Georgia on my Mind (Part 2)

The Georgia-Russia conflict threatens a key source of EU oil and natural gas, adding to their oil-shock worries. The oil-shocked global economy, coupled with Global Warming, is making the world shift from oil-based energy to alternative sources, like Solar and Wind. A US firm recently revealed more “green” features being installed in 40% of renovated homes; by 2010 “green” technology will be included in 10% of all buildings.

The developed countries’ changing energy profiles – with legislation like the US Energy Independence and Security Act (EISA, 2007), or the EU Directive on Electricity Production from Renewable Energy Sources (DEPRES, 2001) – are stimulating the demand for aggregates for the production of alternative energy componentry specifically: Silica for Solar Panels, and Gold and Copper for circuitry and wiring for Wind Turbines.

This is creating massive opportunity for countries with little oil-based competitive advantages – like the Philippines. Philippine industries producing and exporting these components’ raw materials can integrate forward and manufacture the finished goods themselves, with the idea of becoming preferred component suppliers to EU partners. Our natural resource profile featuring silica, gold, and copper abundance, and our cheap skilled labor is a fit. Once again, the Entrepreneurs can create a sunrise industry, unlike the screw-type garments industry - its heavy reliance on cheap labor, subsequently wiped out by cheaper places like Bangladesh and Sri Lanka.

Oil: An Option?

The Galoc, Calauit, Malampaya fields, plus the Spratlys, off the Palawan coast must be explored and exploited. The country’s capability for this may be limited, needing capable Australian or EU Prospectors, with the experience and latest technologies to access what the Chinese estimate (based on the Joint Marine Survey Undertaking) to be a 17.7Billion Ton capacity of Oil. The Department of Energy (DOE) should market our local reserves internationally, offering exploration and extraction rights, while we retain minor stake, and royalties.

The model certainly exists: In 2001, Shell and Chevron-Texaco each obtained 45% of the Malampaya Deepwater Gas-to-Power Project; the Philippine National Oil Company (PNOC) owned 10%. Exploration was spearheaded by the two oil giants. The result (per the DOE) was about Php5.4Billion in gas sales revenues in 2006.

It will offer EU-based oilers a “system” to provide oil to Asia–Pacific Clients. The environment is certainly better than a conflict-torn region like Georgia: warm, threat-free waters, no offshore drilling restrictions…and great seafood. Our bonus would be a technology and knowledge transfer, applicable to other regions (if later identified), subsequently boosting our local production.

Silicon In - Plants

The country abounds in silica (or silicon dioxide) aka sand; a central component in glass. An Ayungon mine generated Php2-3M annually for five years of small-scale mining. Our silica-rich sands, as our pristine beaches show (observe Boracay’s fine sand), can produce high-grade solar panel glass – the substrate shielding the photovoltaic; keeping the elements out, but the energy-producing light, in. Increased photovoltaic efficiency requires blemish-free glass, which can be made from our high-grade silica from Negros Occidental.

Consider that Laguna-based SunPower Philippines, with its recorded US$220M 2006 exports, is already expanding its business fivefold.

Semiconductors, tiny components in integrated circuits and microchips, also need silica. Accounting for 65%, Philippine semiconductors comprise our largest export sector, worth US$31 billion in 2007. Upgrading silica into semiconductors for alternative energy component circuitry – like wind turbines – would allow exporters to capitalize on the huge value added.

Calling All Entrepreneurs!

The fifth most mineralized country in the world, the Philippines’ proven metallic reserves are valued at US$166B, estimated by the DENR for Gold at 967M metric tons (MT), and Copper at 5,300M MT. Instead of merely exporting these minerals, these can be further processed to create circuitry and wiring for turbines. A Wind Map already exists, courtesy of the current Administration, which European suppliers can utilize to deploy their wind systems, manufactured with our materials, and spread to Asia-Pacific markets.

The young Go Negosyo Entrepreneurs may want to follow the esteemed Captains of Industry’s pathways - the Rafael Ataydes, the Manuel Zamoras in mining; and the Dado Banataos in Semiconductors – and integrate forward, going from exporting raw materials to processing them into finished goods: wires, circuitry, semiconductors and solar panel glass. The purpose? One, these finished goods are worth at least three times more. Second the hungry, markets in China, Japan, and Korea will grow – as oil bottoms-out at an estimated US$80, but surges 4 times that in 10 years (a 4th Oil shock?).

Finally our skilled labor – our advantage given in China wages have risen; cheap labor is running out - makes us the most preferred source for these intermediate goods in the Asia-Pacific mainland and the Indian Sub-Continent, given the physical (economic) distance of, say, Chilean copper. This is a “Golden Time” that our Entrepreneurs – and their intrepid, creative spirit – can capitalize on.