“The products bought at a special price will be made available to dealers, operators and independent petroleum players under a memorandum of agreement,” he said.

Further, the DOE said its memo requiring oil firms to provide Euro 2-complaint diesel was “(p)ursuant to existing Philippine National Standards on Diesel Fuel Quality and in accordance with the provisions of Republic Act 8479 (Downstream Oil Deregulation Law), RA 8749 (Clean Air Act) and for the purpose of reducing the impact of rising petroleum prices in the world market.”

“(A)ll industry players are hereby directed to provide at the retail level Euro-II compliant automotive diesel oil as a fuel option for the transport and industrial customers,” the DOE quoted the memo as stating.