OIL refiner Petron Corp. is shelving its plans to expand its oil refinery plant in the country due to the fall of its income, which it now blames on the entry of illicit products mainly sold by so-called white gasoline station operators.
“The business of Petron is becoming bad due to inventory loss and the growing presence of white stations resulting in cheaper fuel prices for no reason,” Petron President and CEO Ramon S. Ang said at the sidelines of the annual stockholders’ meeting of Top Frontier Investment Holdings Inc.
He said the white stations, the owners of those smaller gasoline stations that normally paint their facilities white, now corner about 37 percent of the industry by volume.
Top Frontier is the majority owner of San Miguel Corp., which owns Petron.
“How can they be 10 percent cheaper than us? Where are they sourcing their fuel? If they are importing, their prices should not be this low. Our prices should be relatively the same,” Ang said, adding that they cannot control the situation. He said they may let it pass as it is only cyclical.
He said the imposition of excise taxes on fuel is also becoming an incentive for the entry of smuggled fuel since fuel marking is not required for all and is mandated only for big companies.
“When the tax was just 6 percent VAT [value-added tax], they were already having a heyday. With the addition of a 6-percent excise tax, it is even more profitable for them,” Ang added.
He said the company may not bring down the prices of its product as doing so will hurt them. As a result it will shelve expansion plans and concentrate on its other businesses such as petrochemical products.
“We are lucky if we can have an P8 billion or P9 billion income this year. And most of that will be carried by our Malaysian operations,” he said.
Petron’s net income in the first quarter of the year plunged 77 percent to P1.3 billion, from P5.8 billion last year, mainly due to higher taxes and rising crude oil prices. Of the amount, P1.2 billion came from its Malaysian operations.
Petron earlier said it intends to further expand its Bataan refinery in 2020 by another 90,000 barrels per day, which will cost the company $3.5 billion.
From 180,000 barrels a day, its output will become 270,000 barrels a day to 300,000 barrels a day by 2022, Ang said earlier.