cng master plan for transport in metro manila

8/12/2019 CNG Master Plan for Transport In Metro Manila

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Final Report

Compressed Natural Gas (CNG) MasterPlan for Transport in Metro Manila

December 2003

Prepared For:

Department of Energy

The Republic of The Philippines

Funded By:

Asian Development Bank

44 South Broadway, White Plains, New York 10601, USA

Tel: +1 914 609 0300 Fax: +1 914 609 0399


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Disclaimer

Compressed Natural Gas (CNG) Master Plan for Transport in Metro Manila

This report was prepared by Nexant Inc. (Nexant), for the use of Department of Energy, TheRepublic of the Philippines and Asian Development Bank (CLIENT) in support of their own

consideration of whether and how to proceed with the subject of this report. Except wherespecifically stated otherwise in the report, the information contained herein was prepared on thebasis of information that is publicly available or was provided by the Department of Energy orother Philippine CNG stakeholders and has not been independently verified or otherwiseexamined to determine its accuracy, completeness or financial feasibility.

Neither Nexant, CLIENT nor any person acting on behalf of either assumes any liabilities withrespect to the use of or for damages resulting from the use of any information contained in thisreport. Nexant does not represent or warrant that any assumed conditions will come to pass.This report speaks only as of the date herein and Nexant has no responsibility to update thisreport.

This report is integral and must be read in its entirety.

This notice must accompany every copy of this report.


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Contents

Section Page

List of Abbreviations ........................................................................................................... vii

1 Executive Summary .................................................................................................... 1

1.1 OBJECTIVE OF THE STUDY........................................................................ 1

1.2 CURRENT STATUS IN METRO MANILA................................................... 1

1.3 INTERNATIONAL NGV EXPERIENCES..................................................... 1

1.4 CNG TECHNOLOGY...................................................................................... 2

1.5 CNG ECONOMICS.......................................................................................... 2

1.6 ACTION PLAN................................................................................................ 3

1.6.1 Policies.................................................................................................. 3

1.6.2 Infrastructure Development .................................................................. 3

1.6.3 Financing............................................................................................... 4

1.6.4 Information, Education and Communication........................................ 4

1.6.5 Capacity Building ................................................................................. 4

2 Introduction................................................................................................................. 5

2.1 OBJECTIVES OF THE STUDY...................................................................... 5

2.2 SCOPE OF THE STUDY................................................................................. 5

2.3 METHODOLOGY ........................................................................................... 63 Current Status in Metro Manila................................................................................ 7

3.1 NATURAL GAS DEVELOPMENT................................................................ 7

3.1.1 Supply and Demand.............................................................................. 7

3.1.2 Natural Gas Policies.............................................................................. 11

3.2 TRANSPORTATION SYSTEM IN METRO MANILA................................. 11

3.2.1 Buses ..................................................................................................... 14

3.2.2 Jeepneys ................................................................................................ 15

3.2.3 Megataxis.............................................................................................. 16

3.2.4 Taxicabs ................................................................................................ 16

3.2.5 Tricycles................................................................................................ 16

3.3 FUEL CONSUMPTION AND PRICING........................................................ 16

3.4 PILOT PROGRAM .......................................................................................... 18

4 International Experiences Relevant to Metro Manila ............................................. 21


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4.1 ARGENTINA ................................................................................................... 21

4.1.1 Overview............................................................................................... 21

4.1.2 Lessons Learned.................................................................................... 21

4.1.3 Experiences Relevant to Metro Manila................................................. 22

4.2 ITALY............................................................................................................... 22

4.2.1 Overview............................................................................................... 22

4.2.2 Lessons Learned.................................................................................... 22


4.3 BRAZIL ............................................................................................................ 23

4.3.1 Overview............................................................................................... 23

4.3.2 Lessons Learned.................................................................................... 244.3.3 Experiences Relevant to Metro Manila................................................. 25

4.4 UNITED STATES............................................................................................ 25

4.4.1 Overview............................................................................................... 25

4.4.2 Lessons Learned.................................................................................... 25


4.5 CANADA ......................................................................................................... 26

4.5.1 Overview............................................................................................... 26

4.5.2 Lessons Learned.................................................................................... 27


4.6 UNITED KINGDOM ....................................................................................... 27

4.6.1 Overview............................................................................................... 27

4.6.2 Lessons Learned.................................................................................... 28


4.7 NEW ZEALAND.............................................................................................. 29

4.7.1 Overview............................................................................................... 29

4.7.2 Lessons Learned.................................................................................... 29


4.8 INDIA ............................................................................................................... 30

4.8.1 Overview............................................................................................... 30



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4.9 THAILAND...................................................................................................... 31

4.9.1 Overview............................................................................................... 31


4.10 GENERAL REMARKS.................................................................................... 31

5 Technology Assessment .............................................................................................. 33

5.1 SUPPLY-SIDE ISSUES ................................................................................... 33

5.1.1 Competitive Advantages of CNG over other Alternative Fuels inMetro Manila ........................................................................................ 33

5.1.2 Natural Gas Quality .............................................................................. 34

5.1.3 CNG Refueling Technologies............................................................... 35

5.2 DEMAND-SIDE ISSUES ................................................................................ 36

5.2.1 Vehicle Conversions to NGV ............................................................... 36

5.2.2 On-Board Fuel Tanks............................................................................ 38

6 Environmental Impacts .............................................................................................. 39

6.1 EXISTING AIR QUALITY IN METRO MANILA ........................................ 39

6.1.1 Motor vehicle emissions ....................................................................... 39

6.1.2 Air Quality ............................................................................................ 40

6.1.3 Environmental Policies and Regulations .............................................. 41

6.2 ENVIRONMENTAL IMPACTS OF NGVPPT............................................... 42

6.3 HEALTH AND OTHER SOCIO-ECONOMIC COSTS ................................. 44

6.3.1 The British/Canadian/U.S. Electric Tbus Analysis............................... 44

6.3.2 Economic Evaluation Methodology ..................................................... 45

7 Economics of CNG Use for Transport ...................................................................... 47

7.1 ECONOMIC MODELS.................................................................................... 47

7.2 NGV PENETRATION SCENARIO DEFINITIONS ...................................... 50

7.3 NGVS IN METRO MANILA 2004 - 2014 ...................................................... 52

7.4 PAYBACK PERIODS FOR INCREMENTAL INVESTMENT OF NGVS... 56

7.5 CNG REFUELING STATIONS IN METRO MANILA 2004 2014 ............ 57

7.6 ECONOMICS OF CNG REFUELING STATIONS........................................ 59

7.7 NATIONAL IMPACTS.................................................................................... 60

8 Recommended Action Plan ........................................................................................ 63

8.1 POLICY RECOMMENDATIONS .................................................................. 63


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8.1.1 Infrastructure Development .................................................................. 63

8.1.2 Policy .................................................................................................... 64

8.1.3 Financing............................................................................................... 67

8.1.4 Information, Education and Communications ...................................... 67

8.1.5 Capacity Building ................................................................................. 67

8.2 RECOMMENDED ADDITIONAL STUDIES................................................ 68

8.3 ACTION PLAN................................................................................................ 70

8.3.1 Characteristics of Action Plan Period ................................................... 70

8.3.2 Action Plan for Policy........................................................................... 70

8.3.3 Action Plan for Infrastructure Development......................................... 71

8.3.4 Action Plan for Financing..................................................................... 728.3.5 Action Plan for Information, Education and Communications ............ 73

8.3.6 Action Plan for Capacity Building........................................................ 73

Appendix

A. List of Philippine National Standards for Natural Gas Utilization in Transport

B. International Natural Gas Standards

C. Economic Valuation Methods for Environmental and Health Benefits

D. Presentation Materials by Y. Larry Song and Marisol P. Bacong at the CNG

Workshop Held on October 29, 2003

E. Presentation Materials by Weena T. Chai-Anun at the CNG Workshop Held on

October 29, 2003

F. Presentation Materials by S. Sundar at the CNG Workshop Held on October 29, 2003

G. Assumptions, Data, and Results Tables


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Figure Page

3.1 Natural Gas Reserves in the Philippines....................................................................... 7

3.2 Proposed Natural Gas Pipeline Infrastructure............................................................... 10

3.3 Map of Metro Manila.................................................................................................... 12

3.4 Number of Registered Vehicles By Type and Fuel Used in Metro Manila.................. 13

3.5 Petroleum Product Consumption in the Philippines ..................................................... 17

3.6 Domestic Wholesale Posted Prices/Pump Prices (Php/liter) vs. International DubaiCrude FOB Prices (US$/barrel) .................................................................................... 17

6.1 Annual Mean Total Suspended Particulate (TSP) Concentrations in Metro Manila,1987 - 2001 ................................................................................................................... 40

6.2 Pollutant Emissions Reduction and CO2 Savings Due to Use of CNG Vehicles ........ 44

7.1 NGV Refueling Station Infrastructure Model............................................................... 48

7.2 Vehicle Economic Model ............................................................................................. 49

7.3 National Impact of NGVPPT........................................................................................ 49

7.4 CNG Bus Additions ...................................................................................................... 53

7.5 CNG Taxi Addition....................................................................................................... 53

7.6 CNG Jeepney Addition ................................................................................................. 54

7.7 Total Number of CNG Vehicles ................................................................................... 55

7.8 CNG Vehicle Addition ................................................................................................. 56

7.9 Payback Periods for the Incremental Investment of NGVs .......................................... 57

7.10 Total Number of CNG Refueling Stations.................................................................... 57

7.11 Diesel Displacement by CNG....................................................................................... 58

7.12 Annual CNG Refueling Station Investment ................................................................. 59

7.13 CNG and Diesel Retail Pricing ..................................................................................... 60

7.14 National Economics without Monetizing Environmental Benefits .............................. 60

7.15 National Economics including Full Monetized Environmental Benefits ..................... 617.16 National Economics including 20 Percent Monetized Environmental Benefits........... 62

8.1 Comparison of Fuel Pricing Structure of CNG to Gasoline and Diesel ...................... 65


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Table Page

3.1 Estimate of Natural Gas Reserves (Billion Cubic Feet, BCF ....................................... 7

3.2 Natural Gas Demand and Supply, in BCF.................................................................... 83.3 Population of Public Vehicles in Metro Manila ........................................................... 13

3.4 Major Bus Operators in Manila .................................................................................... 15

3.5 Equipment with rates of duty reduced to 1%................................................................ 20

5.1 Chemical Composition and Physical Properties of Malampaya-1 Separator Gas ........ 34

6.1 Motor Vehicle Emissions in Metro Manila .................................................................. 39

6.2 Emission Standards for In-Use Diesel Vehicles ........................................................... 41

6.3 Emission Benefits of Replacing Diesel with CNG Vehicles ........................................ 43

6.4 Emission Factors, grams per kilometer traveled........................................................... 43

6.5 Comparison of Estimated Environmental and Health Costs for Air Emissions fromPublic Transit ................................................................................................................ 45

7.1 Key Assumptions for Fleet Vehicles ............................................................................ 51

7.2 Key Assumptions for Refueling Stations...................................................................... 52


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List of Abbreviations

ADB Asian Development Bank

BatMan1 Batangas-Manila 1BatMan2 Bataan-Manila 2BCF billion cubic feetBOI Board of InvestmentCME coco methyl esterCNG compressed natural gasCO carbon monoxideDENR Department of Environment and Natural ResourcesDOE Department of EnergyDOF Department of FinanceDOST Department of Science and Technology

DOTC Department of Transportation and CommunicationDTI Department of Trade and IndustryFGH First Gas HoldingsIEC Information, education and communicationIPP Investment Priority PlanIRR Internal Rate o Returnkm kilometerLGU Local Government UnitLNG Liquefied natural gasLPG Liquefied petroleum gasLTFRB Land Transportation Franchise, Regulatory Board

LTO Land Transportation OfficeMC/TC motorcycle/tricycleMJ/m3 Mega Joules per cubic meterMMDA Metro Manila Development AuthorityMON Motor Octane NumberMPa Million PascalsMW megawattNCR National Capital RegionNGV Natural Gas VehicleNGVPPT Natural Gas Vehicle Program for Public TransportNOx Nitrogen oxides

O&M Operation and maintenanceOEM Original equipment manufacturerOGP On-shore gas pressurePEP Philippine Energy PlanPhp Philippine PesosPM10 particulate matter, 10 micronPNOC-EC Philippine National Oil Company- Exploration CorporationPNS Philippine National Standard


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PSPC Pilipinas Shell Petroleum CorporationPUV Public Utility VehicleSOx Sulfur oxidesSPEX Shell Philippines Exploration

TA Technical AssistanceTAGP Trans-ASEAN Gas PipelineTCF trillion cubic feetTIDCORP Trade Investment and Development CorporationTOG total organic gasesTSP total suspended particulatesULSD ultra low sulfur dieselUV utility vehicle


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Section 1 Executive Summary

1.1 OBJECTIVE OF THE STUDY

The objectives of this study are to develop a master plan to specifically address the use ofcompressed natural gas (CNG) in the transport sector over the next 10 years and to provideinputs for the Natural Gas Vehicle Program for Public Transport (NGVPPT).

1.2 CURRENT STATUS IN METRO MANILA

The energy sector has declared its preferential treatment for the use of indigenous energy sourcesand cleaner fuels to achieve the goals of greater self-sufficiency in energy supply and use ofclean fuels and efficient infrastructures. The discovery of indigenous natural gas triggered theenergy sector to plan to use natural gas for both power generation and non-power applications.NGVPPT was launched in October 2002 to promote the use of CNG for transport in the countryparticularly in Metro Manila.

Metro Manila is composed of 12 cities and 5 municipalities. To serve its populace, the regionemploys rail, road and water transport systems. There are a total of 1.38 million motor vehiclesregistered in Metro Manila; 66.3 percent of these vehicles are gas-fed while 33.7 are diesel-fed.Motor vehicles are classified by type as buses, utility vehicles (includes jeepneys and megataxis),cars, tricycles and trucks. Motor vehicles are considered as one of the main contributor of airquality problem in Metro Manila.

The Department of Energy (Executive Order No. 66) was designated as the lead agency indeveloping the natural gas industry. An executive forum composed of different governmentagencies was formed to promote the use of natural gas vehicles (NGVs). Attractive CNG price

relative to diesel price, fiscal incentives (e.g., income tax holidays and lower duty rates) andmore flexible financing schemes are offered to the bus operators and refueling station operators.

1.3 INTERNATIONAL NGV EXPERIENCES

A review of selected experiences with CNG in other countries was conducted to identify keyelements of success or failure with the objective of drawing relevance to Metro Manila. CNGprograms in Argentina, Brazil, India, Italy, Thailand, and U.S. were evaluated due to theirreported success, while the experiences of New Zealand and Canada were studied as failingexamples, and the U.K. example was analyzed to understand the lack of progress of CNGapplication despite advancement in the natural gas field in general.

The following issues are attributed to the success of these programs: CNG price advantage over gasoline as set by fuel tax policy

Absence of heavy government financial subsidies

One single inter-ministry government agency to oversee the CNG industry

Strong incentive program and ongoing public education and quality training

A well integrated plan for the development of vehicles and refueling stations


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A rigorous safety program to enhance public acceptance

Issues associated with unsuccessful CNG programs are:

Changes in government subsidy due to political changes

Unavailability of a wide network of service mechanics

Poor quality of conversion

Rapid increase in conversion without balance with supply side infrastructure

Emission regulations focused on total hydrocarbons only not in favor of natural gas

1.4 CNG TECHNOLOGY

Malampaya natural gas has good quality and is excellent for NGV application. Compared toLPG, CME, LNG and low sulfur diesel, the indigenous natural gas is the best alternative fuelfrom the perspectives of technology, economics, trade balance, energy security, environment and

health.

There are three modes of NGV implementation: kit conversion, re-powering and OEM dedicatedNGV purchase. It is a general consensus in the NGV industry that there is no reputable andreliable after-market diesel engine conversion kit commercially available today. The conversionof heavy duty diesel engines to NGVs is difficult, if not infeasible. The conversion requiresmajor engineering re-work and modification to the diesel engine and, consequently, after-marketconversion often leads to high maintenance, low efficiency and higher emissions, defeating theobjective of converting diesel engines to NGVs. For the NGV program in Metro Manila, it isrecommended to start with new OEM NGVs during the NGVPPT pilot program and use a mix ofOEM NGVs and re-powering option during the full implementation of the NGVPPT.

1.5 CNG ECONOMICS

Simple models are developed, using both local and international data, to provide scenariodevelopment for NGV penetration and financial assessment for NGV refueling stationinfrastructure, vehicle economics and national impact of the NGVPPT.

The model predicts that, in 2014, the total number of NGVs, including buses, taxis, andjeepneys, in Metro Manila will reach about 95,750 supported by about 260 CNG refuelingstations. The investment requirement for the refueling stations is substantial, however, the IRRis estimated to be below 5 percent, which is rather unattractive for an investment of this size.The payback periods for the incremental costs of both dedicated NGVs and re-powered diesel

vehicles are estimated. For dedicated NGVs, the payback periods for the incremental investmentrange from 2.8 to 5 years, 1.4 to 2.6 years, and 1.1 to 2 years for buses, jeepneys and taxies,respectively. For re-powered NGVs, the payback periods for the incremental investment rangefrom 0.6 to 1 years, 0.3 to 0.5 years, and 0.2 to 0.4 years for buses, jeepneys and taxies,respectively.

In the national impact analysis, positive net annual benefits can be realized even with only 20percent of the estimated environmental and health benefits included in the national economics.


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The net positive national benefits imply that the NGV program is beneficial to the country andthat the Government or the Energy Sector should encourage or support the NGV program. Thenational policy should be directed at providing enablement for the CNG industry expansion inlight of environmental and health benefits.

1.6 ACTION PLAN

An action plan is recommended as a result of this study. The plan is defined based on the statusof the CNG industry and the technology employed during the NGVPPT pilot program (until2007) and its full implementation (2007 to 2014). The plan consists of recommended activities,additional studies and their respective timeline to ensure smooth implementation andsustainability of NGVPPT. The solutions adopted to address pollution from mobile sources inMetro Manila integrate policies, infrastructure development, financing, capacity building andinformation, education and communication.

1.6.1 Policies

The legal framework needs to specify fuel, environmental, safety and product standards and theirassociated systems of incentives and sanctions to promote NGVPPT. Pricing structure of fuels(i.e., natural gas, diesel fuel, gasoline and other alternative fuels) has to be reviewed and updatedto incorporate environmental and health benefits/costs associated with each fuel type. This isnecessary to ensure economic advantage of using CNG over diesel fuel. Policies have to bedeveloped and implementable by 2007. Both the national and local government should providetax incentives and special privileges.

Constant review and update of these policies during the full implementation is necessary.Information and experiences built-up each year should be assessed and used to advance the NGV

industry.

1.6.2 Infrastructure Development

Infrastructure development should be timely to ensure balanced growth of the vehicles and therefueling stations. The supply of indigenous natural gas in Metro Manila is critical in the fullimplementation of NGVPPT in 2008. With the shortfall of indigenous gas in 2008, DOE shouldensure there should be an adequate allocation for the transport

Benchmarking should start as soon as the infrastructures are in place. NGV and refuelingstations operations should be monitored to collect information needed for benchmarking. Duringthe pilot phase, the establishment of the refueling station(s) should be accelerated or should be

slightly ahead of the NGV procurement to encourage the bus operators to engage in the CNGbusiness.

A pilot study (learning by doing) of CNG-fed jeepneys and taxicabs during the NGVPPT pilotphase should be conducted to identify technology and operational barriers. Demonstration oftheir successful implementation is needed to attract investments and vehicle operators. Testingand inspection centers of the Bureau of Product Standards and Land Transportation Office haveto be upgraded to serve CNG-fed vehicles by 2008.


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The realization of the importation of LNG and establishment of Bataan to Manila (BatMan2pipeline) in 2008 may make the use of LNG for long distance buses/trucks and L/CNG refuelingfeasible. The viability of tricycles for CNG application also needs to be studied.

1.6.3 Financing

Financing institutions should work with the government and the private sector in providing moreinnovative financing schemes to overcome the high investment costs of NGVs and refuelingstations. The government should also encourage public-private sector partnership, channeling offoreign investments, and bundling of institutions to secure investment conditions.

1.6.4 Information, Education and Communication

Widespread awareness of the significance of NGVs in reducing air pollution problems in MetroManila is needed to successfully implement activities of NGVTPP. General public awareness isa continuous process, thus, different types of awareness programs reflecting the publics

involvement have to be developed.

The lessons learned from the pilot phase have to be communicated to all stakeholders. The pilotphase will help the policymakers to be aware of the need to develop appropriate legislations andincentives and allocate human resources and budget. The government agencies and MMDAshould be able to address and create approaches to manage air quality problems effectively. Theprivate sector need to be aware of the incentives and financing schemes available to encouragethem to investment on NGVs.

1.6.5 Capacity Building

Capacity building involves building institutional mandates and arrangements. It also involves

educating policy/decision makers, regulatory bodies, NGV and refueling operators, and thesupport groups that will enable the effective operation of NGVs and refueling stations.

DOE should set uniform policies and coordinate the implementation of regulations.

The training needs of different groups have to be identified. Local capability has to be built upthrough exposure to international experiences. Certification programs on safety and technicalcapacity should be established.

Access to real and updated information necessary in the decision making process should be madeavailable by creating a national management information system. Linkages with other groups canbe established by creating an NGV association to strongly represent the collective views,concerns and recommendations of the NGV industry.


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Section 2 Introduction

The heightened concern about air quality problem in Metro Manila due to transportation

emissions and the availability of natural gas in Luzon encouraged the Philippine Government tolaunch the Natural Gas Vehicle Program for Public Transport (NGVPPT) in October 16, 2002.The Department of Energy (DOE), together with other government agencies and the privatesector, has vigorously embarked on the promotion of CNG for transport. The Program is in itspilot stage to demonstrate the technical and financial viability of natural gas vehicles.

Currently, DOE is coordinating with other relevant government agencies and private sector tosupport NGVPPT by establishment of a mother-daughter refueling system, procurement of atleast 100 buses by end of 2003 and establishment of a pipeline gas from Batangas to Manila by2007. Government financing institutions such as the Development Bank of the Philippines(DBP), Philippine Export and Import Agency (PHILEXIM) and the Land Bank of the

Philippines (LBP) are providing more flexible financing schemes for bus operators. Income taxholidays and lower duty rates are also offered to interested investors. Scheme to provide non-monetary incentives are being formulated such as franchise and fast tracking of environmentalpermits.

2.1 OBJECTIVES OF THE STUDY

The development of the Compress Natural Gas (CNG) Master Plan for Transport in MetroManila is a technical assistance (TA) granted by the Asian Development Bank (ADB) to theGovernment of the Philippines through DOE to specifically address the use of CNG in thetransport sector over the next 10 years and provide inputs for the NGVPPT. The TA will help

the energy sector to better understand the different efforts in developing this new industry and togive clear directions towards its full implementation. The development of the Master Plan isSubproject 7 of TA No. 3128-HI, Air Emission Policy Studies.

2.2 SCOPE OF THE STUDY

The Master Plan involves the review of both the current status of NGVPPT and the internationalexperiences relevant to Metro Manila, assessment of techno-economic implications of theNGVPPT, formulation of policies, identification of additional studies and the design of theaction plan. The scope of the Study includes the following:

Review of current status in Metro Manila and on-going domestic initiatives Review of international experiences relevant to Metro Manila

Assessment of supply side options including the availability of natural gas for transport andthe infrastructure required for utilizing it in the transport sector

Evaluation of demand side requirements and barriers including a cost benefit analysis for theadoption of CNG technology


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Evaluation of existing incentives

Conduct of economic analysis

Recommendation of further policies/actions required for effective implementation of the

CNG program

2.3 METHODOLOGY

The four key efforts in this two-month study were interviews with Metro Manila CNG vehiclesstakeholders, assessment of NGV and refueling technologies relevant to Metro Manila, economicmodeling and CNG Workshop in Manila. The activities undertaken were:

Conduct interviews in Metro Manila with CNG stakeholders including government officials,gas suppliers, financial institutes, bus and jeepney operators, and other technical experts

Obtain data from public sources, agencies of the Government of the Philippines and others,

and international NGV organizations, experts and vendors

Conduct CNG Workshop with participants from the government (DOE, DOT, DOF, etc.),ADB, gas suppliers, financial institutes, and public transit operators. (Two internationalCNG experts/resource persons from India and Thailand were invited to discuss the CNGexperiences of their countries and to provide comments on the current study.)

Obtain comments from stakeholders and the international resource persons during the CNGWorkshop

Analyze and reconcile the information and data obtained

The models developed to assess economic costs and/or benefits are:

Cash flow model for financial assessment of station operations;

Vehicle economic model to determine benefits to NGV fleet operators; and

National economic model to determine net costs and benefits to Metro Manila of NGVdevelopment.

Details of the models used shall be discussed in Section 7.


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Section 3 Current Status in Metro Manila

3.1 NATURAL GAS DEVELOPMENT

3.1.1 Supply and Demand

The estimated natural gas reserve from discovered and prospective fields yields at least 5.8trillion cubic feet (TCF) to a high of 20.8 TCF (Table 3.1). The proven natural gas reserves (90percent) are mainly located in Camago/Malampaya gas fields (Figure 3.1). The potentialreserves are not well confirmed and the gas fields need exploration.

Table 3.1 Estimate of Natural Gas Reserves (Billion Cubic Feet, BCF)

Gas Fields Minimum(BCF)

Prospective(BCF)

Maximum(BCF)

Camago/Malampaya 2,528 3,340 4,277San Martin 243 359 454

Proven

San Antonio 4Mindoro-Cuyo 2,720 7,060 11,120Cotabato 60 1,158 1,760Cagayan 176 322 518

Potential

Central Luzon 78 637 2,594

Figure 3.1 Natural Gas Reserves in the Philippines

A consortium composed of Shell Exploration (SPEX), Texaco Philippines, Inc and the PhilippineNational Oil Company-Exploration Corporation (PNOC-EC) operates the Malampaya DeepWater Gas-to-Power Project. The San Antonio gas field is operated by PNOC. At present, theCamago/Malampaya gas field has a platform capacity of 500 mmcfd and a sub-sea pipeline


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capacity of 650 mmcfd. The gas is transported from the platform to the landfall site inTabangao, Batangas by a 504 kilometer underwater pipeline. The dry gas is treated in theOnshore Gas Processing Plant (OGP) prior to sale to the three power plants in Batangas. Thepower plants have a total generating capacity of 2,760 MW in 2002 that is, the 1,200 MW IlijanPower Plant, 1,060 MW Santa Rita Power Plant and the 500 MW San Lorenzo Power Plant. TheOGP can still accommodate an additional power generating capacity equivalent to 1,000 MW.As of 2002, the indigenous natural gas shares 6.29 percent of the energy demand requirement ofthe country, mainly for power use. The 2004 2013 Philippine Energy Plan (PEP) Updatesprojected that the power sector will dominate the natural gas demand (Table 3.2). The gasrequirement for power generation could increase to 131.3 BCF in 2008 with the conversionand/or expansion of the 850 MW oil-fired Sucat Plant and the 500 MW Limay plant, and thecommissioning of a proposed 1,200 MW Mariveles Greenfield Gas-fired Power Plant. The non-power uses of natural gas are for industrial, commercial and transportation. The industrialdemand from natural gas is estimated at 56.4 BCF in 2008 and at 62.3 BCF by 2013. Initialdemand of the commercial sector is estimated at 5.5 BCF in 2008 and could increase to 8.3 in

2013.

In the transport sector in 2004, 100 CNG vehicles are expected to run, needing a total of 0.15BCF of natural gas. In 2008, the number of vehicles is projected to increase to 722 and to 1,500units in 2013. By 2013, gas demand in the transport sector will hit 2.5 BCF. The projectedtransport demand is expected to increase above those given in Table 3.2 with more aggressivepromotion of NGVs in the Metro Manila.

Table 3.2 Natural Gas Demand and Supply, in BCF

Sector 2004 2008 2013DEMAND

Power 101.3 131.3 262.7Industry 56.4 62.3Commercial 5.5 8.3Transport 0.15 1.4 2.5Total Demand 101.5 194.6 335.8

SUPPLYIndigenous 103 132.8 242.4Imported to meet theprojected demand

61.8 93.4

Source: 2004-2013 PEP Updates

The 2004-2013 PEP estimated that natural gas production will reach 138.2 BCF in 2008, afterwhich output will significantly increase starting in 2010 at 187.2 BCF and finally 242.4 BCF by2013. The shortfall from the domestic natural gas supply will be provided by the new gas fieldsto be proven or by imported gas, either as LNG or through the Trans-ASEAN Gas Pipeline(TAGP). Over the long-term together with other ASEAN member countries, TAGP couldprovide the potential local gas supply deficit.


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To support the development of downstream natural gas industry, DOE has identified thefollowing pipeline infrastructure and related facilities that need to be established in the next 10years (Figure 3.2):

80 to 100 km Batangas-Manila Pipeline (BatMan1) by 2007

130 to 150 km Bataan-Manila Pipeline (BatMan2) by 2008

35 km Sucat-Malaya Thermal Power Plant Spurline (SuMa) by 2010

35 to 40 km Bataan-Cavite Submarine Pipeline (BatCave) by 2008

A 40 km city gas pipeline along the EDSA-Taft Loop in Metro Manila with refilling stationsat Taft Avenue and other parts of the metropolis, tentatively scheduled for completion in2007

LNG Terminals in Bataan (2008) and Batangas (2012)

Construction of a network of gas refilling stations for NGVs in the NCR


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Figure 3.2 Proposed Natural Gas Pipeline Infrastructure


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The presence of BatMan1 pipeline by 2007 is projected to trigger downstream use of natural gasfor power and non-power use in Metro Manila area as well as other parts of Luzon. Theindigenous natural gas will provide fuel to Sucat Thermal Power Plant (2008 to 2009) and theMalaya Thermal Power Plant (2010).

PNOC-EC, which was granted a permit to own and operate the Batangas to Manila Pipeline, hasalready conducted several feasibility and market studies. Construction is scheduled tocommence by the middle of 2005. First Gas Holding (FGH), who has been awarded thefranchise to transmit and distribute gas in Luzon Area under RA 8997, is expected to be vastlyinvolved with the network and market development. FGH is also interested in the conversion ofthe Sucat Power Plant where the other end of BatMan1 pipeline in Manila will end.

The BatMan2 pipeline in 2008 will transport LNG for power and industrial use to Subic Bay,Clark in Angeles City, and Cavite (from 2010 to 2012) and to power plants in Limay, Bataan(2008) and Morong, Bataan (from 2010 to 2012). Also, the BatMan2 pipeline to Manila will beused for power generation in Navotas and to support fuel needs of the commercial, industrial andtransport sectors. Both BatMan1 and BatMan2 will be connected to the 40 km city gas pipelinealong the EDSA-Taft loop.

In the next 10 years, DOE indicates that about US$5.51 billion is needed to tap the potentialnatural gas resources in the Philippines while US$7 billion is needed to put the basicinfrastructure to promote and expand the use of natural gas in all sectors.

3.1.2 Natural Gas Policies

The energy sector has declared of its preferential treatment to use of indigenous energy sources

and cleaner fuels to achieve its goals of greater self-sufficiency, stable and secure energy supplyand use of clean and efficient energy fuels and infrastructures. Indigenous natural gas is expectedto supply a significant portion of future energy requirements for both power and non-powerapplications. Under the Interim Rules and Regulations Governing the Transmission, Distributionand Supply of Natural (DOE Circular No. 2002-080995), DOE has the overall responsibility ofsupervising and regulating the development and operation of the natural gas industry throughgranting of permits for the construction, expansion, operation and maintenance andmodification of pipelines and transmission and distribution facilities and for the supply of naturalgas to customers and all other measures allowed under existing laws. With the cooperation ofother government agencies incentives are being provided to the natural gas industry players.

3.2 TRANSPORTATION SYSTEM IN METRO MANILA

Metro Manila or the National Capital Region (NCR) composes 14.5 percent (10.49 million) ofthe total population of the country. Metro Manila is composed of 12 cities and 5 municipalities(Figure 3.3). To serve its populace, the region employs rail, road and water transport systems.There are three railway systems namely, the Metro Rail Transport System that serves the EDSAroute, the Light Rail Transport system that serves the Baclaran to Monumento route and the


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upcoming Metro Rail Transport 2, which will serve the Divisoria to Marikina route. Vehicles forroad transport are categorized as trucks, buses, utility vehicles

1, cars and motorcycles/tricycles

2.

Figure 3.3 Map of Metro Manila

MRT LRT 1 LRT 2MRT LRT 1 LRT 2

1Utility vehicles is the collective name for heavy duty vehicles like jeepney, van, Asian utility vehicles, Pajero,

Fierra, owner-type jeep, etc.2Tricycles are motorcycles with side cars used for public transport with capacity of 3 to 5 passengers.


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As of 2002, there are a total of 1.38 million motor vehicles registered in the NCR, 66.3 percentare gasoline-fed while 33.7 are diesel-fed (Figure 3.4). Utility vehicles have the highest number(638,785) followed by cars (463,256). About 60 percent of the utility vehicles and 2.7 percent ofcars are diesel-fed. The number of buses registered at the NCR in 2002 is 11,716, 97 percent ofwhich are diesel-fed. There were 191,033 gasoline-fed motor-/tri-cycles registered in MetroManila.

Figure 3.4 Number of Registered Vehicles By Type and Fuel Used in Metro Manila

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1996 1997 1998 1999 2000 2001 2002

No.ofVehicles

Diesel Trucks

Gasoline Trucks

Trailers Diesel

Diesel Motor-/tri-

cycles

Gasoline Motor-/tri-

cycles

Diesel Buses

Gasoline Buses

Diesel UV

Gasoline UV

Diesel Cars

Gasoline Cars

The population of public vehicles (jeepney, taxi and buses) in Metro Manila from 1980 to 2001is shown in Table 3.3 below.

Table 3.3 Population of Public Vehicles in Metro Manila

Type of Service 1980 1985 1990 1995 2001

Jeepney (a) 27,080 31,235 27,659 53,352 61,152Taxi (b) 10,125 5,406 1,715 21,702 38,433Bus (c) 3,578 4,543 5,247 8,315 11,546Total 40,783 41,184 34,621 83,369 111,131

a) jeepneys are diesel-fed

b) include both megataxis (60 percent diesel-fed) and taxicabs (2.7 percent diesel-fed).

c) more than 97 percent of buses is diesel-fed


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The choice of mode of transport by commuters in Metro Manila are driven by the fare, level ofcomfort, air pollution and travel time. The Land Transportation Office (LTO) regulates transportfares, motor vehicle registration (including emission testing) while the Land TransportationFranchising and Regulatory Board (LTFRB) regulate franchises. Both LTO and LTFRB are linebureaus of the Department of Transportation and Communication (DOTC). DOTC is presentlyembarking on a Fleet Modernization Program. Franchises of vehicles with more than 15 years ofage from the date of its manufacture will not be renewed. This includes both the new and second-hand imported vehicles. For rebuilt vehicles, age shall be based on the date of its initialregistration.

The Metro Manila Development Authority (MMDA) is responsible for a) coordination andintegration of the efforts of LGUs and central government in formulating effective policies andplans, and implementing effective traffic and transport projects and b) management of trafficflow and enforce discipline and traffic rules in Metro Manila. At present, MMDA isimplementing the following traffic management measures:

EDSA bus lanes two outside lanes designated for buses, with yellow lane separator;

Unified Vehicle Volume Reduction Program vehicles banned one day per week on allstreets, on basis of plate number ending; and

Regulating loading and unloading stations, parking areas and vehicular routes.

3.2.1 Buses

Buses serve the main thoroughfares of Metro Manila, the North and South Expressways, theManila-Cavite coastal road and Commonwealth Avenue. Provincial buses enter Metro Manila toload and unload passengers in their respective terminals.

Buses plying the Metro Manila area are either second hand or locally assembled buses withimported engines. Most second hand buses are imported from Japan (about 90 percent) with anaverage age of 8 years. Price of a second hand bus from Japan is about US$5,000. Therefurbished bus is sold at US$13,000 to include the freight, taxes, refurbishment and profit3.These buses can operate up to 7 more years for a total vehicle life of 15 years. There arehowever 20 year-old buses in Metro Manila that are still in service.

There are over 150 bus operators in Metro Manila, with only a small number of them having asignificant number of buses. There are 11 major bus operators identified in Metro Manila, someof which are also operating in the provinces (Table 3.4)3. Buses are owned and operated by

small to medium size companies that own a fleet with its own set of personnel, terminal(sometimes shared with other companies) and maintenance shops. Big bus companies have theirown filling stations located in their central garage or terminal.

3Source: Implementation of the Philippine Natural Gas Vehicle Program for Public Transport. Part 1, Technical

and Financial Analysis of OEM Buses. Academy of Educational Development. May 2003


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Table 3.4 Major Bus Operators in Manila

Bus Operator Name No. of Buses in a Fleet Route Average bus life, yearsFive Star Bus Co. Inc. 340 C 5Philtranco Service Ent. Inc 340 P/C 10Tritran Inc. 280 P/C 8Jell Transport/ES Transport 200 C 15RRCG Transport 170 P/C 15CICN Transit 80 C 10Ma-Fel Transit 50 C 5+Fermina Express 50 C 6Southern City Lines 20 C 10Saint Rose Transit Inc 150 * P/C 5-10California Bus Lines 150* C 15Notes: 1. C City Route; P Provincial Route.

2. The number of buses in fleet marked by asterisk indicate that a large number of these buses (i.e., 30to 35 percent) are no longer operational as they are used as a source of spare parts for the remaining

buses.

Buses are tagged as an eye-sore in Metro Manila and pollutive because of its black smokeemission. Over the past 10 years there have been moves to remove provincial buses altogetherfrom Metro Manila roads. However, identification of suitable terminal sites, together with thesheer number of buses and passengers that would have to be handled, has made this policydifficult to implement.

3.2.2 Jeepneys

Jeepneys are the most popular mode of transport in Metro Manila. Jeepneys can be foundeverywhere else except EDSA.

Jeepneys are locally designed/assembled vehicles, similar to open mini buses with 14 to 24passengers capacity. They are made of locally manufactured bodies with secondhand importeddiesel engines (usually Isuzu and Fuso brands from Japan). The cost of jeepneys is in the rangeof Php 250,000 to 350,000 (US$4,500 to US$6,400). Jeepneys are diesel-fed with no discreetpattern for refueling and engine conditioning because daily operation depends on the ownerspreferred time.

Due to its low cost, jeepneys became a livelihood for low to middle income families. Jeepneysare generally poorly maintained thus have low efficiency and are prone to breakdowns. Also,jeepneys are frequently apprehended for violating the emission standards for motor vehicles.Jeepney owners and drivers associations are formed to exercise control over entry operationsalong particular routes, repair, maintenance and terminal management.


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3.2.3 Megataxis

Megataxis is an 8 to 10 passenger utility vehicle, much like an Isuzu Hi-Lander, ToyotaTamaraw FX and Mitsubishi Adventure. They are usually bought brand new with a life

expectancy of 10 years. Like jeepneys, megataxis have fixed route with a maximum franchise of35 km. The Megataxi vehicle more convenient ride for commuters than jeepneys because theyare air conditioned, have more comfortable seats, and the passengers are not exposed to airpollution. Also, they are more preferred than taxicabs because of the cheaper fixed rate.

3.2.4 Taxicabs

Taxicabs are cars converted to public transport. Taxicabs are owned and operated by a family orby small to medium size companies that own a fleet with its own set of personnel, terminal(sometimes shared with other companies) and maintenance shops. Most of the taxis are gasoline-fed.

3.2.5 Tricycles

Tricycles are motorcycles (equipped with a two-stroke or four-stroke engines) attached withside-cars that can accommodate 3 to 5 passengers. The sidecars are locally designed andmanufactured by small to medium enterprises located all over Metro Manila. Tricycles providefeeder services within sub-divisions and other areas where larger vehicles cannot penetrate.Tricycle terminals are located near villages/subdivisions to transport passengers from mainthoroughfares to their respective residences. Tricycle franchise are on per area basis, owned andoperated by one owner per vehicle. Tricycles with brand new engines cost from Php 85,000 toPhp 110,000.

3.3 FUEL CONSUMPTION AND PRICING

Figure 3.5 indicates that diesel is one of the primary petroleum product used in the country but issteadily decreasing at 1.2 percent annually from 1998 to 2000. In 2000, the total dieselconsumption is 42 million barrels while gasoline consumption is approximately 22.8 millionbarrels. LPG consumption is steadily increasing at 8 percent per year since 1995. In 2000, LPGconsumption reaches 12.28 million barrels.

The pump prices of the petroleum products in the country in years 2000 to 2002 are shown inFigure 3.6. As shown local petroleum product prices are adjusted to the international Dubaicrude FOB prices and the foreign exchange rates. The reported prices of diesel, regular gasolineand LPG as of September, 2003 are Php 15.78 per liter, Php 19.29 per liter, and Php 11.65 perliter, respectively.


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Figure 3.5 Petroleum Product Consumption in the Philippines

0

10,000

20,000

30,000

40,000

50,000

1995 1996 1997 1998 1999 2000

Year

ThousandBarrels

Diesel

Gasoline

LPG

Figure 3.6 Domestic Wholesale Posted Prices/Pump Prices (Php/liter) vs. International DubaiCrude FOB Prices (US$/barrel)

0.00

10.00

20.00

30.00

40.00

50.00

60.00

Jan-00

Mar

-00May

-00Jul-00

Sep-00

Nov-00

Jan-01

Mar

-01May

-01Jul-01

Sep-01

Nov-01

Jan-02

Mar

-02May

-02Jul-02

Sep-02

Nov-02

Jan-03

Mar

-03May

-03Jul-03

Sep-03

Month-Year

Premium Gasoline

Unleaded Gasoline

Regular Gasoline

Diesel

LPG

Dubai FOB, ($/bbl)

Forex, P/$


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3.4 PILOT PROGRAM

NGVPPT was launched in October 2002 to promote use of compressed natural gas (CNG) fortransport in the country. President Gloria Macapagal-Arroyo unveiled a portfolio of incentives

which includes financial packages, tariff reductions and franchise grants among others, toencourage companies to supply, acquire and operate original equipment manufactures natural gasvehicles (OEM-NGVs), converted or retrofitted NGVs and related equipment and facilities.

The Department of Energy (Executive Order No. 66) was designated as the lead agency indeveloping the natural gas industry. An executive forum composed of different governmentagencies was formed to promote use of NGVs and to implement the following:

Demonstration of NGVs. The very first initiative of DOE was the conversion of a dieselengine Isuzu HiLander vehicle to a 100 percent natural gas engine unit. This wasfollowed by the conversion of three more vehicles i.e., two shuttle buses (in December

2001 and January 2002) and one Nissan Patrol service vehicle (in June 2002). Also,PNOC, jointly with PETRONAS Malaysia, is currently demonstrating six ENVIRO 2002taxi units to promote factory-built or OEM-NGVs. In March 2003, the first CNGrefueling station was inaugurated at the PNOC-ECs San Antonio Gas Plant (SAGP) inIsabela. Also, DOE conjointly with Ashok Leyland of India introduced CNG buses tooperators by allowing them to alternately use the demo unit (September 2003).

Construction of refueling stations. Memorandum by and among DOE, the SC 39(Malampaya Consortium) and Pilipinas Shell Petroleum Corporation (PSPC) was signedon August 4, 2003 for the establishment of mother-daughter refueling stations. Themother station shall be located adjacent to the on-shore gas plant (OGP) in Batangaswhile the daughter station shall be located in Calamba (around 50 road-km away from

Metro Manila City). PNOC also plans to establish a daughter refueling station at FortBonifacio.

OEM-NGV and NGV conversion/retrofit. The bus operators are already firming upcommitment to purchase a total of 150 CNG buses. These buses will run through theBatangas-Manila Corridor and will utilize the mother-daughter station established byPSPC above.

Design/recommend incentive packages and financial assistance. The Development Bankof the Philippines and the Trade and Industry Development Corporation (TIDCORP) areproviding flexible financing schemes for the bus operators.

Privileges and incentives firmed up for the NGV industry are:

Attractive CNG price that translates to a 40 percent discount to diesel price in thefirst seven years of NGVTPP.

Lower excise tax for CNG (2 percent) compared to diesel and gasoline (3percent).

Income tax holiday for qualified NGV industry related activities under the Boardof Investments (BOI) 2003 Investment Priority Plan (IPP). Application forregistration for all natural gas projects must be accompanied by a copy of the


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Certificate of Accreditation as a participant of the NGVTPP by the DOE. Theseinclude the following:

(1) Land transportation using CNG

(a) Registered PUB operators must have their own terminals that canaccommodate the total number of buses under their franchises

(b) Application for registration must be accompanied with copy offranchise from the LTFRB.

(2) Conversion shops

(a) This covers converting, retrofitting, repairing, operating andmaintaining NGVs in accordance with relevant PNS and proceduresand shall provide warranties to stakeholders

(b) Only projects with minimum investment of US$2 million may qualifyfor registration.

(3) Terminals for CNG refueling stations(a) This covers design, construction, installation and operation of CNG

refueling station and related infrastructures and facilities in accordancewith relevant PNS and procedures.

(b) Projects complying with the following may qualify for pioneer status:(i) Must have new facilities;(ii) Cater to shipping vessels or land transport or a combination of

both;(iii) Cater to at least one clientele, other than the proponents own

business interests, needing enhancement of logistical componentof its operation; and

(iv) Minimum project cost of US$500,000.(c) Application for registration must be accompanied with a proof of

application with the concerned regulatory agency such as but notlimited to an Endorsement, a Certificate of Registration or Permit toOperate or any related document required.

(4) Manufacture/Assembly of NGVs

(a) This covers establishment of new facility or utilizing an existingassembly facility for the assembly/manufacture of brand new qualityNGVs and related parts/components which shall involve at least thebasic assembly processes, i.e., painting, trimmings and quality

testing/inspection.(b) Only projects with minimum investment of US 8 million may qualifyfor registration.

(5) Application for registration for all natural gas Registered PUB operatorsmust have their own terminals that can accommodate the total number ofbuses under their franchises.


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One percent rate of duty on imported NGVs, NGV engines and other NGVindustry related equipment, facilities, parts and components as certified by theDOE. Table 3.5 shows the list of equipment that will enjoy the 1 percent rate ofduty if related to for NGVPPT.

Issuance of Certificate of Compliance with Emission Standards to NGVs by LTO

Preferential franchises fro LTFRB for NGVs on newly opened routes

Fast track issuance by the DENR of Environmental Compliance Certificate (ECC)for NGV facilities and refueling stations

Table 3.5 Equipment with rates of duty reduced to 1%

H.S. Code Description Rate of Duty if not relatedto NGVPPT (%)

3923.9 Others under Articles for the conveyance or packing of

goods, of plastics; stoppers, lids, caps and other closures, of

plastics

15

7613.00 00 Aluminum containers for compressed or liquefied gas 7

8407.34 90 Other Spark ignition reciprocating or rotary internal

combustion piston engines

10

8414.90 00 Parts Air or vacuum pumps, air or other gas compressors

and fans; ventilating or recycling hoods incorporating a fan,

whether or not fitted with filters

5

8421.31 00 Intake air filters for internal combustion engines 10

8481.30 00 Check valves 5

8702.90 90 Other Motor vehicles for the transport of ten or more persons

including the driver

20

9026.20 90 to

9026.90 00

Pressure gauges for motor vehicles 10

Build technical capability/expertise on NGV conversion, fabrication of conversionsystems, etc. Currently, capability building is limited to DOST and DOE through localand international trainings.

Adopt and develop standards and identify regulatory requirements. The Bureau ofProduct Standards approved 48 Philippine National Standards (PNS) for natural gasutilization in transport (see Appendix A). According to the draft evaluation report onPhilippine Natural Gas Standard (DBHORNE LLC and Charonic Canada, Inc., August2003), the PNS(s) are adequate to provide a safe foundation for the pilot program but hasto be expanded and enhanced into a comprehensive structure that can be used by thefuture CNG industry in the Philippines. The available standards do not cover the area of

CNG-specific fueling station components, fuel transfer requirements and fuel metering.The appropriate additional safety standards and the capacity building associated with itsimplementation is covered by the above mentioned study.

Conduct information, education and communication. Public awareness program islimited and has not reached so far to some major stakeholders in the transport sector.


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Section 4 International Experiences Relevant to Metro Manila

In this section, a review of selected experiences with CNG in other countries was conducted to

identify key elements of success or failure with the objective of drawing relevance to MetroManila. These countries are Argentina, Italy, Brazil, U.S.A., New Zealand, the United Kingdom,Canada, India and Thailand.

4.1 ARGENTINA

4.1.1 Overview

Argentina is the CNG vehicle world leader with over 925,000 vehicles and over 1,000 refuelingstations. Over the past 10 years, vehicle conversions have taken place at a rate of 8,000 vehiclesper month. Most converted vehicles are individually owned passenger cars. Currently there arevery few CNG buses or trucks. Most vehicles are converted gasoline/CNG bi-fuel vehicles.Argentina has plentiful supplies of natural gas and a well developed network of gas trunkpipelines. Natural gas is inexpensive compared to gasoline as a result of differences in fueltaxes. Although the Argentine government strongly endorsed the development of CNG, itsdevelopment effort has been entirely accomplished by the drive of private enterprise, supportedby the governments favorable fuel tax structure. The National Gas Regulatory Authority,ENARGAS, oversees the program by issuing licenses to CNG companies and issuing standards.OEMs are starting to get involved with conversion kits and components. Domestic production ofcomponents has also developed, even to the point of exporting equipment to other countries.The CNG industry has a good safety record, with few accidents. All converted vehicles mustdisplay a sticker to demonstrate compliance with standards. Regular training programs areoffered to CNG groups and to the public.

4.1.2 Lessons Learned

The following summarizes the lessons learned in Argentinas NGV programs:

Policy Lessons

Inter-fuel taxation policies create advantage for CNG over gasoline

Absence of government subsidies such as government financial assistance for vehicleconversions or purchases allows the NGV industry to grow with long-term sustainability

One single CNG government authority (ENARGAS) has full authority and responsibility

Standards and regulations incorporate domestic and international experience

Ongoing public education and training help promote the NGV programs

Economic Lessons

Inexpensive fuel and maintenance costs allow quick payback of conversion cost


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Simultaneous development of vehicle and refueling station mitigates chicken and eggdilemma

Abundant availability of natural gas helps establish the foundation for the NGV program

Inter-related NG industries synergistically re-enforce the NGV program

4.1.3 Experiences Relevant to Metro Manila

Argentina experiences relevant to Metro Manila are:

It is effective to have one and only one NGV program authority to set uniform policiesand coordinate/implement relevant regulations

Public education and training programs will alleviate public misgivings concerning safetyand performance of NGVs and refueling stations and increase public awareness of NGVbenefits

Some economic incentives or regulatory advantages for construction of sufficientrefueling stations will help improve refueling infrastructure

Vehicle and refueling growth need to be balanced

Independent quality control is a key to successful implementation of NGV program

4.2 ITALY

4.2.1 Overview

Italy has the longest experience with natural gas vehicles, starting at the beginning of World WarII. Today it ranks behind only Argentina and Brazil with over 400,000 vehicles and 400refueling stations. Currently the NGV industry has multiple drivers in Italy: diversification ofenergy supply, preservation of historic buildings, landmarks and artwork, environmentalconcerns, and economic growth. Most existing CNG vehicles are bi-fuel private cars. Taxishave been slow to convert to CNG due to the fact that most CNG refueling stations are clusteredon the outskirts of cities due to space limitations in city centers. This makes CNG fueling lessattractive to taxi drivers. OEM dedicated vehicles have just recently become available. CNGfuel is priced favorably under both gasoline and diesel due to lower excise and VAT taxes.Other incentives are also available: partial reimbursement for vehicle conversion, new NGVpurchase incentives, 70 percent subsidies for new refueling stations, and exemption of CNGvehicles from local traffic control regulations. CNG bus development has lagged due to limitedspace at key city depots, but is expected to increase as historic city centers are closed to privatetransport. With its long history of CNG use, Italy has a well developed natural gas distributionsystem. CNG industry is also well developed with Italian companies selling technology andproducts worldwide. Almost all of Italys natural gas is imported, demonstrating that domesticsupply of natural gas is not necessary to having a successful CNG program.


Lessons learned form Italys long experience include:


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Policy Lessons

A favorable tax system created attractive CNG pricing

Government decrees provided a strong driver for the CNG transit bus program Exemptions of traffic limitations during high air pollution days and in historic city

centers encourage the use of NGVs

Strong government energy and natural gas policies supported the development of anationwide gas distribution system and refueling infrastructure

Technology Lessons

A growing infrastructure industry with know-how supports the development of NGVs

Economic Lessons

Economic incentives help promote after-market conversion of gasoline cars andencourage manufacturing of OEM NGVs

Economic incentives help expand the countrys CNG infrastructure


Italian experiences relevant to Metro Manila are:

Strong government support is needed to facilitate the development of natural gasdistribution and refueling network

As the NGV program progresses and matures, positive ripple effects to the economicgrowth in the related industries will take place

In addition to incentives or initiatives that require capital investment of governmentsupport, regulatory or non-financial incentives can also be very effective

4.3 BRAZIL

4.3.1 Overview

Brazil has the second largest population of CNG vehicles in the world, with over half a millionvehicles and over 550 refueling stations. CNG vehicle growth is proceeding at a rapid pace with

thousands of vehicle conversions per month and a target of more than 100 new refueling stationsby the end of 2003. Most of the CNG vehicles in Brazil are taxis, private cars and light-dutyvehicles that have been converted to bi-fuel operation on either CNG/gasoline or CNG/ethanol.The original objective of Brazils CNG program in the mid 1980s (called Plangas) was toconvert urban bus fleets, government fleets and cargo vehicles. Initial results were discouragingdue to limited refueling infrastructure at the time, acceptable technology for conversion of dieselfueled heavy duty engines was not yet developed, and bus companies could not shoulder thefinancial cost of vehicle conversion. Subsidized conversion of taxis was allowed in 1992 and


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that led to large demand growth for CNG vehicular fuel. In 1996 private cars were added to thePlangas program (though conversion subsidies were halted) and CNG vehicle growth has beenvery strong ever since. Converted vehicles require a certificate issued by a state controlledagency. Federal and state fuel taxes price CNG fuel favorably to gasoline and ethanol, but notversus diesel. Although Brazil has adequate supplies of natural gas, both from domesticproduction and imports, metropolitan areas could use expanded natural gas deliveryinfrastructure. Over 20 automobile OEMs operate in Brazil, but none are currently offeringdedicated NGVs. Brazil also has a history of ethanol fueled vehicles that predated the Plangasprogram. All gasoline sold in Brazil still contains 25 percent ethanol. The Proalcool program,which is Brazils fuel ethanol program, ran into difficulties in the late 1980s as world oil pricesdropped, Brazil began producing more oil domestically, and high sugar prices decreased theincentive to produce alcohol from sugar cane. Approximately 400,000 dedicated ethanolvehicles still remain, and the ethanol program still has political attractiveness. Brazil did issuemandates for the conversion of diesel fueled buses to CNG, but a combination of contractual andtechnical obstacles could not be overcome and there remain very few CNG buses in Brazilian

cities. Potential new CNG vehicle users are concerned with the lack of a visible long-termgovernment energy policy. They worry that the difficulties with the ethanol program will berepeated with CNG. CNG vehicle safety and reliability in Brazil is a concern, as accidents andmechanical problems with converted vehicles have occurred.


Specific lessons learned in Brazil include:

Policy Lessons

The ethanol legacy casts a shadow over the CNG program

The current transit bus regulations discourage participation and investment

Technology Lessons

Initiatives for NGV development were out of synch with available equipment andtechnology

Economic Lessons

Taxi conversion program was very successful when subsidies for conversion wereoffered initially

Private car conversions are increasing rapidly as the natural gas supply becomes morereadily available

Urban bus conversions were hampered by (1) high investment and long pay-back periodand (2) uncertainties related to the renewal of operating contracts

Inter-fuel taxation results in CNG being favorable relative to gasoline, but not to diesel


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Other Lessons

The lack of public education prevents NGVs from wider acceptance by the public


Brazilian experiences relevant to Metro Manila are:

Vehicle conversion acceptance grows when inter-fuel price advantages can be guaranteedover extended periods of time

Effective subsidies can generate interest in CNG conversion and related development

Infrastructure will need to grow in parallel with vehicle growth

Widespread public education and training will improve public acceptance of NGVs

4.4 UNITED STATES

4.4.1 Overview

The United States has experienced steady growth in its development of NGVs. Sincecommencing in the late 1980s, there are now approximately 130,000 NGVs on the road, servicedby about 1,200 refueling stations. The U.S. gas pipeline infrastructure is extensive and LNG isalso available. Natural gas pricing relative to gasoline and diesel varies with location, but naturalgas does enjoy a small price advantage to conventional fuels. NGV development in the U.S. hasbeen primarily driven by environmental and energy diversity concerns, with economicdevelopment as a secondary driver. Several major pieces of legislation specifically mandate thatgovernment and private fleets purchase increasing numbers of alternatively fueled vehicles as

their fleets are updated. Additionally, the federal government provides tax deductions forpurchases of clean fuel vehicles and construction of refueling stations. Individual states havealso a variety of incentives and vehicle mandates. Due to these fleet mandates, the United Stateshas penetrated the natural gas fuelled bus arena to a greater extent than most other countries.NGV buses now comprise 7 percent of all buses on the road and 18 percent of new buses now onorder will be fuelled by natural gas. Most light duty vehicles converted belong to fleets, whilethe individually owned car market has seen little transition to natural gas.


Lessons learned from NGV development in the United States include:

Government mandates help facilitate the steady growth of NGV program. However,many NGV mandates focus on numbers of vehicles acquired, rather than on natural gasuse or displacement of conventional fuel. As a result, there are many bi-fuel vehicles infleets that continue to operate on conventional fuel

In order to take NGV growth to the next level, the owners of private vehicles need to beconvinced to convert. This market sector is particularly cost conscious and significantfinancial incentives may be required to penetrate the sector


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Successful U.S. incentives generally have the following characteristics:

They are focused on reducing emissions or petroleum use

They are large enough to entice consumers to buy a natural gas vehicle

They are grant based, rather than tax incentive based They are easy for consumers to receive and for the government to administer

Energy Information Administration (EIA) collects and disseminates data on energy,alternative fuel, etc.


The U.S. experiences relevant to Metro Manila are:

Government mandates targeting fleet owners are very effective, however, it is veryimportant to focus on natural gas use or displacement of conventional fuel, rather thanjust focusing on number of NGVs

Creation of information management system can help facilitate successful planning andimplementation of NGV program

4.5 CANADA

4.5.1 Overview

Natural gas vehicle development in Canada began in the mid 1980s due to a combination offavorable factors: plentiful supplies of cheap domestic natural gas compared to high pricedimported oil, a desire to control urban air pollution, and a governmental climate in favor ofpublic spending to promote cleaner technology. Initial growth of CNG vehicles (gasoline to bi-

fuel conversions) was quite strong and within a few years the CNG vehicle population reached15,000 with about 80 public refueling facilities located at existing gasoline service stations.Since this early success, NGV growth in Canada has been disappointing. CNG vehicle totalshave leveled off at 21,000 with 140 public and 85 private refueling stations. Growth isnegligible at this time, with new vehicle conversions replacing retired vehicles. CNG enjoys a33 percent price advantage over gasoline due to Federal and provincial tax policy. Conversionkits are available, but labor costs for conversion can be quite high. Federal and some provincialand private subsidies are provided for vehicle acquisition, refueling stations, marketing activitiesand research and development. There are some CNG vehicle mandates, but they are ineffectivedue to wording loopholes.

1 Air quality is not a concern in Canada and no CNG regulations are

related to emissions, although Canada is committed to reducing greenhouse gas emissions as a

signatory to the Kyoto Protocol. There are many OEM NGV related companies in Canada.Initial optimism regarding NGV growth in Canada was probably too high. Gas companies builtlarge refueling stations to take advantage of economies of scale, but large fleet owners were

1For example, the Federal Alternative Fuels Act requires that 75 percent of all government agency vehicles use

alternative fuels where it is cost effective and operationally feasible. The government has been in compliance with

the act for 5 years, but the Federal fleet of over 23,000 vehicles had acquired only 779 alternative fuel vehicles,

since so few vehicles fit the definition as written, mostly due to cost ineffectiveness.


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reluctant to acquire large CNG vehicle fleets prior to running small test programs. The vehiclesthat did convert belonged to small fleets and private vehicle owners with high fuel demands.Thus stations had to be publicly accessible, requiring partnerships with local retailers. Some ofthe large stations closed due to poor economics, which left some NGV users stranded anddiscouraged further growth of infrastructure. Vehicle conversion centers were set up in centralconversions, but vehicle owners were too far away from these centers, which were underutilized.Initial claims for NGV emissions and economics were exaggerated. At this point, developmentof NGV vehicles and infrastructure must be considered a failure. Curiously, there are manyNGV related companies based in Canada that are quite successful. These include fuel stationbuilders, engine manufacturers and bus companies. All of their businesses are done abroad,either in the U.S. or elsewhere around the world.


Lessons learned from the Canadian experience include:

Over-optimistic promotion of NGV technology can result in failure to meet goals andpoor credibility

Infrastructure development is crucial to acceptance and growth

CNG must be made readily available at publicly accessible locations

Profitability of refueling stations requires sufficient vehicle capacity

Vehicle and station service mechanics need to be readily available to NGV users

Incentives should encourage natural gas fuel use, not just vehicle acquisition

Semi-permanent subsidies or mandates may be required to achieve emission or energy

security goals when price advantages can not be guaranteed


Canadian experiences relevant to Metro Manila are:

Education and training programs for NGV users and facilitators are critical to the successof NGV program

Mechanic and repair technician training and availability will increase acceptance of newtechnology

It is essential to have a coordinated strategy of growth of NGVs and refuelinginfrastructure

4.6 UNITED KINGDOM

4.6.1 Overview

Development of NGVs in the UK has been insignificant. Although a natural gas industry group,the Natural Gas Vehicle Association, was formed to promote natural gas vehicle use, there areless than 1,000 vehicles and under 20 refueling stations in the entire country. The gas industryhas been deregulated but there are some interests in natural gas vehicles as a pathway to


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hydrogen fueled vehicles. The Cleaner Vehicles Task Force, comprised of government agencies,motor manufacturers, motoring organizations, fuel suppliers, and other private and public sectorbodies was established to promote the use of more fuel-efficient, less polluting, less resourceintensive, and quieter vehicles. Natural gas vehicles were one of the technologies recommendedby the Task Force and the UK government responded by initiating its PowerShift program,which provides grants for NGVs and refueling infrastructure. Use of ultra-low sulfur diesel fuel(ULSD) will become mandatory in the UK starting in 2005. This may inadvertently impose anobstacle to initiating widespread use of CNG since both fuels have similar vehicular emissions.


The barriers enco

cng master plan for transport in metro manila

Documents