CNG Master Plan For Transport in Metro Manila

Final Report
Compressed Natural Gas (CNG) Master

Plan 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

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, The
Republic 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 where
specifically stated otherwise in the report, the information contained herein was prepared on the
basis of information that is publicly available or was provided by the Department of Energy or
other Philippine CNG stakeholders and has not been independently verified or otherwise
examined to determine its accuracy, completeness or financial feasibility.
Neither Nexant, CLIENT nor any person acting on behalf of either assumes any liabilities with
respect to the use of or for damages resulting from the use of any information contained in this
report. 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 this
report.
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 ........................................................................................... 6
3 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
Contents

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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.................................................................................... 24
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
Contents

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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 in
Metro 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
Contents

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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..................................................................... 72
8.3.5 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
Contents

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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 Dubai
Crude 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 ..................... 61
7.16 National Economics including 20 Percent Monetized Environmental Benefits........... 62
8.1 Comparison of Fuel Pricing Structure of CNG to Gasoline and Diesel ...................... 65

Contents

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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.................................................................... 8
3.3 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 from
Public 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 1
BatMan2 Bataan-Manila 2
BCF billion cubic feet
BOI Board of Investment
CME coco methyl ester
CNG compressed natural gas
CO carbon monoxide
DENR Department of Environment and Natural Resources
DOE Department of Energy
DOF Department of Finance
DOST Department of Science and Technology
DOTC Department of Transportation and Communication
DTI Department of Trade and Industry
FGH First Gas Holdings
IEC Information, education and communication
IPP Investment Priority Plan
IRR Internal Rate o Return
km kilometer
LGU Local Government Unit
LNG Liquefied natural gas
LPG Liquefied petroleum gas
LTFRB Land Transportation Franchise, Regulatory Board
LTO Land Transportation Office
MC/TC motorcycle/tricycle
MJ/m3 Mega Joules per cubic meter
MMDA Metro Manila Development Authority
MON Motor Octane Number
MPa Million Pascals
MW megawatt
NCR National Capital Region
NGV Natural Gas Vehicle
NGVPPT Natural Gas Vehicle Program for Public Transport
NOx Nitrogen oxides
O&M Operation and maintenance
OEM Original equipment manufacturer
OGP On-shore gas pressure
PEP Philippine Energy Plan
Php Philippine Pesos
PM10 particulate matter, 10 micron
PNOC-EC Philippine National Oil Company- Exploration Corporation
PNS Philippine National Standard
Contents

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PSPC Pilipinas Shell Petroleum Corporation
PUV Public Utility Vehicle
SOx Sulfur oxides
SPEX Shell Philippines Exploration
TA Technical Assistance
TAGP Trans-ASEAN Gas Pipeline
TCF trillion cubic feet
TIDCORP Trade Investment and Development Corporation
TOG total organic gases
TSP total suspended particulates
ULSD ultra low sulfur diesel
UV 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 of
compressed natural gas (CNG) in the transport sector over the next 10 years and to provide
inputs 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 sources
and cleaner fuels to achieve the goals of greater self-sufficiency in energy supply and use of
clean fuels and efficient infrastructures. The discovery of indigenous natural gas triggered the
energy 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 country
particularly in Metro Manila.
Metro Manila is composed of 12 cities and 5 municipalities. To serve its populace, the region
employs rail, road and water transport systems. There are a total of 1.38 million motor vehicles
registered 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 air
quality problem in Metro Manila.
The Department of Energy (Executive Order No. 66) was designated as the lead agency in
developing the natural gas industry. An executive forum composed of different government
agencies 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) and
more 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 key
elements of success or failure with the objective of drawing relevance to Metro Manila. CNG
programs in Argentina, Brazil, India, Italy, Thailand, and U.S. were evaluated due to their
reported success, while the experiences of New Zealand and Canada were studied as failing
examples, and the U.K. example was analyzed to understand the lack of progress of CNG
application 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 to
LPG, CME, LNG and low sulfur diesel, the indigenous natural gas is the best alternative fuel
from 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 dedicated
NGV purchase. It is a general consensus in the NGV industry that there is no reputable and
reliable after-market diesel engine conversion kit commercially available today. The conversion
of heavy duty diesel engines to NGVs is difficult, if not infeasible. The conversion requires
major engineering re-work and modification to the diesel engine and, consequently, after-market
conversion often leads to high maintenance, low efficiency and higher emissions, defeating the
objective of converting diesel engines to NGVs. For the NGV program in Metro Manila, it is
recommended to start with new OEM NGVs during the NGVPPT pilot program and use a mix of
OEM 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 scenario
development for NGV penetration and financial assessment for NGV refueling station
infrastructure, vehicle economics and national impact of the NGVPPT.
The model predicts that, in 2014, the total number of NGVs, including buses, taxis, and
jeepneys, in Metro Manila will reach about 95,750 supported by about 260 CNG refueling
stations. The investment requirement for the refueling stations is substantial, however, the IRR
is 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 investment
range 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 range
from 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 20
percent 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 and
that the Government or the Energy Sector should encourage or support the NGV program. The
national policy should be directed at providing enablement for the CNG industry expansion in
light 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 status
of the CNG industry and the technology employed during the NGVPPT pilot program (until
2007) and its full implementation (2007 to 2014). The plan consists of recommended activities,
additional studies and their respective timeline to ensure smooth implementation and
sustainability of NGVPPT. The solutions adopted to address pollution from mobile sources in
Metro Manila integrate policies, infrastructure development, financing, capacity building and
information, education and communication.
1.6.1 Policies
The legal framework needs to specify fuel, environmental, safety and product standards and their
associated 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 updated
to incorporate environmental and health benefits/costs associated with each fuel type. This is
necessary to ensure economic advantage of using CNG over diesel fuel. Policies have to be
developed and implementable by 2007. Both the national and local government should provide
tax 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 the
refueling stations. The supply of indigenous natural gas in Metro Manila is critical in the full
implementation of NGVPPT in 2008. With the shortfall of indigenous gas in 2008, DOE should
ensure there should be an adequate allocation for the transport
Benchmarking should start as soon as the infrastructures are in place. NGV and refueling
stations operations should be monitored to collect information needed for benchmarking. During
the 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 CNG
business.
A pilot study (learning by doing) of CNG-fed jeepneys and taxicabs during the NGVPPT pilot
phase should be conducted to identify technology and operational barriers. Demonstration of
their successful implementation is needed to attract investments and vehicle operators. Testing
and inspection centers of the Bureau of Product Standards and Land Transportation Office have
to 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 (BatMan2
pipeline) in 2008 may make the use of LNG for long distance buses/trucks and L/CNG refueling
feasible. 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 more
innovative financing schemes to overcome the high investment costs of NGVs and refueling
stations. The government should also encourage public-private sector partnership, channeling of
foreign 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 Metro
Manila is needed to successfully implement activities of NGVTPP. General public awareness is
a 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 pilot
phase will help the policymakers to be aware of the need to develop appropriate legislations and
incentives and allocate human resources and budget. The government agencies and MMDA
should be able to address and create approaches to manage air quality problems effectively. The
private sector need to be aware of the incentives and financing schemes available to encourage
them 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 the
support 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 up
through exposure to international experiences. Certification programs on safety and technical
capacity should be established.
Access to real and updated information necessary in the decision making process should be made
available by creating a national management information system. Linkages with other groups can
be 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 to
launch 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 private
sector, has vigorously embarked on the promotion of CNG for transport. The Program is in its
pilot stage to demonstrate the technical and financial viability of natural gas vehicles.
Currently, DOE is coordinating with other relevant government agencies and private sector to
support NGVPPT by establishment of a mother-daughter refueling system, procurement of at
least 100 buses by end of 2003 and establishment of a pipeline gas from Batangas to Manila by
2007. 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 tax
holidays 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 environmental
permits.
2.1 OBJECTIVES OF THE STUDY
The development of the Compress Natural Gas (CNG) Master Plan for Transport in Metro
Manila is a technical assistance (TA) granted by the Asian Development Bank (ADB) to the
Government of the Philippines through DOE to specifically address the use of CNG in the
transport 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 to
give clear directions towards its full implementation. The development of the Master Plan is
Subproject 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 international
experiences relevant to Metro Manila, assessment of techno-economic implications of the
NGVPPT, formulation of policies, identification of additional studies and the design of the
action 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 and
the infrastructure required for utilizing it in the transport sector
Evaluation of demand side requirements and barriers including a cost benefit analysis for the
adoption of CNG technology
Section 2 Introduction

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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 vehicles
stakeholders, assessment of NGV and refueling technologies relevant to Metro Manila, economic
modeling 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 international
CNG experts/resource persons from India and Thailand were invited to discuss the CNG
experiences of their countries and to provide comments on the current study.)
Obtain comments from stakeholders and the international resource persons during the CNG
Workshop
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 NGV
development.
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 5.8
trillion cubic feet (TCF) to a high of 20.8 TCF (Table 3.1). The proven natural gas reserves (90
percent) are mainly located in Camago/Malampaya gas fields (Figure 3.1). The potential
reserves 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 4,277
San Martin 243 359 454
Proven
San Antonio 4
Mindoro-Cuyo 2,720 7,060 11,120
Cotabato 60 1,158 1,760
Cagayan 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 Philippine
National Oil Company-Exploration Corporation (PNOC-EC) operates the Malampaya Deep
Water Gas-to-Power Project. The San Antonio gas field is operated by PNOC. At present, the
Camago/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 in
Tabangao, Batangas by a 504 kilometer underwater pipeline. The dry gas is treated in the
Onshore Gas Processing Plant (OGP) prior to sale to the three power plants in Batangas. The
power plants have a total generating capacity of 2,760 MW in 2002 that is, the 1,200 MW Ilijan
Power Plant, 1,060 MW Santa Rita Power Plant and the 500 MW San Lorenzo Power Plant. The
OGP 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 of
the country, mainly for power use. The 2004 2013 Philippine Energy Plan (PEP) Updates
projected that the power sector will dominate the natural gas demand (Table 3.2). The gas
requirement for power generation could increase to 131.3 BCF in 2008 with the conversion
and/or expansion of the 850 MW oil-fired Sucat Plant and the 500 MW Limay plant, and the
commissioning 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 industrial
demand from natural gas is estimated at 56.4 BCF in 2008 and at 62.3 BCF by 2013. Initial
demand 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 0.15
BCF of natural gas. In 2008, the number of vehicles is projected to increase to 722 and to 1,500
units in 2013. By 2013, gas demand in the transport sector will hit 2.5 BCF. The projected
transport demand is expected to increase above those given in Table 3.2 with more aggressive
promotion of NGVs in the Metro Manila.
Table 3.2 Natural Gas Demand and Supply, in BCF

Sector 2004 2008 2013
DEMAND
Power 101.3 131.3 262.7
Industry 56.4 62.3
Commercial 5.5 8.3
Transport 0.15 1.4 2.5
Total Demand 101.5 194.6 335.8
SUPPLY
Indigenous 103 132.8 242.4
Imported to meet the
projected 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, after
which output will significantly increase starting in 2010 at 187.2 BCF and finally 242.4 BCF by
2013. The shortfall from the domestic natural gas supply will be provided by the new gas fields
to 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 could
provide the potential local gas supply deficit.

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To support the development of downstream natural gas industry, DOE has identified the
following pipeline infrastructure and related facilities that need to be established in the next 10
years (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 stations
at Taft Avenue and other parts of the metropolis, tentatively scheduled for completion in
2007
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 gas
for power and non-power use in Metro Manila area as well as other parts of Luzon. The
indigenous natural gas will provide fuel to Sucat Thermal Power Plant (2008 to 2009) and the
Malaya Thermal Power Plant (2010).
PNOC-EC, which was granted a permit to own and operate the Batangas to Manila Pipeline, has
already conducted several feasibility and market studies. Construction is scheduled to
commence by the middle of 2005. First Gas Holding (FGH), who has been awarded the
franchise to transmit and distribute gas in Luzon Area under RA 8997, is expected to be vastly
involved with the network and market development. FGH is also interested in the conversion of
the 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 be
used for power generation in Navotas and to support fuel needs of the commercial, industrial and
transport sectors. Both BatMan1 and BatMan2 will be connected to the 40 km city gas pipeline
along the EDSA-Taft loop.
In the next 10 years, DOE indicates that about US$5.51 billion is needed to tap the potential
natural gas resources in the Philippines while US$7 billion is needed to put the basic
infrastructure 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 supply
and use of clean and efficient energy fuels and infrastructures. Indigenous natural gas is expected
to supply a significant portion of future energy requirements for both power and non-power
applications. Under the Interim Rules and Regulations Governing the Transmission, Distribution
and Supply of Natural (DOE Circular No. 2002-080995), DOE has the overall responsibility of
supervising and regulating the development and operation of the natural gas industry through
granting of permits for the construction, expansion, operation and maintenance and
modification of pipelines and transmission and distribution facilities and for the supply of natural
gas to customers and all other measures allowed under existing laws. With the cooperation of
other 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) of
the 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 EDSA
route, 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 for
road 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 2 MRT LRT 1 LRT 2

1
Utility vehicles is the collective name for heavy duty vehicles like jeepney, van, Asian utility vehicles, Pajero,
Fierra, owner-type jeep, etc.
2
Tricycles 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 percent
are 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 of
cars are diesel-fed. The number of buses registered at the NCR in 2002 is 11,716, 97 percent of
which are diesel-fed. There were 191,033 gasoline-fed motor-/tri-cycles registered in Metro
Manila.
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
N
o
.

o
f

V
e
h
i
c
l
e
s
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 2001
is 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 61,152
Taxi (b) 10,125 5,406 1,715 21,702 38,433
Bus (c) 3,578 4,543 5,247 8,315 11,546
Total 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 of
comfort, air pollution and travel time. The Land Transportation Office (LTO) regulates transport
fares, motor vehicle registration (including emission testing) while the Land Transportation
Franchising and Regulatory Board (LTFRB) regulate franchises. Both LTO and LTFRB are line
bureaus of the Department of Transportation and Communication (DOTC). DOTC is presently
embarking on a Fleet Modernization Program. Franchises of vehicles with more than 15 years of
age 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 initial
registration.
The Metro Manila Development Authority (MMDA) is responsible for a) coordination and
integration of the efforts of LGUs and central government in formulating effective policies and
plans, and implementing effective traffic and transport projects and b) management of traffic
flow and enforce discipline and traffic rules in Metro Manila. At present, MMDA is
implementing 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 all
streets, 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, the
Manila-Cavite coastal road and Commonwealth Avenue. Provincial buses enter Metro Manila to
load and unload passengers in their respective terminals.
Buses plying the Metro Manila area are either second hand or locally assembled buses with
imported engines. Most second hand buses are imported from Japan (about 90 percent) with an
average age of 8 years. Price of a second hand bus from Japan is about US$5,000. The
refurbished bus is sold at US$13,000 to include the freight, taxes, refurbishment and profit
3
.
These buses can operate up to 7 more years for a total vehicle life of 15 years. There are
however 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 a
significant number of buses. There are 11 major bus operators identified in Metro Manila, some
of 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 their
own filling stations located in their central garage or terminal.

3
Source: 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, years
Five Star Bus Co. Inc. 340 C 5
Philtranco Service Ent. Inc 340 P/C 10
Tritran Inc. 280 P/C 8
Jell Transport/ES Transport 200 C 15
RRCG Transport 170 P/C 15
CICN Transit 80 C 10
Ma-Fel Transit 50 C 5+
Fermina Express 50 C 6
Southern City Lines 20 C 10
Saint Rose Transit Inc 150 * P/C 5-10
California Bus Lines 150* C 15
Notes: 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., 30
to 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 smoke
emission. Over the past 10 years there have been moves to remove provincial buses altogether
from Metro Manila roads. However, identification of suitable terminal sites, together with the
sheer number of buses and passengers that would have to be handled, has made this policy
difficult to implement.
3.2.2 Jeepneys
Jeepneys are the most popular mode of transport in Metro Manila. Jeepneys can be found
everywhere else except EDSA.
Jeepneys are locally designed/assembled vehicles, similar to open mini buses with 14 to 24
passengers capacity. They are made of locally manufactured bodies with secondhand imported
diesel engines (usually Isuzu and Fuso brands from Japan). The cost of jeepneys is in the range
of Php 250,000 to 350,000 (US$4,500 to US$6,400). Jeepneys are diesel-fed with no discreet
pattern for refueling and engine conditioning because daily operation depends on the owners
preferred time.
Due to its low cost, jeepneys became a livelihood for low to middle income families. Jeepneys
are 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 operations
along 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, Toyota
Tamaraw 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 of
35 km. The Megataxi vehicle more convenient ride for commuters than jeepneys because they
are air conditioned, have more comfortable seats, and the passengers are not exposed to air
pollution. 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 or
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. Most of the taxis are gasoline-
fed.
3.2.5 Tricycles
Tricycles are motorcycles (equipped with a two-stroke or four-stroke engines) attached with
side-cars that can accommodate 3 to 5 passengers. The sidecars are locally designed and
manufactured by small to medium enterprises located all over Metro Manila. Tricycles provide
feeder services within sub-divisions and other areas where larger vehicles cannot penetrate.
Tricycle terminals are located near villages/subdivisions to transport passengers from main
thoroughfares to their respective residences. Tricycle franchise are on per area basis, owned and
operated by one owner per vehicle. Tricycles with brand new engines cost from Php 85,000 to
Php 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 is
steadily decreasing at 1.2 percent annually from 1998 to 2000. In 2000, the total diesel
consumption is 42 million barrels while gasoline consumption is approximately 22.8 million
barrels. LPG consumption is steadily increasing at 8 percent per year since 1995. In 2000, LPG
consumption reaches 12.28 million barrels.
The pump prices of the petroleum products in the country in years 2000 to 2002 are shown in
Figure 3.6. As shown local petroleum product prices are adjusted to the international Dubai
crude FOB prices and the foreign exchange rates. The reported prices of diesel, regular gasoline
and LPG as of September, 2003 are Php 15.78 per liter, Php 19.29 per liter, and Php 11.65 per
liter, respectively.


00453.001.11
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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
T
h
o
u
s
a
n
d

B
a
r
r
e
l
s
Diesel
Gasoline
LPG

Figure 3.6 Domestic Wholesale Posted Prices/Pump Prices (Php/liter) vs. International Dubai
Crude FOB Prices (US$/barrel)
0.00
10.00
20.00
30.00
40.00
50.00
60.00
J
a
n
-
0
0
M
a
r
-
0
0
M
a
y
-
0
0
J
u
l
-
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S
e
p
-
0
0
N
o
v
-
0
0
J
a
n
-
0
1
M
a
r
-
0
1
M
a
y
-
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1
J
u
l
-
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1
S
e
p
-
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1
N
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-
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J
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-
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-
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J
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-
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3
S
e
p
-
0
3
Month-Year
Premium Gasoline
Unleaded Gasoline
Regular Gasoline
Diesel
LPG
Dubai FOB, ($/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) for
transport in the country. President Gloria Macapagal-Arroyo unveiled a portfolio of incentives
which includes financial packages, tariff reductions and franchise grants among others, to
encourage companies to supply, acquire and operate original equipment manufactures natural gas
vehicles (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 in
developing the natural gas industry. An executive forum composed of different government
agencies 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 diesel
engine Isuzu HiLander vehicle to a 100 percent natural gas engine unit. This was
followed 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 2002
taxi units to promote factory-built or OEM-NGVs. In March 2003, the first CNG
refueling station was inaugurated at the PNOC-ECs San Antonio Gas Plant (SAGP) in
Isabela. Also, DOE conjointly with Ashok Leyland of India introduced CNG buses to
operators 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 signed
on August 4, 2003 for the establishment of mother-daughter refueling stations. The
mother station shall be located adjacent to the on-shore gas plant (OGP) in Batangas
while 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 Fort
Bonifacio.
OEM-NGV and NGV conversion/retrofit. The bus operators are already firming up
commitment to purchase a total of 150 CNG buses. These buses will run through the
Batangas-Manila Corridor and will utilize the mother-daughter station established by
PSPC above.
Design/recommend incentive packages and financial assistance. The Development Bank
of the Philippines and the Trade and Industry Development Corporation (TIDCORP) are
providing 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 the
first seven years of NGVTPP.
Lower excise tax for CNG (2 percent) compared to diesel and gasoline (3
percent).
Income tax holiday for qualified NGV industry related activities under the Board
of Investments (BOI) 2003 Investment Priority Plan (IPP). Application for
registration 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. These
include the following:
(1) Land transportation using CNG
(a) Registered PUB operators must have their own terminals that can
accommodate the total number of buses under their franchises
(b) Application for registration must be accompanied with copy of
franchise from the LTFRB.
(2) Conversion shops
(a) This covers converting, retrofitting, repairing, operating and
maintaining NGVs in accordance with relevant PNS and procedures
and shall provide warranties to stakeholders
(b) Only projects with minimum investment of US$2 million may qualify
for 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 accordance
with 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 component
of 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 not
limited to an Endorsement, a Certificate of Registration or Permit to
Operate or any related document required.
(4) Manufacture/Assembly of NGVs
(a) This covers establishment of new facility or utilizing an existing
assembly facility for the assembly/manufacture of brand new quality
NGVs and related parts/components which shall involve at least the
basic assembly processes, i.e., painting, trimmings and quality
testing/inspection.
(b) Only projects with minimum investment of US 8 million may qualify
for registration.
(5) Application for registration for all natural gas Registered PUB operators
must have their own terminals that can accommodate the total number of
buses under their franchises.

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One percent rate of duty on imported NGVs, NGV engines and other NGV
industry related equipment, facilities, parts and components as certified by the
DOE. Table 3.5 shows the list of equipment that will enjoy the 1 percent rate of
duty 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 related
to 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 conversion
systems, etc. Currently, capability building is limited to DOST and DOE through local
and international trainings.
Adopt and develop standards and identify regulatory requirements. The Bureau of
Product Standards approved 48 Philippine National Standards (PNS) for natural gas
utilization in transport (see Appendix A). According to the draft evaluation report on
Philippine Natural Gas Standard (DBHORNE LLC and Charonic Canada, Inc., August
2003), the PNS(s) are adequate to provide a safe foundation for the pilot program but has
to be expanded and enhanced into a comprehensive structure that can be used by the
future 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 its
implementation is covered by the above mentioned study.
Conduct information, education and communication. Public awareness program is
limited 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 Metro
Manila. 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 refueling
stations. Over the past 10 years, vehicle conversions have taken place at a rate of 8,000 vehicles
per month. Most converted vehicles are individually owned passenger cars. Currently there are
very 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 trunk
pipelines. Natural gas is inexpensive compared to gasoline as a result of differences in fuel
taxes. Although the Argentine government strongly endorsed the development of CNG, its
development effort has been entirely accomplished by the drive of private enterprise, supported
by 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 of
components 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 must
display a sticker to demonstrate compliance with standards. Regular training programs are
offered 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 vehicle
conversions 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 egg
dilemma
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 policies
and coordinate/implement relevant regulations
Public education and training programs will alleviate public misgivings concerning safety
and performance of NGVs and refueling stations and increase public awareness of NGV
benefits
Some economic incentives or regulatory advantages for construction of sufficient
refueling 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 War
II. Today it ranks behind only Argentina and Brazil with over 400,000 vehicles and 400
refueling stations. Currently the NGV industry has multiple drivers in Italy: diversification of
energy supply, preservation of historic buildings, landmarks and artwork, environmental
concerns, and economic growth. Most existing CNG vehicles are bi-fuel private cars. Taxis
have been slow to convert to CNG due to the fact that most CNG refueling stations are clustered
on the outskirts of cities due to space limitations in city centers. This makes CNG fueling less
attractive to taxi drivers. OEM dedicated vehicles have just recently become available. CNG
fuel 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 NGV
purchase incentives, 70 percent subsidies for new refueling stations, and exemption of CNG
vehicles from local traffic control regulations. CNG bus development has lagged due to limited
space at key city depots, but is expected to increase as historic city centers are closed to private
transport. With its long history of CNG use, Italy has a well developed natural gas distribution
system. CNG industry is also well developed with Italian companies selling technology and
products worldwide. Almost all of Italys natural gas is imported, demonstrating that domestic
supply 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 a
nationwide 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 and
encourage 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 gas
distribution and refueling network
As the NGV program progresses and matures, positive ripple effects to the economic
growth in the related industries will take place
In addition to incentives or initiatives that require capital investment of government
support, 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 million
vehicles 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 stations
by the end of 2003. Most of the CNG vehicles in Brazil are taxis, private cars and light-duty
vehicles 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 to
convert urban bus fleets, government fleets and cargo vehicles. Initial results were discouraging
due to limited refueling infrastructure at the time, acceptable technology for conversion of diesel
fueled heavy duty engines was not yet developed, and bus companies could not shoulder the
financial 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 the
Plangas program (though conversion subsidies were halted) and CNG vehicle growth has been
very strong ever since. Converted vehicles require a certificate issued by a state controlled
agency. Federal and state fuel taxes price CNG fuel favorably to gasoline and ethanol, but not
versus diesel. Although Brazil has adequate supplies of natural gas, both from domestic
production and imports, metropolitan areas could use expanded natural gas delivery
infrastructure. Over 20 automobile OEMs operate in Brazil, but none are currently offering
dedicated NGVs. Brazil also has a history of ethanol fueled vehicles that predated the Plangas
program. 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 prices
dropped, Brazil began producing more oil domestically, and high sugar prices decreased the
incentive to produce alcohol from sugar cane. Approximately 400,000 dedicated ethanol
vehicles still remain, and the ethanol program still has political attractiveness. Brazil did issue
mandates for the conversion of diesel fueled buses to CNG, but a combination of contractual and
technical 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-term
government energy policy. They worry that the difficulties with the ethanol program will be
repeated with CNG. CNG vehicle safety and reliability in Brazil is a concern, as accidents and
mechanical 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 and
technology
Economic Lessons
Taxi conversion program was very successful when subsidies for conversion were
offered initially
Private car conversions are increasing rapidly as the natural gas supply becomes more
readily available
Urban bus conversions were hampered by (1) high investment and long pay-back period
and (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 guaranteed
over 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. Since
commencing in the late 1980s, there are now approximately 130,000 NGVs on the road, serviced
by about 1,200 refueling stations. The U.S. gas pipeline infrastructure is extensive and LNG is
also available. Natural gas pricing relative to gasoline and diesel varies with location, but natural
gas does enjoy a small price advantage to conventional fuels. NGV development in the U.S. has
been primarily driven by environmental and energy diversity concerns, with economic
development as a secondary driver. Several major pieces of legislation specifically mandate that
government and private fleets purchase increasing numbers of alternatively fueled vehicles as
their fleets are updated. Additionally, the federal government provides tax deductions for
purchases of clean fuel vehicles and construction of refueling stations. Individual states have
also a variety of incentives and vehicle mandates. Due to these fleet mandates, the United States
has 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 on
order will be fuelled by natural gas. Most light duty vehicles converted belong to fleets, while
the 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 gas
use or displacement of conventional fuel. As a result, there are many bi-fuel vehicles in
fleets that continue to operate on conventional fuel
In order to take NGV growth to the next level, the owners of private vehicles need to be
convinced to convert. This market sector is particularly cost conscious and significant
financial 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 very
important to focus on natural gas use or displacement of conventional fuel, rather than
just focusing on number of NGVs
Creation of information management system can help facilitate successful planning and
implementation 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 of
favorable factors: plentiful supplies of cheap domestic natural gas compared to high priced
imported oil, a desire to control urban air pollution, and a governmental climate in favor of
public 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 reached
15,000 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 totals
have leveled off at 21,000 with 140 public and 85 private refueling stations. Growth is
negligible at this time, with new vehicle conversions replacing retired vehicles. CNG enjoys a
33 percent price advantage over gasoline due to Federal and provincial tax policy. Conversion
kits are available, but labor costs for conversion can be quite high. Federal and some provincial
and private subsidies are provided for vehicle acquisition, refueling stations, marketing activities
and research and development. There are some CNG vehicle mandates, but they are ineffective
due 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 built
large refueling stations to take advantage of economies of scale, but large fleet owners were

1
For 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 vehicles
that 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 of
the large stations closed due to poor economics, which left some NGV users stranded and
discouraged further growth of infrastructure. Vehicle conversion centers were set up in central
conversions, 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, development
of NGV vehicles and infrastructure must be considered a failure. Curiously, there are many
NGV related companies based in Canada that are quite successful. These include fuel station
builders, 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 and
poor 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 success
of NGV program
Mechanic and repair technician training and availability will increase acceptance of new
technology
It is essential to have a coordinated strategy of growth of NGVs and refueling
infrastructure
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 are
less than 1,000 vehicles and under 20 refueling stations in the entire country. The gas industry
has 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 sector
bodies was established to promote the use of more fuel-efficient, less polluting, less resource
intensive, and quieter vehicles. Natural gas vehicles were one of the technologies recommended
by 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 an
obstacle to initiating widespread use of CNG since both fuels have similar vehicular emissions.
The barriers encountered in UKs NGV development include:
Policy Barriers
No rebates exist to encourage the use of CNG
No guarantee that switching to natural gas will pay off economically
The current fuel-neutral policy does not specifically promote NGV development
Use of ULSD will become mandatory in the UK starting in 2005. This may inadvertently
impose an obstacle to initiating widespread use of CNG
Economic Barriers
The economics are still not sufficient to encourage fleet operators to switch to natural gas
Operating costs remain the major concern for bus operators
All fleet operations are privately controlled and focused on short term profitability
Other Barriers
There is a lack of natural gas infrastructure which discourages private vehicles to convert
Current emission regulations control total HCs rather than non-CH
4
HCs and
consequently put NGVs at a disadvantage compared to ULSD fueled vehicles
The U.K. experiences relevant to Metro Manila are:
The introduction of a new vehicle fuel requires a price advantage over the existing fuel
The current UK alternative fuel program is fuel neutral and therefore does not
specifically promote NGV development
There is support from the natural gas industry, but currently insufficient to provide the
impetus needed to start a viable CNG vehicle program

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4.7 NEW ZEALAND
4.7.1 Overview
New Zealands experience with NGVs began in earnest in 1979. Conditions were favorable for
the development of natural gas as a vehicle fuel. A major gas field off the coast of the North
Island had been developed and the government had committed to more offtake than could be
used for electricity generation. New Zealand was importing 90 percent of its transportation fuel
and oil prices were spiking upwards. The government was in favor of regulating the energy
economy. A number of government organizations developed a master plan for natural gas use,
including NGVs. With government financed incentives for vehicle conversion, refueling station
construction, training of equipment services and operators, along with public awareness
campaigns, the initial development of NGVs was quite rapid. Natural gas was priced at 40-50
percent of the cost of gasoline. Within 5 years, there were 110,000 vehicles and 450 refueling
stations. 10 percent of all spark ignition engines on the North Island were NGV powered.
Natural gas was not available on the South Island. The vehicles were converted gasoline
vehicles. Diesel conversions did not take place, as the conversion technology for diesel was not
yet developed. Initial obstacles, such as long queues at stations, low-pressure cylinders, and poor
quality conversion kits were overcome by a combination of government and industry
champions. In 1984, a new Labor Party government was elected in New Zealand. NGV
incentives were withdrawn and the oil industry was deregulated. Oil companies then bought
privately owned stations and removed the CNG equipment. Global oil prices declined. An
excise duty on diesel was removed and a road tax imposed on vehicles that eliminated natural
gas price advantage. New vehicle conversions plummeted and natural gas fuel use declined as
existing vehicles were retired due to vehicle turnover. At this point, less than 10,000 NGVs
remain in service in New Zealand.
Lessons learned from New Zealands NGV history include:
Government subsidized programs are at risk from political change and are not easily
sustainable
A substantial price discount for natural gas fuel (40-50%) is needed to justify conversion
based strictly on economic payback
If conversion goals are set too high or rapid, the quality of the conversions could suffer as
a result
Strong support by government and industry champions is very helpful in initiating and
maintaining a fuel conversion program
New Zealand experiences relevant to Metro Manila are:
A CNG master plan that does not include heavy government subsidies is more likely to
be sustainable on a long term basis

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Strong government support in terms of CNG development, communication with users
and developers of CNG technology, and in sponsoring training and educational
campaigns are essential for the initial growth of NGV industry
CNG program growth should be managed so that poor equipment does not become an
issue
4.8 INDIA
2

4.8.1 Overview
India has a relatively successful NGV program in Delhi. Currently, it has a total of 115 CNG
refueling stations, including 77 mother and online stations. The total CNG vehicles operating in
Delhi reached 77,368 as of January 2003. These CNG vehicles include 7,695 buses, 48,074
autorickshaws, 4,149 RTVs, 10,350 private cars and 7,100 taxis. Delhi has just received the
Clean Cities International Partner of the Year Award for the progressive and successful CNG
transport program. Delhis move toward CNG was driven by the judiciary directives rather
than the executive orders. In 1986, the India Supreme Court directed Delhi Government to detail
out steps to control pollution in the city. In 1992, GAILs pilot study established the feasibility
of CNG as an alternative fuel in three cities including Delhi. Among the many directives by the
Supreme Court are fines on diesel buses, phase-out of diesel buses (800 buses per month starting
from May 2002) and priority given to the transport sector for CNG allocation.
Indian experiences relevant to Metro Manila include:
Plan in advance
Proper co-ordination between various agencies - imperative
Adequate infrastructure
Gas
Refueling stations widely spread
Vehicles technology and equipments
Safety norms to be in place
Inspection & maintenance

2
Based on the presentation of Mr. S. Sundar of TERI, New Delhi, India, during the CNG Workshop held in Manila
on October 29, 2003.

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4.9 THAILAND
3

4.9.1 Overview
Thailand has implemented NGV program since 1984 when the country established cooperation
with New Zealand to try five demo CNG buses with one refueling station. Since then, there has
been a strong government commitment in the use of natural gas in transport to alleviate air
pollution, increase energy security, reduce medical care cost and create job opportunities. As of
September 2003, Thailand had a total of 1,389 NGVs, including 103 buses, 1,100 bi-fuel taxis
and 186 bi-fuel fleet and passenger cars served by 10 CNG refueling stations, including 2 mother
stations, 2 conventional stations and 6 daughter stations. One hundred taxis were converted to
NGV for free in 2001 and 1,000 more taxis were converted for free in 2002. Under the
2003/2004 Implementation Project, 10,000 addition taxi conversions, 100,000 CNG OEM taxis,
and 42 CNG refueling station construction are anticipated. The CNG price guarantee has been
provided as shown in the following schedule:
Up to 2006: 50% of diesel
2007: 55% of gasoline, 91 octane
2008: 60% of gasoline, 91 octane
From 2009: 65% of gasoline, 91 octane
The ceiling price of CNG will be at 10.34 Baht/kg, no matter how high of diesel and gasoline
retailed prices are.
Thai experiences relevant to Metro Manila include:
Motivation of natural gas utilization
Government commitment to the program
Sustainable economic advantages over liquid fuels
Infrastructures availability
Appropriate NGV technologies
Appropriate program management
4.10 GENERAL REMARKS
Based on the above analysis, 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

3
Based on the presentation of Ms. Weena T. Chai-Anun of PTT Public Company Limited, Bangkok, Thailand
during the CNG Workshop held in Manila on October 29, 2003.

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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
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
All the successful NGV programs (and in all the successful countries) require strong government
support in terms of inter-fuel taxation favoring CNG over other types of fuels or other forms of
financial subsidies to reduce CNG pump price or to help pay for vehicle conversions or
purchases. This is especially important during the initial stage of NGV implementation in order
to encourage the switch to CNG and to achieve the desired market penetration. This is a
necessary cost to the government, however, it does not imply that the NGV program is not
sustainable. The sustainability issue needs to be examined from a national perspective. The cost
of NGV implementation can be offset by the environmental and health benefits that a
government will realize as a result of a better air quality. When the benefits of an NGV program
exceed the cost of NGV implementation, it will allow the government to apply the net or a
portion of the net benefit to in turn further enable the NGV program. The sustainability issue
of the NGV program in Metro Manila will be examined in Section 7.7, National Impact.
It is to be noted that, most countries started the NGV programs with taxis running on CNG. In
this study, we assume that the successful implementation of NGVPPT is a pre-requisite and
agree with the NGVPPTs emphasis on the CNG buses which are more manageable during the
first phase when the refueling infrastructure development is rather limited and the pipeline for
delivering natural gas to Metro Manila is not expected to complete until the 2007/2008
timeframe. In this study, we assume the CNG penetration in both taxi and jeepney market will
begin to take off starting from 2007 (see Section 7), while the activities for CNG taxis and
jeepneys between 2004 and 2007 are limited to demonstration purposes.

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Section 5 Technology Assessment
5.1 SUPPLY-SIDE ISSUES
5.1.1 Competitive Advantages of CNG over other Alternative Fuels in Metro Manila
While LPG has lower hydrocarbon and particulates (but higher CO and NOx) emissions than
CNG as demonstrated in several studies, there are no technological or economic incentives to
choose LPG over CNG in Metro Manila. LPG use for transport has not been successful in Metro
Manila because of shortage of supply and competes with the demand for household use. The
accessibility of indigenous natural gas in Metro Manila, the uncertainties in the demand and
supply projections of DOE, and the economics associated with providing additional
infrastructure for LPG, made it more feasible to dedicate CNG for use of transport in Metro
Manila. The indigenous natural gas in the Philippines will serve better national interest.
While the pure or blended biodiesel (CME) can be used in diesel engines with no major
modification and offers substantial emission reduction compared to the conventional diesel, the
limited supply and high production costs of CME will make it more suitable for niche, rather
than country-wide, applications.
While low sulfur diesel (0.05% S) offers emission improvement compared to the conventional
diesel, the emissions are still much higher than CNG. Use of ULSD (0.005% S) is most
welcomed in Metro Manila. However, its use will not be fully realized until the existing
vehicular emission standard (based on EURO 1) will be upgraded. The government will be
implementing the use of LSD in January 2004 and is set to review and upgrade the emission
standards in 2005.
While LNG can be a feasible alternative to CNG for some types of heavy duty fleets, a different
infrastructure needs to be developed.
It has been argued that if the objective of the Government of the Philippines is to improve the air
quality in Manila, the Government should set emissions and fuel quality standards, facilitate and
encourage the use of clean fuels like CNG, ULSD, LPG etc. and leave to the users to chose one
or the other fuels. Such an approach would ensure that the bulk of the vehicular population in
Manila begins to use clean fuel, thus making a major impact on air quality in the city. Allowing
users to choose clean fuel for their vehicles is certainly a good market-driven approach.
However, when too many alternative clean fuels that require different infrastructures co-exist in
the market, the individual efforts to promote the use of alternative fuel may just cancel each
others progress. The competition for obtaining limited financial resources for infrastructure
development may hinder the development of all alternative clean fuels in the long run.
We believe indigenous natural gas is the best alternative fuel from the perspectives of
technology, economics, trade balance, energy security, environment and health.

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5.1.2 Natural Gas Quality
5.1.2.1 Malampaya Natural Gas Quality
Table 5.1 summarizes the composition and other relevant physical properties of the Separator
Gas from Malampaya-1.
Table 5.1 Chemical Composition and Physical Properties of Malampaya-1 Separator Gas

Composition Mol%
Hydrogen Sulfide 0.00
Carbon Dioxide 3.79
Nitrogen 0.74
Methane 90.28
Ethane 2.77
Propane 1.26
Iso-Butane 0.30
N-Butane 0.44
Iso-Pentane 0.17
Hexanes 0.11
Heptanes 0.07
Octanes 0.04
Nonanes 0.02
Decanes 0.01
Undecanes + 0.00
Total 100.00
Specific Gravity 0.639
Gross Heating Value 38.64 MJ/m3
Net Heating Value 34.87 MJ/m3
Wobbe Index 48.338 MJ/m3

Malampaya natural gas has good quality and is excellent for NGV application for the following
reasons:
Relatively high methane content
Relatively low heavier hydrocarbon concentration
Insignificant sulfur compound content
Slightly high but acceptable carbon dioxide concentration (see Appendix B)

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No major gas processing or clean-up, thus no additional capital investment, is anticipated for the
pipeline natural gas for NGV utilization.
5.1.2.2 International Natural Gas Quality Standards
To accommodate the requirements of NGV engines applications, a number of international
natural gas quality standards have been developed. The two best known and most widely used
international natural gas standards for specifying the quality of natural gas for use as compressed
fuel for vehicles are SAE J1616 and ISO 15403. Brief descriptions of both international natural
gas quality standards are presented in Appendix B.
5.1.3 CNG Refueling Technologies
Refueling facility design and technology is affected by the availability of natural gas supply and
the operating characteristics of the vehicles to be refueled at the facility. Vehicle sizes and uses,
fleet size, trip length, operating hours, and other factors can all influence the choice of
technology used at the facility, as well as the location of the facility.
5.1.3.1 Mother Stations
Compressed natural gas is commonly delivered from production fields or storage locations to
utility companies and/or end users via pipeline. The degree to which the presence of pipeline
infrastructure coincides with the need for natural gas refueling facilities in a given geographic
area will determine the type of refueling facilities required. Refueling facilities with access to a
continuous supply of natural gas from a pipeline are often referred to as pipeline or mother
stations. These stations always have the fuel available to refill vehicles. Mother stations usually
have the following major equipment components:
Dryers
Compressors
Storage
Controls
Dispensers
Valves and Fittings
5.1.3.2 Daughter Stations
Mother or pipeline stations can also act as fuel suppliers to other stations not connected to the
pipeline. These other stations, often called daughter stations, are sited in a natural gas vehicle
territory to provide sufficient fuel to supply the entire vehicle population. Periodic delivery of
fuel from the pipeline or mother station to the daughter station is required to ensure that the fuel
demand of the daughter station is met. The daughter station will contain sufficient gas storage
tankage delivered from the mother station to supply its requirements for refueling CNG vehicles.
When a trailer truck delivers CNG to a daughter station, the truck will connect to a daughter
stations booster compressor which in turn connects to the daughter stations cascade storage
tanks. The booster compressor and the cascade storage tanks serve as a buffer to refuel the

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vehicles. The cascade storage tanks will maintain pressure high enough to fill the vehicles.
When the pressure in the cascade storage tanks drops to a certain level, the booster compressor
will be activated and more CNG will be drawn from the truck, compressed by the booster
compressor, and stored in the cascade storage tanks for refueling.
It is very important when designing a natural gas refueling infrastructure that all vehicles with
empty fuel tanks are always able to reach a refueling station. Any vehicle that runs out of fuel
will require towing back to a refueling facility, or a CNG cylinder mounted on a small service
truck can provide emergency fuel to the NGV fuel tank.
5.2 DEMAND-SIDE ISSUES
5.2.1 Vehicle Conversions to NGV
There are three modes of NGV implementation:
Kit conversions of existing diesel or gasoline engines. Diesel engines, unless using a
pilot amount of diesel to initiate the combustion (i.e., diesel injection pilot ignition),
usually requires adding spark plugs and major engine block and cylinder re-work.
Gasoline engines can usually be maintained as bi-fuel or dedicated NGV
Re-powering in which a new, dedicated OEM CNG engine replaces a non-CNG engine
in an existing vehicle, which depends on the feasibility of integration with the
transmission and other existing systems
OEM dedicated NGV purchase, or assembly from engine, chassis and body systems
Each requires addition of appropriate CNG or LNG fuel tankage.
Most OEM vehicle manufacturers do not support kit conversion, because only OEM engines will
give the expected emission results. Some OEM CNG engines have knock sensors that avoid the
engines from going off-tuning and wrecking themselves.
Some OEM vehicle manufacturers may offer re-powering option but only reluctantly. This is
because potential problems may be blamed on the engine, but be the fault of other existing
vehicle systems.
5.2.1.1 OEM
Original equipment manufacturers provide a selection of natural gas powered vehicles. Selection
of the vehicles depends on the needs of the purchaser. Capital and operating costs, vehicle
capacity, and vehicle range are some of the major variables to be considered. Care should be
taken to ensure that vehicle fuel connections are compatible with station dispensers.
For taxis, the amount of on-board fuel storage needs to be balanced with passenger and cargo
capacity. CNG storage cylinders can be mounted under the vehicle body or under passenger
seats to maximize usable carrying capacity. Tank weight will not normally cause a large penalty
on driving range for taxis, thus, steel or aluminum tanks, which are heavier but cheaper, may be
considered in order to minimize vehicle cost. For vehicles that make longer trips to areas where

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natural gas is not available, a bi-fuel configuration (CNG or LNG plus tankage for alternative
gasoline or diesel) would be called for.
For transit buses, the range of the bus route will determine the volume of fuel storage required.
Since buses usually refuel only at the depots, they often require a large volume of fuel storage.
In this application, the use of tanks constructed from composite materials will reduce the weight
penalty incurred by this fuel volume.
It should be pointed out that the emission control device (ECD) is an integral part of CNG engine
that contributes to emission reduction. The continuous use of ECD is a critical aspect of NGV
implementation.
5.2.1.2 Re-Powering
Re-powering is the practice of replacing an existing engine with a natural gas powered engine on
an existing vehicle chassis. It is necessary to confirm that the new engine will be compatible
with the drive train and mounting configuration of the vehicle, both for good vehicle
performance and to maintain OEM warranty coverage that may be in effect. This practice occurs
more frequently with trucks and buses than with taxis.
5.2.1.3 Kit Conversions
Spark ignition (SI) gasoline engines can be operated on natural gas simply by adding a gas
carburetor and fuel storage tanks. When gasoline vehicles are converted to natural gas, the
gasoline fuel system is usually left on the vehicle to provide a liquid fuel option. This bi-fuel
arrangement does not allow optimization of the engine for the high octane natural gas, but has
been justified by the convenience of having a back-up fuel where CNG refueling facilities are
not well developed. Removal of the gasoline tank and carburetor results in a dedicated
conversion. This allows optimization of the compression ratio and intake manifold for natural
gas fuel, but such retrofit engine modifications do add to the cost.
Natural gas has a low cetane rating and is therefore not suited to compression ignition engines
(i.e., diesel engines). When converting a diesel engine to natural gas fuel, assistance is needed in
starting the combustion process by either injecting a small amount of diesel to initiate the
combustion or using spark plugs. It is to be noted that the dual-fuel system works well in a high-
torque regime. Under this condition, a high degree of replacement of diesel by natural gas can
be achieved. The natural gas substitution is usually reduced when engines operate at low loads
because of a poor combustion efficiency in the lean gas-air phase. Light-load operation of a
vehicle therefore often results in a reduction in diesel replacement. To improve the low-load
operation, the electronic control with multi-point timed port injection has been used. The main
advantage of the dual-fuel system is an operational one the driver can revert to diesel operation
when necessary, making access to CNG refueling facilities less critical in locations where
refueling facilities are not well developed. It should be noted that kit conversion of diesel is
generally not recommended, as discussed in the next paragraph.
Converting diesel engines, especially heavy duty engines, to CNG with aftermarket kits is
generally infeasible and, therefore, is not recommended due to the following reasons:

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OEMs will not support aftermarket conversion and no reputable kits are available
Major engine modifications required: change compression ratio, head and pistons (may
require re-boring cylinder); install cam-triggered ignition (distributor or alternator) and
throttle valve
High maintenance, low efficiency, higher emissions
5.2.2 On-Board Fuel Tanks
CNG tanks are cylindrical vessels capable of storing natural gas at high pressure. They are
available in 4 distinct types:
Type 1 all metal construction, usually steel or aluminum
Type 2 metal liner reinforced with composite reinforcing bands over the cylindrical portion
only
Type 3 metal liner, usually aluminum with composite reinforcement from end to end
Type 4 non-metallic flexible composite liner with composite reinforcement from end to end
Tank weight is a critical variable in vehicle economics:
Lower weight allows addition of more tanks/more CNG, and thus extends vehicle range
Transit bus designs often prefer roof mounted tanks, which can be unstable with high
weight steel tanks
Safety of composite tanks is well demonstrated
Steel tanks are normally used for taxis
Lighter tanks provide more mounting options and safer designs for buses
We recommend Types I, II, and III for buses, jeepneys and taxis for economic reason and Type I
tanks for tricycles again mainly for economic consideration.
It is useful to point out here the difficulties that have been experienced by taxi/bus operators in
other countries in locating CNG cylinders. The bus transport industry in India has been severally
hampered from carrying heavy passenger loads or going on bad roads as cylinders need to be
located under the chassis. The introduction of low floor city buses has also been hampered due
to problems in location of CNG cylinders. Locating the cylinders in the roof of the buses
involves changes in bus designs and increase in cost. Similarly taxi operators have faced
problems in carrying luggage as boot space is occupied with CNG cylinders.

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Section 6 Environmental Impacts
6.1 EXISTING AIR QUALITY IN METRO MANILA
6.1.1 Motor Vehicle Emissions
Motor vehicles are considered as the major contributor of air quality problem in Metro Manila
after all diesel-fired power plants retired in 2002. Area sources are also widespread but are
difficult to estimate in inventories and generally overlooked. Some important area sources are
resuspended road dust, refuse and agricultural burning and open cooking fires. The
Environmental Management Bureau of DENR calculated that the percent contribution of motor
vehicles to the total pollutant emissions in Metro Manila is:
99 percent for carbon monoxide (CO)
99 percent for sulfur oxides (SOx)
98 percent for nitrogen oxides (NOx)
96 percent for total organic gases (TOG)
18 percent for particulate matters
23 percent for PM10
The CO emission from motor vehicles in 2002 is 1 million tons per year while SO
2
emission is
8,100 tons per year. Gasoline-fed vehicles have higher TOG and CO emissions than diesel-fed
vehicles. Particulate matters, SOx and NOx emissions are higher for diesel-fed vehicles (Table
6.1). However for NOx, gasoline-fed cars and UVs show higher emissions than diesel-fed.
Total particulate matters emitted from transport sector are 46.2 thousand equivalent to 18 percent
total particulate matters and 23 percent PM10. Total particulate matters from household,
commercial and industrial emissions and road dust account for 82 percent.
Table 6.1 Motor Vehicle Emissions in Metro Manila

Pollutants (tons per year) Vehicle
Type
Fuel
Used TOG CO NOx SOx PMex PM10
Gasoline 44,409 313,661 17,297 120 596 590 Cars
Diesel 273 882 825 226 247 237
Gasoline 72,937 489,952 25,171 74 906 898 UV
Diesel 11,287 41,779 22,509 6,398 13,921 13,364
Gasoline 740 740 80 0.1 1 1 Buses
Diesel 7,769 7,767 7,830 207 740 276
Gasoline 49,932 95,004 1,284 51 4,208 4,187 MC/TC
Diesel 0 0 0 0 0 0
Gasoline 77,900 16,803 1,822 2 23 22 Trucks
Diesel 11,426 38,291 38,600 1,022 4,632 1,359
Gasoline 168,799 916,161 45,654 248 5,734 5,698 Total
Diesel 30,755 88,659 69,764 7,853 19,540 15,236
Grand Total 199,540 1,004,820 115,418 8,100 25,274 20,934
Source: Environmental Management Bureau DENR, 2002


00453.001.11
40

6.1.2 Air Quality
The few air quality monitoring stations in Metro Manila provides limited information on
pollutant levels. Monitoring is done at least once a month for TSP and only occasionally for
SO
2
, NO
2
and CO.
The annual geometric mean concentration of TSP at all available sites in Metro Manila shows a
downward trend in concentration since 1995. However, all the values are still above the annual
guidelines of 90 g/m
3
(Figure 6.1).

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

0
50
100
150
200
250
300
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
A
n
n
u
a
l

T
S
P

c
o
n
c
e
n
t
r
a
t
i
o
n
,

u
g
/
m
3
TSP (ug/m3) Annual average TSP guideline value (90 ug/m3

Nitrogen oxides measured at the Ateneo station in Quezon City show that NO
2
levels range from
58 to 214 g/m
3
. No reliable inference can be made from the measurement results as some
results exceeded the guideline values while others conform. CO measurements in the same area
show the concentration to be above the eight-hour guideline value of 10 mg/m
3
but under the
one-hour guideline 35 mg/m
3
.
A WHO sponsored study on the exposure of a sample population to vehicular emissions in 1990
and 1991 in Manila showed that chronic respiratory symptoms are significantly higher among

00453.001.11
41

jeepney (local transport mode) drivers than commuters and air-conditioned drivers. Nearly 51
million cases of respiratory symptom days in Metro Manila costs about US$170 million. A
recent study
1
(World Bank) indicates that there is a 70 percent increase in cases of respiratory
symptoms over a decade (from 33 million cases in 1992 to 51 million cases in 2002) in Metro
Manila. The estimated costs of PM emissions in Metro Manila area at US$392 million per year
based on the number of excess deaths and occurrence of chronic bronchitis in 2001.
6.1.3 Environmental Policies and Regulations
The Philippine Clean Air Act of 1999 and its Implementing Rules and Regulations are the key
policies on control of pollutant emissions from vehicles and on maintaining air quality within
acceptable limits. The government embarked on several strategies, and is continuing to find
solutions, to address air pollution in Metro Manila such as: (a) progressive improvements in
fuel quality, emission standards and technology; (b)improved inspection and maintenance; and
(c) improved transport planning and traffic demand management.
Vehicular emissions are regulated through the new vehicle standards and through in-use
standards. The Clean Air Act requires a review of the standard every 5 years. In-use vehicle
emission limits are progressively improved as since 1997 (Table 6.2). The government adopted
the Euro 1 standard for vehicles in 2002 but is planning adopt stricter emission limits (i.e., Euro
2) in 2005.
Table 6.2 Emission Standards for In-Use Diesel Vehicles
Vehicle Type Effectivity Standards Test
CO (percent) HC (ppm) Smoke (HSU)*
Gasoline Vehicles 1997 3.5 600 Idle
2003 0.5 100 Low Idle
0.3 (=10.03) At high idle
Diesel Vehicles Before 2003 2.5 m
-1
Free acceleration (For naturally
aspirated engines, limit is 2.5
m
-1
for turbo-charged engine
and 4.5 m
-1
for a 1,000 m
increase in elevation.
2003 1.2m
-1
Free acceleration (For naturally
aspirated engines, limit is 2.2
m
-1
for turbo-charged engine
and 3.2 m
-1
for a 1,000 m
increase in elevation.
Motorcycles (2 to
4 stroke engines)
Current 6 Idle test
* HSU = Hartridge smoke unit, m
-1
= light absorption coefficient

1
Philippines Environment Monitor, The World Bank, Washington, D.C., 2002

00453.001.11
42

The type of engine technology used and fuel quality used determines the compliance of vehicles
to current and future emission standards set by the government. The removal of lead in gasoline
since January 2001 resulted to reduction in ambient lead levels and use of catalytic converters
for new gasoline-powered vehicles. Sulfur in diesel shall be reduced from 0.25 percent sulfur
(2,500 ppm) to 0.05 percent (500 ppm). Use of low sulfur diesel fuel (0.05 percent sulfur or 500
ppm) shall be implemented by January 2004.
DOTC is responsible for implementing emissions standards for motor vehicles, set by the Act.
DOTC can deputize other law enforcement agencies and LGUs for this purpose. It authorizes
private emission testing centers duly accredited by DTI, implements the motor vehicle inspection
system, and imposes and collects emissions fees. LTO conducts emission testing as vehicle
annual registration requirement and conduct roadside inspection to ensure that vehicles comply
with in-use emission standards. Non-compliant vehicles are apprehended and fined. The
LTFRB has also adopted the policy of canceling the franchise of vehicles proven to be repeat
offenders of emission standards.
6.2 ENVIRONMENTAL IMPACTS OF NGVPPT
One of the major goals of NGVPPT is to introduce clean fuel and technology to improve air
quality in Metro Manila. The use of CNG in transport is expected to reduce particulate, SO
2
,
NO
2
and CO emissions in the transport sector. However, emission benefits from CNG vehicles
will also depend on whether OEM dedicated CNG, CNG aftermarket conversions, bi-fuel or dual
fuel systems were tested. Also, emission levels are functions of engine, after-exhaust treatment
technology, fuel quality and the driving cycles. Dedicated NGVs can have a considerable
exhaust emissions advantage over conventional diesel engine vehicles (Table 6.3). The emission
characteristics of dual-fuel vehicles will depend on the extent to which diesel is substituted by
natural gas over the engine operation range. The stop-and-start nature of buses in Metro Manila
will limit the amount of natural gas substituting diesel, significantly reducing the environmental
advantage of switching to CNG. Compared to gasoline-fed engines, Dhaliwal et al.
2
concluded
that natural gas engines operating in light duty vehicles had consistently higher total
hydrocarbon emissions (-18% to 45%) but very low non-methane hydrocarbons (-99% to -14%).
CO (-66% to 274%) and NOx (-81% to 160%) readings registered a wide range.

2
Researchers at the University of Alberta have completed an extensive literature review of emission studies on light
and heavy duty vehicles powered by alternative fuels. Dhaliwal et.al. presented a summary of this compilation in
paper at the Society of Automotive Engineers (SAE) 2000 World Congress in Detroit Michigan.

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Table 6.3 Emission Benefits of Replacing Diesel with CNG Vehicles
Fuel CO NOx PM
Diesel 2.4 g/km 21 g/km 0.38 g/km
CNG 0.4 g/km 8.9 g/km 0.12 g/km
% reduction 84 58 97
Source: The World Bank Technical Paper No. 516. Breathing Clean, Considering the Switch to Natural Gas Buses The World
Bank. Washington, D.C.
The emission factor per pollutant per vehicle type varies over time and in different places and
fleets. For diesel and gasoline fed vehicles in Metro Manila, these can be attributed to the age
and maintenance and operation. For CNG fed vehicles, the quality of conversions or OEM
projects as well as the installation and maintenance affects the emission concentrations of
pollutants. The emission factors used in this study, as shown in Table 6.4., were estimated
based from literature survey (i.e., for CNG vehicles) and on actual tests conducted on vehicles in
Metro Manila. Emission factors in Table 6.4 for each vehicle types were held constant.
Table 6.4 Emission Factors, grams per kilometer traveled
3

Particulates SO2 NO2 CO HC CO2
Diesel
Buses 1.5 2.5 (0.48) 12.5 12.4 3.7 1.3
Jeepneys 0.9 1.3(0.26) 1.4 2.5 0.7 1.1
Cars 0.6 0.6(0.12) 2 1.9 0.65 0.4
CNG
Buses 0.012 0 0.07 2.1 0.04 1.0
Jeepneys 0.012 0 0.04 0.67 0.04 0.9
Cars 0.012 0 0.04 0.67 0.04 0.3
Note: Emission factors for each vehicle type were held constant and did not consider advances in technology in the next 10
years.
Based on the CNG vehicle penetrations of 1 percent for buses, 8 percent for taxis and 7 percent
for jeepneys projected in Section 7, a significant reduction of pollutant emissions are expected
(Figure 6.2). The emission factors given in Table 6.4 for each vehicle type were held constant
and did not consider advances in technology in the next ten years. The sulfur content of diesel
fuel from 0.25 percent to 0.05 percent resulted in significant reduction in SO
2
emissions.

3
Sources: a) The Feasibility Study on CNG Development for Public Utility Vehicles in Metro Manila, June 2002;
b) USEPA- AP42 and c) Vehicular Emission Control Planning in Metro Manila, April 1992


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Figure 6.2 Pollutant Emissions Reduction and CO2 Savings Due to Use of CNG Vehicles
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
Year
T
o
n
s

P
e
r

Y
e
a
r
CO NOx
HC SOx
PM CO2
SOx (use of low sufur 0.05% wt)

6.3 HEALTH AND OTHER SOCIO-ECONOMIC COSTS
To estimate health impacts of reducing pollutant emissions with different types of fuel use, and
draw conclusions from the estimates, two types of data need to be used and understood
estimates of differential emissions, and the health impacts of each type of emission.
Unfortunately, there have been many different types of data taken or estimates made on vehicle
emissions under different conditions and assumptions of vehicle use patterns, vehicle
technology, fuel quality, etc. To truly compare conventionally fuelled vehicles with NGVs
regarding fuel efficiencies and environmental performance, measurements must be made in-use,
on-board using realistic driving cycles. This has not always been the case with published data.
Also, there have been many different estimates made of the health effects and cost consequences
of different air pollutants. There are large variances among these different bases and studies.
The technical conditions change significantly over time as to, say, NGV versus diesel vehicle
emissions, and the susceptibility of individuals to pollution, the cost of healthcare and the
valuation of human life vary widely with culture, location and economic level.
6.3.1 The British/Canadian/U.S. Electric Tbus Analysis
Table 6.5 gives one set of reputable estimates for a broad range costs related to vehicle air
emissions. These costs are compared for conventional diesel and NGV.


00453.001.11
45

Table 6.5 Comparison of Estimated Environmental and Health Costs for Air Emissions from
Public Transit
(1997 cents/km)
Environmental (1) Health Environmental + Heath
NOx (2) PM Total Average
Conventional Diesel 2.21 - 3.91 8.60 - 14.86 4.55 - 12.24 15.36 - 30.98 23.17
NGV 0.36 - 1.29 1.41 - 5.07 0.05 - 0.19 1.81 - 6.55 4.17
(1) Estimated cost of damages to forests, crops and buildings due to Nox and PM, about 97% due to Nox
(2) NOx direct health effect costs + Nox aerosols + NOx ozone effects (smog); both NOx and PM make
significant contribution to health costs, with NOx predominating
Source: "Calculations Relating to Health and Environmental Costs, in Relation to Public Service Vehicles"
by Kevin Brown, Faculty of Science, University of Alberta, Edmonton, AB

The data expresses a cost range for each item to reflect variations in emissions test data. Actual
costs are likely to be in the middle of each range. Only costs related to NOx and PM were
considered, but there are many other species in transportation-related emissions to air, surface
water and ground water, which have associated health costs that are much harder to estimate.
Therefore, this is only a partial representation of health costs. Further, there are many different
models for estimating pollution-related health costs. Emissions data for these calculations were
based on emissions test data, generally published in the 1997 timeframe, provided by the
Northeast Advanced Vehicle Consortium, The U.S. Office of Transportation Technologies, U.S.
EPA, BC TransLink, Edmonton Transit System, EPCOR and the San Francisco Municipal
Railway. Health cost calculations were derived from a study report - N.J. Eyre, E. Ozdemiroglu
and P. Steele (1997) in Fuel location effects on the damage costs of transport emissions,
Journal of Transport Economics and Policy, 31 (1), pp. 5-24.
As shown, the environmental health and benefits of CNG over diesel public service vehicles are
significant. The average environmental and health cost due to pollutant emissions from a
conventional diesel public transit is more than five times higher than NGVs.
Internalization of the health and environmental benefits derived from use of NGVs will
demonstrate its major advantage over diesel-fed vehicles. The national impact of health and
environmental benefits will make the use of CNG-fed vehicles in Metro Manila a more viable
option.
6.3.2 Economic Evaluation Methodology
There are a wide range of economic evaluation methods that can be used to estimate the values
of environmental impacts (Appendix C). Primary methods require collection and analysis of
data while secondary methods rely on the findings of previously conducted primary research.
Due to limited time and resources, the valuation method used in this Study is the Benefits
Transfer Method. This method is a secondary method and may produce less defensible estimates
of damages or benefits than primary research methods. However, when carefully applied,
benefits transfer and other secondary methods will be adequate for the economic analyses of this
NGVPPT. The values given in Table 6.5 were used to estimate the environmental and health

00453.001.11
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costs associated with running CNG and diesel fed vehicles in Metro Manila. Due to physical
and socio-cultural differences of North America (origin of data) and the Philippines, there were
some uncertainties in the values used. Thus, two national economic impact scenarios were
presented in Section 7 that is, national impact of NGVPPT with fully monetized environmental
benefits and that with only 20 percent monetized environmental benefits.
It is however recommended that primary methods such as cost-of-illness (COI), averting action
and value of statistic life, and value of statistical life year be further investigated as to their
applicability in Metro Manila.

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Section 7 Economics of CNG Use for Transport
7.1 ECONOMIC MODELS
Nexant developed a series of simple Excel spreadsheet models to help evaluate the economics of
the NGVPPT program. It should be noted that, because of the time constraint (i.e., two months
for the entire study), it has been agreed and understood that the outputs of the model calculations
presented in this section are for indication purpose only. Furthermore, the data concerning
vehicle statistics and characteristics (fuel consumption, distance traveled per day, etc.) contained
in the previous reports
1
specifically prepared for the NGVPPT and for Metro Manila are
reconciled and used as inputs to the models. Further detailed study is recommended as stated in
Section 8 of this report.
The key model elements are:
Scenario Development for NGV Penetration
Financial Assessment Models
NGV refueling station infrastructure
Vehicle economics
National impact of the NGVPPT
The NGV refueling station infrastructure model for financial assessment of station operations
depends on a complex set of drivers, as illustrated in Figure 7.1. The model allows selection of
NGV market penetration cases and fuel pricing scenarios and takes into account costs, technical
factors, and other financial factors, to generate cash flows, net present values (NPVs), and
internal rates of return (IRRs) for the various cases considered.

1
A Master Plan Study on the Development of the Natural Gas Industry in the Republic of the Philippines, The
Institute of Energy Economics, Japan, January 2002.
The Feasibility Study on CNG Development for Public Utility Vehicles in Metro Manila, Philippines, Japan
External Trade Organization, June 2002.
Pricing Scheme for Compressed Natural Gas for NGVPPT, Lazaro Bernardo Tiu & Associates, Inc., April 2003.
Feasibility Study on Natural Gas Utilization in Transport, Department of Energy, The Republic of the Philippines,
December 2002.
Implementation of the Philippine Natural Gas Vehicle Program for Public Transport (NGVPPT), Academy for
Educational Development / US Agency for International Development, May 2003.

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48

Figure 7.1 NGV Refueling Station Infrastructure Model

Model
of
Station Development,
Refueling NGV Fleets
Cash Flow,
Profit and
Loss
Calculation
Fuel Price
Station Cost
Model
Capital and
O&M
Assumptions fuel efficiency, station logistics
(mother-daughter, etc.), daily travel, operating
days, displaced fuel economics
NGV Penetration
Scenarios
(Taxis, Buses,
Jeepneys)
vehicles converted per
year and refueling
stations to serve
Assumptions vehicles
served per station
Assumptions Nexant crude prices
IRR

The Vehicle Economic Model, as illustrated in Figure 7.2 calculates benefits to NGV fleet
operators for fuel savings, taking into account incremental capital for NGV and incremental or
reducing operating and maintenance costs.
The CNG price at pump is calculated based on the landed cost at daughter station which in turn
is calculated based on the gas price proposed by DOE for a period of seven years (see Appendix
G). From 2004 to 2010, the CNG pump price increases gradually from about 54 percent of that
of diesel (2004) to about 64 percent (2010). From 2011 to 2014, we assume that the CNG price
will be maintained at 64% of diesel in order to attract CNG users. The detailed CNG price used
for the vehicles and refueling station economics is shown in Appendix G.

The maintenance cost savings (cleaner burning of gaseous fuel resulting in less frequent
maintenance needs and lower maintenance cost) for buses are based on the USAID study cited
earlier. The maintenance savings for taxis and jeepneys are estimated based on buses
maintenance costs.


00453.001.11
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Figure 7.2 Vehicle Economic Model

Fuel Price
Vehicle
Economics Model
Incremental Cost of NGVs
Incremental or Reducing O&M
NGV
Annual
Cost Savings,
Payback Period

The National Impact Model, as illustrated in Figure 7.3, determines the net costs or benefits of
NGV development to Metro Manila and the Philippines. This model takes into account the cost
of natural gas used for CNG, the natural gas pipeline cost attributed to CNG, differences in
imported costs of NGVs and refueling systems as NGVs are developed. In addition to the
savings in diesel import reduction, a critical aspect of this model is the economic credit assigned
for the environmental improvements that are projected to occur due to the NGV program.

Figure 7.3 National Impact of NGVPPT
Savings in Diesel
Import Reduction
National
Economic Model
NGV Differential Import Costs
OEM & Components
Monetized
Environmental
Benefits
Net Costs / Benefits
to Manila / Philippines
CNG Refueling Systems
Import Costs
Cost of Natural Gas Used for
CNG
Natural Gas Pipeline Costs
Attributed to CNG


00453.001.11
50

For a national impact analysis of NGV program in this study, only the costs or transactions
that cross the national border of the Philippines are considered. On the cost side, this includes
the cost of refueling station hardware, the incremental costs of NGVs and components, and the
natural gas pipeline attributable to CNG, that the Philippines as a nation has to import from
foreign countries. Additionally, the use of indigenous natural gas for vehicles represents a
depletion of national resources and thus, the opportunity cost of natural gas that could have been
sold to foreign country at an international parity price. If natural gas needs to be imported as
LNG to supplement the indigenous natural gas for NGVs, then the international parity price has
to be used to account for the import cost of natural gas. On the savings side, there is a reduction
on diesel import because of the use of CNG. The net cost of the above will then be compared to
the environmental and health benefits that the Philippines as a nation can realized because of the
improvement on air quality resulting from CNG use.
7.2 NGV PENETRATION SCENARIO DEFINITIONS
NGV market penetration has been examined under Low, High and Medium (Base) scenarios.
The base case scenario reflects a reasonable ramp-up period to a full station utilization. It is
somewhat aggressive, but achievable. The high penetration scenario assumes higher vehicle
conversions and station utilization. It represents a rapid sustained growth in NGV penetration.
The low penetration scenario assumes a slower start and a slower penetration rates, compared to
the base case scenario.
The scenario development model first estimates an appropriate current year number of stations
built for taxis, jeepneys, and buses, respectively. Taking into account the learning curve effect
and international experience, the CNG vehicles per station are allowed to increase gradually to
maximum values (300 for buses, 350 for jeepneys, and 400 for taxis). Based on the current year
NGVs per station and the current year number of stations, the cumulative CNG vehicle addition
can then be determined for buses, jeepneys, and taxis, respectively. The percent of current year
potential CNG additions and the percent of total fleet are then calculated and checked for their
appropriateness against international experience and the interests of DOE and other stakeholders.
The current year sum of stations for taxis, jeepneys, and buses is then used to determined the
number of mother and daughter stations based on a pre-determined daughter to mother station
ratio which is also allowed to increase gradually to a maximum value of 7.
The delivery of CNG from mother stations to daughter stations is assumed by mobile trailers.
Two mobile trailers per daughter station are assumed.
The following assumptions and parameters define each scenario:
Potential NGV conversions per year:
Overall fleet growth
Rate of vehicle retirement
Rate of engine replacement (re-powering)
Fleets addressed:

00453.001.11
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Taxis
Buses
Jeepneys
Refueling stations:
Vehicles per station
Mix of Mother and Daughter stations
Natural gas consumption:
Vehicle efficiency (km/diesel equivalent liter)
Distance driven km per day per vehicle
Average days of operation per year
Key assumptions to define the penetration of target vehicles are provided in Table 7.1 (fleet
vehicles) and Table 7.2 (refueling stations). Other assumptions and relevant information are
shown in Appendix G.
Table 7.1 Key Assumptions for Fleet Vehicles

Bus Jeepney Taxi
Fleet Characteristics
Fleet Size @ 2002 12,123 62,375 41,508
Annual Fleet Growth, % 5 2 8
Vehicle Characteristics
Diesel Consumption, km/l 1.99 2.34 3.01
CNG Engine Efficiency, % of Diesel Engine 85 85 85
Distance per Day, km/day 175 175 250
Service Day per Year, days/year 330 330 330
Incremental Costs of CNG over Diesel Vehicle
Dedicated NGV, thousand Pesos/unit (@ 2002)
High 860 340 260
Low 480 190 150
Repowering Diesel to CNG, thousand Pesos/unit (@ 2002)
High 170 70 50
Low 100 40 30
Savings on Maintenance Cost, Pesos/km 0.59 0.30 0.24
Refueling Characteristics
Maximum Vehicles per Station 300 350 400


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Table 7.2 Key Assumptions for Refueling Stations

Maximum No of Daughter Stations per Mother Station 7
Mobile Trailers per Daughter Station 2
Capital Cost per Unit, Pesos/unit
Mother Station 45,637,000
Daughter Station 16,429,000
Mobile Trailer 6,800,000
Operating Cost Mother Daughter Trailer
Labor requirement, men/unit 4 2 2
Maintenance, % of Capital Investment 1.5 1.5 1.5
Depreciation, year 20 20 10
Others, % of Labor + Maintenance + Electricity 1 1

The typical price of a new CNG heavy-duty bus in the U.S. is about $325,000, while the price of
a comparable diesel version is about $250,000. The price for medium-duty CNG buses ranges
from $60,000 to $150,000. For comparison purpose, the diesel version of these buses is on the
order of $40,000 to $100,000. A number of Asian countries, in particular, India, China, Korea,
and Japan are in the process of developing CNG prototype of this type of medium-duty buses for
their local markets and possibly for export. When a bus operator is confronting with the decision
on CNG bus purchase, the most critical aspect in his/her decision making is the incremental cost
of a CNG bus over the diesel version of a comparable bus. Thus, using the incremental cost, as
is customarily done in the NGV industry, for analysis is a more relevant approach and is used in
this study.
7.3 NGVS IN METRO MANILA 2004 - 2014
The cumulative NGVs, expressed as percent of total fleet, for buses, taxis, and jeepneys, from
2004 to 2014 are shown in Figure 7.4, Figure 7.5 and Figure 7.6, respectively.

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53

Figure 7.4 CNG Bus Additions
2004 - 2014
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
C
U
M
U
L
A
T
I
V
E

C
N
G

V
E
H
I
C
L
E
S
,

%
T
O
T
A
L

F
L
E
E
T
BASE CASE HIGH CASE LOW CASE

Figure 7.5 CNG Taxi Addition
2004 - 2014

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
C
U
M
U
L
A
T
I
V
E

C
N
G

V
E
H
I
C
L
E
S
,

%
T
O
T
A
L

F
L
E
E
T


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Figure 7.6 CNG Jeepney Addition
2004 - 2014

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
C
U
M
U
L
A
T
I
V
E

C
N
G

V
E
H
I
C
L
E
S
,

%
T
O
T
A
L

F
L
E
E
T

As shown in Figure 7.4, for the base case scenario, CNG buses start at 155 or 1 percent of the
total bus fleet in 2004 and reach about 2,000 or about 9 percent of the total bus fleet in 2014.
CNG buses reach about 40 percent and 5 percent of the total bus fleet for the high and low case
scenarios, respectively.
As shown in Figure 7.5, insignificant number of CNG taxis is expected before 2007 that is the
year in which the construction of the Batangas-Manila natural gas pipeline is expected to be
completed. CNG taxis start at 1,000 or 2 percent of the total taxi fleet in 2008 and reach about
50,000 or about 48 percent of the total taxi fleet in 2014 for the base case scenario. CNG taxis
reach about 67 percent and 13 percent of the total taxi fleet for the high and low case scenarios,
respectively.
Same as the case for CNG taxis, insignificant number of CNG jeepneys is expected before the
completion of the Batangas-Manila natural gas pipeline. As shown in Figure 7.6, CNG jeepneys
start at 750 or 1 percent of the total jeepney fleet in 2008 and reach about 43,750 or about 55
percent of the total jeepney fleet in 2014 for the base case scenario. CNG jeepneys reach about
77 percent and 18 percent of the total jeepney fleet for the high and low case scenarios,
respectively.
In 2014, as shown in Figure 7.7, the total number of NGVs in Metro Manila reaches about
95,750 in the base case scenario. For the high and low case scenarios, the numbers are 140,000
and 29,000, respectively.

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Figure 7.7 Total Number of CNG Vehicles
2004 2014
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
N
U
M
B
E
R

O
F

N
G
V
S
Base Case High Case Low Case

The base case annual CNG vehicle additions are shown in Figure 7.8, with taxis and jeepneys
being the key fleet for NGV market penetration from 2008 to 2014. In 2013, the total new NGV
addition reaches a peak of almost 23,000 vehicles. The NGV addition in 2014 reduces to around
19,000 indicating an excess capacity in the existing refueling stations that can become potentially
available for CNG private passenger car applications.

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Figure 7.8 CNG Vehicle Addition
Base Case
0
5,000
10,000
15,000
20,000
25,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 V
E
H
I
C
L
E

A
D
D
I
T
I
O
N
S

P
E
R

Y
E
A
R
TAXIS BUSES JEEPNEYS

7.4 PAYBACK PERIODS FOR INCREMENTAL INVESTMENT OF NGVS
The payback calculations are carried out based on the incremental cost of CNG vehicle, the CNG
cost savings that the vehicle owners receive at pump, i.e., the price difference between diesel and
CNG, and the savings on maintenance. The payback analysis based on opportunity cost of
natural gas is not done because there are no fuel savings without the CNG discount. The
opportunity cost of the gas and consequently the sustainability issue are treated independently in
the national impact analysis.
The payback period is estimated based on the incremental costs for both dedicated NGVs and re-
powered diesel vehicles indicated in Table 7.1. For dedicated NGVs, the payback periods for the
incremental investment range from 2.8 to 5 years, 1.4 to 2.6 years, and 1.1 to 2 years for buses,
jeepneys and taxies, respectively as shown in Figure 7.9. For re-powered NGVs, the payback
periods for the incremental investment range from 0.6 to 1 years, 0.3 to 0.5 years, and 0.2 to 0.4
years for buses, jeepneys and taxies, respectively.

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Figure 7.9 Payback Periods for the Incremental Investment of NGVs

0
1
2
3
4
5
6
Low High
Y
E
A
R
S
Dedicated CNG Buses Dedicated CNG Jeepneys Dedicated CNG Taxis
Repowered Diesel Buses Repowered Diesel Jeepneys Repowered Diesel Taxis

7.5 CNG REFUELING STATIONS IN METRO MANILA 2004 2014
In order to satisfy the NGV market penetration discussed above, the total number of CNG
refueling stations increases from 4 before 2007 to 15 in 2008 and reaches 260 in 2014 in the base
case scenario, as shown in Figure 7.10. The number of refueling stations reaches 375 and 120 in
2014 for the high and low case scenarios, respectively.
Figure 7.10 Total Number of CNG Refueling Stations
2004 2014
0
50
100
150
200
250
300
350
400
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
T
o
t
a
l

N
u
m
b
e
r

o
f

R
e
f
u
e
l
i
n
g

S
t
a
t
i
o
n
Base Case High Case Low Case


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The diesel displacement by CNG reaches about 2.5 billion liters in 2014 for the base case
scenario as illustrated in Figure 7.11. The diesel displacements in 2014 are 3.7 and 0.8 billion
liters for the high and the low case scenarios, respectively.
Figure 7.11 Diesel Displacement by CNG
2004 - 2014
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
D
I
E
S
E
L
,

M
I
L
L
I
O
N

L
I
T
E
R
S
Base Scenario High Scenario Low Scenario


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7.6 ECONOMICS OF CNG REFUELING STATIONS
The CNG refueling station investment requirement is substantial. As the total number of CNG
refueling stations begin to increase in 2008, the total annual investment also increases rapidly.
The investment increases from 0.4 billion pesos in 2008 and reaches 2.2 billion pesos in 2014 in
the base case scenario, as shown in Figure 7.12. Based on crude oil pricing forecast (see
Appendix G) and the base case NGV penetration scenario, the IRR for refueling stations is
estimated to be below 5 percent, which is rather unattractive for an investment of this size.
Figure 7.12 Annual CNG Refueling Station Investment
Base Case
0.0
0.5
1.0
1.5
2.0
2.5
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
B
I
L
L
I
O
N

P
E
S
O
S

P
E
R

Y
E
A
R

The relationship between CNG and diesel retail prices is shown in Figure 7.13. It is assumed
that the CNG retail price on a diesel equivalent liter basis increases gradually from about 55
percent of the diesel retail price in 2004 to about 64 percent in 2014 (see discussion in Section
7.1).

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Figure 7.13 CNG and Diesel Retail Pricing
2004 - 2014
0
5
10
15
20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
P
E
S
O

P
E
R

D
I
E
S
E
L

E
Q
U
I
V
A
L
E
N
T

L
I
T
E
R
Diesel Retail CNG Retail

7.7 NATIONAL IMPACTS
The national impact model (see Figure 7.3) indicates negative benefits without considering
environmental and health benefits (see Table 6.5) associated with the NGV program as shown in
Figure 7.14. The costs increase steadily from 23.6 million pesos in 2004 to 6.6 billion pesos in
2014 in using diesel re-powering option. In the case of using OEM dedicated NGVs, the costs
increase from 56.3 million pesos in 2004 to 14.3 billion pesos in 2014.
Figure 7.14 National Economics without Monetizing Environmental Benefits

-16
-14
-12
-10
-8
-6
-4
-2
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
N
A
T
I
O
N
A
L

B
E
N
E
F
I
T
S
,
B
I
L
L
I
O
N

P
E
S
O
S

P
E
R

Y
E
A
R
REPOWERING DIESEL TO CNG USING OEM DEDICATED CNG VEHICLES
( g )

Positive annual benefits can be realized by 2004 (re-powering case) and by 2008 (OEM case), if
100 percent of the estimated environmental and health benefits are considered in the national
impact calculation. This is shown in Figure 7.15.

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Figure 7.15 National Economics including Full Monetized Environmental Benefits

-20
0
20
40
60
80
100
120
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
N
A
T
I
O
N
A
L

B
E
N
E
F
I
T
S
,
B
I
L
L
I
O
N

P
E
S
O
S

P
E
R

Y
E
A
R

It should be noted that the environmental and health costs indicated in Table 6.5 is based on data
collected in North America. Recognizing the fact that the environmental and health costs can be
substantially lower in the Philippines, the national benefit is re-estimated by allowing only 20
percent of the monetized environmental and health benefits in the national impact model (Figure
7.3). As shown in Figure 7.16, even with only 20 percent of the estimated environmental and
health benefits included in the national economics, positive annual benefits can be realized by
2009 (re-powering case) and by 2013 (OEM case). Depending on the mix of re-powering and
OEM options, the actual cost/benefit will be in the region bounded by the two extreme cases.

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Figure 7.16 National Economics including 20 Percent Monetized Environmental Benefits

-4
-2
0
2
4
6
8
10
12
14
16
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
N
A
T
I
O
N
A
L

B
E
N
E
F
I
T
S
,
B
I
L
L
I
O
N

P
E
S
O
S

P
E
R

Y
E
A
R

The positive national benefits imply that the NGV program is beneficial to the country and that
the Government or the Energy Sector should encourage or support the NGV program. The
national policy should be directed at providing enablement for the CNG industry expansion in
light of environmental and health benefits (see Section 8).

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Section 8 Recommended Action Plan
8.1 POLICY RECOMMENDATIONS
Based on the local initiatives in the NGVPPT and international CNG experiences relevant to
Metro Manila and the techno-economic analysis discussed in the previous sections, the following
are the key recommendations for the development of the CNG Master Plan for Metro Manila.
These recommendations are further categorized in five different areas: (1) infrastructure
development, (2) policy, (3) financing, (4) information, education and communication, (5)
capacity building.
8.1.1 Infrastructure Development
Include specific plans for NGVs (i.e., buses, jeepneys and taxis) in Metro Manila during
the NGVPPT
The pilot project of the energy sector should include determination and demonstration of
the viability of CNG taxis and jeepneys to the vehicle operators and the public. Also,
DOE and other government agencies need to understand the technology, vehicle
characteristics and costs and benefits associated with their operation. The following
activities should be undertaken:
Select demo locations (e.g., franchise routes, service areas, etc.)
Locate daughter stations to serve the demo areas
Accelerate refueling infrastructure development to encourage expansion of NGVs
(i.e., putting construction of refueling stations slightly ahead of NGV
acquisitions)
Build-up local data and benchmark to international experience
The lack of experience by energy sector in NGV industry has caused the potential
operators of refueling stations and NGVs to use international data. Local data need to be
build-up to enable the operators to determine the real costs and benefits of NGVs
compared to diesel- and gasoline-fired vehicles. Monitoring and evaluation procedures
have to be established as well as a comprehensive database on the following parameters.
Number of vehicles served per refueling station
O&M cost
Fuel consumption
Emissions
Safety
Other tangible and intangible factors
Establish pipeline from Batangas to Manila by 2007.
The abundance of natural gas in Metro Manila is needed during the full project
implementation. The construction of BatMan1 will improve the economics of the

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refueling stations and ensure timely delivery of natural gas from the mother to daughter
stations.
With the projected shortfall of indigenous natural gas in 2008, DOE should commit an
adequate amount to meet NGV demand in Metro Manila. Under the Base Case Scenario,
total CNG consumption will increase from 72.6 million liters in 2008 to 2,950.3 million
liters in 2014.
Balance vehicle and refueling growth on a long-term basis
Continuous monitoring and assessment of growth of vehicle is necessary to ensure
sufficient supply of CNG and balanced growth of refueling stations. The refueling
stations should be strategically located not only to serve the CNG vehicles in the area but
also to operate in an economically acceptable manner. There should be a collective
concurrence among stakeholders (i.e., DOE, DOTC, MMDA, NGV operators and gas
suppliers) on which franchise areas shall be allocated to NGVs and the phases of
NGVPPT implementation.
Upgrade testing and inspection centers to serve NGVs
Testing and inspection centers of the Bureau of Product Standards and the Land
Transportation Office should be upgraded (testing equipment and manpower) to be able
to serve CNG-fed vehicles.
Collaborate with engine OEMs and technology developers
The NGV industry should collaborate with engine OEMs and technology developers to
gain knowledge on the best available technologies suitable to Philippine condition and
build-up local manufacturing capabilities. Regular exposure of policy makers, vehicle
operators and refueling station operators to international experiences should be made.
Conduct R&D on viability of tricycles for CNG application (i.e., integrity of body
structure, types and sizes of tanks, engine, economics, etc.)
8.1.2 Policy
The energy sector should provide enablement for CNG industry expansion in light of
environmental and health benefits. Internalization of environmental cost to fuel pricing and
quality of equipment will provide a bigger advantage to CNG and cleaner technologies.
Assure natural gas price advantage and, on a longer-term basis, internalize environmental
cost in inter-fuel pricing.
The comparison of pricing structures of unleaded gasoline, diesel and CNG (Figure 8.1).
Under Republic Act No. 81841, An Act Restructuring the Excise Tax on Petroleum
Products, Amending for the Purpose Pertinent Sections of the National Internal Revenue
Code, As Amended, unleaded premium gasoline have an excise tax of four pesos and
thirty-five centavos (Php 4.35) while diesel fuel oil have an excise tax of one peso and
sixty-three centavos (Php1.63). Locally extracted natural gas is subjected to two percent

00453.001.11
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(2%) tax rate based on the actual market value of the gross output at the time of removal
(Section 151 (2) of the National Internal Revenue Code). Duty and taxes account for
about 22 percent of the average retail price of unleaded gasoline and 11 percent of the
average retail price of diesel. Fuel tax only accounts for 1.3 percent of the proposed retail
price of CNG. As shown in Figure 8.1, the average retail price of natural gas (Php 9.98
per diesel liter equivalent) is lower than that of diesel (Php 16.43 per liter) and gasoline
(Php 20.73). The difference of natural gas price from diesel is Php 6.45 per liter and
Php10.75 per liter from gasoline.
Figure 8.1 Comparison of Fuel Pricing Structure of CNG to Gasoline and Diesel
0
5
10
15
20
25
Unleaded
Gasoline
Diesel CNG
Dealer/Hauler take
Oil Company Uptake
Duty & Taxes
Crude/Gas Price

Note: CNG- assumes a fuel price of US$3.25 per MMBtu (Php 6.45 per diesel liter equivalent)
The environment and health benefits of using CNG vehicles (Figure 7.14, 7.15 and 7.16)
in place of diesel-fed vehicles is equivalent to Php 33.45 per dle when full environmental
benefit is considered and Php 6.7 per dle when only 20 percent of the environmental
benefit is considered. The energy sector in the long term has to translate the
environmental and health benefits/cost from using CNG, diesel or gasoline to the fuel
price structure to encourage consumers to use cleaner fuels. Restructuring of fuel prices
should be complemented with improvements in emission standards to further justify use
of cleaner fuels. Restructuring of fuel prices and implementation of emission standards
will require active involvement of variety of stakeholders (government, private sector,
and civil society). It is important that both oil and auto industry are fully involved. In
order to increase the acceptability of the associated costs to consumers, nationwide
awareness campaigns have to be conducted.
Create differential tax benefits related to quality of the equipment (e.g., environmental
and fuel efficiency benefits) to force the adoption of the best technology.
Provide economic incentives or regulatory advantages for construction of sufficient
refueling stations. The economic incentives may include lower import duties and value-
added-tax (VAT) exemptions to the importation of equipment and facilities for CNG
refueling and infrastructure purposes. The exclusivity of use of the equipment for CNG

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promotion should be ensured by issuance of certificates of accreditation and certification
of authority to import under the NGVTPP.
Both the national and local governments should assist interested investors in identifying
and acquiring lands for refueling stations and overcoming safety issues. Land use
policies for gas refueling stations have to be developed. Local government business taxes
and real property taxes can relaxed. Investors have to be supported in complying
environmental and safety requirements. These can lead to reduction in transaction costs
during the construction of the refueling stations.
A pre-investment study or feasibility study of refueling stations can be undertaken and
provided to would-be investors.
Develop CNG related industry to help promote national economy (e.g., body building,
tank manufacturing, fuel system, component manufacturing, export business, etc.).
Economic incentives such as reduction in import duties, VAT exemptions and income tax
holidays have to be extended to the manufacturing sector. Enterprises with projects
related to CNG transport promotion can be qualified as projects with high social
economic returns and therefore can avail of the maximum incentives provided for under
income tax holidays (ITH) and net operating loss carryover (NOLCO) implemented by
the Board of Investment.
Review and upgrading of environmental emission standards for vehicles. Introduction of
progressively tighter emission standards for vehicles will help promote the use of cleaner
alternative fuels or will lead to adoption of cleaner conventional fuels (e.g., ultra-low
sulfur diesel or ULSD) or promotion of more advance technologies. Local emission
standards for vehicles, lower that the national standard, can be implemented in Metro
Manila.
The Philippine Clean Air Act requires a review of the emission standards for transport
every five years. However, there are no plans on what vehicle standards to be adopted in
the short to medium-term. The government decision of using low sulfur diesel (500 ppm)
at the beginning of 2004 can be timely for possible adoption of Euro 2 Standard by 2005.
LSD can significantly reduce sulfur dioxide emissions from diesel vehicles but will not
cause significant reduction in PM emissions. While ULSD is not seen to be readily
available in the Philippines in the medium term, strong consideration should be given in
replacing diesel vehicles with CNG vehicles. Conversion/replacement of gasoline-fed
vehicles will result to positive reductions of NOx and HC.
Standard specifications need to have a legal framework specifying sanctions to promote
compliance with the standards promulgated and a system of incentives. Imposition of
fines and suspension of registrations are some of the effective measures implemented in
the Philippines. However, monitoring and enforcement still needs to be strengthened.
Create more non-financial incentives and regulations to allow exclusive use of NGV,
while restricting times of use and places of use for gasoline and diesel vehicles. DOE
and DOTC should coordinate and plan with MMDA on special privileges that can be
given to NGVs (e.g, new franchise areas to serve tourist areas and shopping centers,
special routes that can reduce travel time, and terminals for CNG-fed jeepneys and taxis).

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Involve all stakeholders (government, gas suppliers, refueling stations, vehicle
manufacturer, fuel system providers, conversion centers, vehicle fleet owners, and
financing institutions) in the decision making process.
Create opportunity for private sector to enhance its public relation campaign (e.g.,
recognition, awards, labeling).
8.1.3 Financing
Consider flexible financial arrangement to cover incremental cost for NGVs.
Government financing institutions should provide credit facilities with more flexible
financing schemes (deferred payment schedule, adjustable rate with a cap) and repayment
schemes.
Encourage participation of new investors for refueling structure development and NGV
manufacturing. The government should encourage public-private sector partnership,
channeling of foreign investments, and bundling of institutions to secure investment
conditions.
Seek emission credits from international community from use of CNG. The local and
global benefits derived from pollutant emission reduction as well as GHGs can provide
new funds for NGVPPT.
8.1.4 Information, Education and Communications
Communicate outputs of the pilot project to the stakeholders (be more transparent). The
successes and failures of the NGVPPT pilot program should be shared with all other
stakeholders to avoid replication of mistakes.
The policy makers should need to be aware of the need to develop appropriate
legislation (standards)and economic incentives and allocation of human and
financial resources.
The government agencies and MMDA need to be aware of the availability of
approaches and instruments to manage air quality and reduce vehicle emissions
and their effectiveness
The private sector need to be aware of the financial costs of NGVs and refueling
stations, the existence of technological alternatives and the provisions of the
relevant laws.
Disseminate CNG benefits to the public (e.g., safety, performance and environmental
advantages) and involve press (i.e., newspaper, radio and TV) as frequently as possible
and as much as possible. The public needs to be aware of the actual air quality levels and
its health and environmental consequences. Also, the public should also be aware of the
possibilities that require them to act in support of cleaner air.
8.1.5 Capacity Building
Create centralized authority to oversee CNG industry, set uniform policies and coordinate
implementation of regulations. A legal framework should be timely set-up to reinforce
national and sectoral commitment to the CNG industry. Roles and responsibilities of
government institutions directly involved should be clearly defined. DOE, now the lead

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agency in implementing NGVPPT, needs the strong support of government agencies, the
local government and some private institutions.
Educate regulatory bodies and other relevant government agencies on regulating CNG
industry (i.e., testing, monitoring, quality control, and enforcement). Local capability has
to be build-up through exposure to international experiences. A training needs
assessment is needed to identify the specific training needs of each agency.
Incorporate NGV education in vocational and adult schools (e.g., operation, maintenance
and repair) and college curriculum (e.g., technology). In the short-term, technical skills
in operation, maintenance and repair of NGVs and refueling stations should be
developed to support the growth of the industry. Certification programs on safety and
technical capacity should also be established. In the long term, NGV technology can be
introduced to college education.
Create national information management system to facilitate successful planning and
implementation of NGV program. Clear and simple procedures have to be formulated to
minimize bureaucracy and accelerate decision on:
permitting
loan application
accreditation (for importation of vehicles/refueling equipment and parts, BPS,
testing laboratories, auditors, etc.)
availing of financial and non-financial incentives
Establish safety and product standards for full implementation of NGV Program
Create NGV association in the Philippines to strongly represent the collective view,
concerns and recommendation of the NGV industry and facilitate its development. The
NGV association will also provide a venue for constant dialogue and collaboration of
vehicle operators, refueling station operators, fuel suppliers, vehicle suppliers and
technology developers.
8.2 RECOMMENDED ADDITIONAL STUDIES
It is recommended that the following additional studies are performed at appropriate stages (see
Action Plan below) to further address the related issues concerning policy, inter-fuel pricing,
infrastructure, technology, and economics.
Determination of optimum inter-fuel pricing structure
Formulation of tax structure related to quality of equipment (e.g., clean technology).
Life-cycle cost analyses of buses, jeepneys and taxis. This more detailed analysis is
necessary in the preparation of feasibility studies and business plans for vehicle
operators.
Determination of appropriate management program for each targeted vehicle group
Viability assessment of:
CNG penetration into private vehicle sector

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CNG tricycles
LNG as fuel for long-distance buses/trucks and as sources for CNG daughter
stations (i.e., L/CNG)
Determination of most suitable technologies and strategic locations of mother/daughter
infrastructure
Investigation of emission credit trading potential from use of CNG
Conduct of a economic evaluation of environmental impacts (using primary data) of
implementing NGVPPT in Metro Manila

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8.3 ACTION PLAN
The action plan based on the above policy and study recommendation is summarized below. The
plan is defined based on the status of the CNG industry and the technology employed during the
NGVPPT pilot program (until 2007) and its full implementation (2007 to 2014). The Action
Plan assumes that a gas pipeline from Batangas to Manila (BatMan1) is installed by 2007.
8.3.1 Characteristics of Action Plan Period
The period from 2004 to 2007 is characterized by the continuation of the NGVPPT pilot
program. The BatMan1 pipeline is expected to be completed in 2007. The NGVs during this
period are mainly the OEM buses that are a part of the pilot program. The period from 2007 to
2014 reflects the full implementation of the NGVPPT. During this period, in addition to OEM
technology, re-powering will be considered. After-market kit conversion when proved to be
technologically feasible will be examined at the latter half of the full implementation period.

8.3.2 Action Plan for Policy
The review and formulation of policies should be completed during the pilot period to ensure
that the framework for NGV industry is in place during the full project implementation. A legal
framework needs to specify different standards and the system of incentives and sanctions.
Institutional mandates for the different activities involving NGVPPT and the associated
responsibilities have to be clearly defined Constant review and update of these policies during
the full implementation is necessary. The involvement of the stakeholders in all aspects of is
important in the acceptability and implementation of the policies. Information and experiences
built-up each year should be assessed and used to advance the NGV industry.
2004 2007 2010 2014
PERIOD CHARACTERISTICS
Continuation of NGVPPT
pilot program
Full implementation of NGVPPT
(Private sector vehicle pilot program)
STATUS OF INDUSTRY
VEHICLES
Buses 155 390 855 1,986
Jeepneys 0 0 8,250 43,750
Taxi 0 0 9,750 50,000
Total NGVs 155 390 18,855 95,736
REFUELING STATIONS 3 4 67 261
TECHNOLOGY
OEM OEM / Repowering OEM / Repowering
(After-market kit conversion)

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2004 2007 2010 2014
Natural gas and inter-
fuel pricing structure
Review of inter-fuel
pricing structure
Financial incentives
Review of financial
incentives
Non-financial incentives
Review of non-financial
incentives
Formulate tax structure
to quality of equipment
Environmental, Safety
and Product Standards
Review of standards
Develop domestic and
international market
Involve all stakeholders
in decision making

8.3.3 Action Plan for Infrastructure Development
The demonstration of jeepneys and taxis along with the buses should be conducted during the
pilot phase. Benchmarking should start as soon as the infrastructures are in place. NGV and
refueling stations operations should be monitored to collect information needed for
benchmarking. During the 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 CNG business. In the long term, a balanced growth of NGVs and refueling
stations should be achieved.
The establishment of Batangas-Manila 1 (BatMan1) pipeline in 2007 is critical in the full
implementation of NGVPPT. With the projected shortfall of indigenous natural gas in 2008, it is
important that adequate amount of gas is allocated to the transport sector. The realization of the
importation of LNG and establishment of Bataan to Manila (BatMan2 pipeline) in 2008 may
make the use of LNG for long distance buses/trucks and L/CNG refueling feasible.

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2004 2007 2010 2014
Jeepney Demo
Taxi Demo
Establish BatMan1
Pipeline
Benchmarking
Acceleration of refueling
infrastructure
Balance refueling
stations and no. of
NGVs
Mother-Daughter station
strategic locations
Upgrade
testing/inspection
center for NGVs
Collaborate with OEM
and technology
developers
Study LNG for long
distance buses/trucks
and L/CNG refueling
Study kit conversion
viability
Study viability of tricycle

8.3.4 Action Plan for Financing
The availability of investments during the pilot phase is necessary to jump-start the procurement
CNG vehicles and refueling stations. Innovative and more flexible financing schemes by the
government and government financing institutions should be created. New investments from
public and private sectors and development institutions should be considered.
2004 2007 2010 2014
Flexible financing
arrangements
Review financing
mechanism
Encourage new
investors
Outsourcing
international funds
through environmental
benefits

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8.3.5 Action Plan for Information, Education and Communications
IEC is a critical element for the successful implement of the NGV program. Clear
communication of the NGVPPT outputs, procedures and other public information has to be
established early in the program. NGV education in vocational schools in a near term and in
colleges in a longer term also needs to be implemented. Awareness raising on the general
understanding of all concerned stakeholders on harmful impacts of vehicle pollution and policies
for NGVPPT is necessary to gain public support. Adequate funding should be made available
for the development and implementation of awareness raising campaigns.
2004 2007 2010 2014
Communicate outputs of
NGVPPT
Public information

8.3.6 Action Plan for Capacity Building
A centralized authority should be designated to coordinate establishment of policies,
infrastructure, financing and capacity building. The partnership of public and private sector
should be instigated during the pilot phase. Responsibilities of participating agencies have to be
clearly defined. The local government, in this case the MMDA, should be involved in the
formulation of the strategies. The private sector should be engaged in policy formulation,
planning and implementation of NGVPPT.
The capacity of all stakeholders to support the NGV industry should be built during the pilot
phase. These include training of government agencies, NGV professionals and mechanics and
technicians. Due to lack of local experience, international exposures is necessary.
2004 2007 2010 2014
Establishment of
centralized authority
Establishment of NGV
association
Collaboration of vehicle
suppliers and operators
Training of regulatory
bodies and government
agencies
Training of mechanics
and technicians
Information
management systems

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Final Report

Compressed Natural Gas (CNG) Master

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