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Philippine refiners start sale of low-sulphur diesel
Philippine refiners Petron Corp PCOR.PS and Pilipinas Shell Petroleum Corp have started selling low-sulphur diesel in Manila in line with their commitment to comply with the country's Clean Air law by November 1.

The refiners and other small retailers have committed to bring down the sulphur content of automotive diesel oil to 0.05 percent from 0.20 percent by that date in Manila and in the whole country by January to reduce air pollution.

But officials of both Petron and Pilipinas Shell said they had not yet decided whether to pass on to consumers the additional costs of producing the low-sulphur diesel.

Petron, the country's largest refiner with a capacity of 180,000 barrels of oil per day (bpd), launched its low-sulphur diesel on Friday.

Its rival Pilipinas Shell, a unit of the Royal/Dutch Shell group SHEL.L RD.AS and which has a capacity of 130,000 bpd, started selling the low-sulphur diesel yesterday.

Caltex (Philippines) Inc, a unit of Chevron Texaco CVX.N , has said it plans to close its 72,000-bpd refinery later this month and convert it to a 2.7-million barrel depot for petroleum products.

The Philippines, an importer of both crude and oil products, consumes between 135,000-157,500 barrels per day (BPD) of diesel or about 45 percent of its estimated 300,000-350,000 bpd total oil product demand, Pilipinas Shell country chairman Edgar Chua told reporters.

Pilipinas Shell, which claims to have a market share of between 33 and 34 percent of local oil product demand, said it may either import or produce locally low-sulphur diesel.

Petron also has an estimated market share of 33 to 34 percent while Caltex has 20 percent. The rest is divided among local oil retailers and importers, Chua said.

"It is economics which will drive our decision whether to import or produce diesel locally," Pilipinas Shell spokesman Roberto Kanapi told Reuters.

Pilipinas Shell estimated an additional cost of 30 centavos to 50 centavos per litre in producing low-sulphur diesel.

Early this year, local oil firms increased gasoline prices by 60 centavos per litre after the government imposed a maximum aromatics content of 35 percent and lowered the benzene content to two percent by volume from four percent.

An official of Petron, who asked not to be identified, said his firm's refinery could only produce a portion of their low-sulphur diesel requirement. He declined to give details.

Petron has said it would begin the construction later this year of an isomerisation unit and gas oil hydrotreater at its refinery. Both projects are expected to cost $100 million.

The isomerisation unit would reduce the aromatics and benzene content of Petron's gasoline products while the hydrotreater unit would reduce its sulphur content, the Petron official said.

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