VERY soon, the Philippines could be fully dependent on oil imports as the country’s remaining oil refiner announced Monday the strong possibility of shutting down its Bataan refinery, which supplied less than 30 percent of the country’s total demand last year.
Petron Corporation, according to its chairman Ramon S. Ang, could not stress enough the struggle it has been experiencing just to keep business afloat.
“Napakahirap ng refinery business ngayon. Ang question lagi is, hanggang kailan kaya ng Petron ang ganitong sitwasyon? I think hindi rin kami tatagal kung hindi magbabago ang sitwasyon. ’Di ko lang masabi ang exact date basta very soon din [The refinery business is in dire straits now. The question always is, until when can Petron survive this situation? I think we also won’t last if things don’t improve. I just can’t say the exact date but it’s very soon],” said Ang.
When asked categorically if Petron has decided to cease refinery operations, Ang said, “We will go to that direction probably very soon.”
Ang’s announcement comes on the heels of Fitch Solutions’s assessment last week that the closure of Pilipinas Shell Petroleum Corp.’s (PSPC) refinery would have a substantial impact on the country’s economy.
PSPC announced in August its decision to cease refinery operations in Tabangao, Batangas. Not long after, the upstream company of Shell Philippines announced it was letting go of its 45-percent stake in the Malampaya gas-to-power project.
The possible shutdown of oil refineries in the country could affect the country’s supply and security of petroleum products.
“We will be at the mercy of foreign suppliers when the refinery is gone. We will be forced to get from various sources. If you have a refinery your supply inventory is good for 70 to 90 days. But if you’re just an importer, you only have a 5 to 10 days’ inventory. All of a sudden in a shutdown, the inventory level really goes down. There could be occasional shortages, like if there’s a storm, or something,” said Ang, in a mix of English and Filipino.
Meanwhile, Energy Secretary Alfonso Cusi said the Department of Energy (DOE) has yet to receive any notification from Petron Corporation on its alleged plan to permanently close its refinery in Limay, Bataan.
“Based on news reports, the company is still in the middle of dialogues with the government regarding tax issues.
“We at the DOE are looking into the taxation concerns raised in coordination with the Department of Finance. At the same time, we are also evaluating how a closure scenario would impact pricing, as well as the country’s energy security,” Cusi said.
“We will closely monitor the developments as we affirm to be always with our stakeholders in finding solutions to whatever hurdles the industry is facing.
“But whatever business measures Petron will arrive at in the course of its discussion with the concerned parties, we at the DOE will respect the management’s decision,” Cusi added.
Buy back Petron?
Consumer group advocate Laban Konsyumer, Inc., shared the same view.
LKI President Victor Dimagiba said the immediate impact of this decision would be fuel supply. “The country will now be 100 percent at the mercy of traders and suppliers. We don’t have a fuel storage. The supply and prices will make the country dependent on foreign supply and prices,” he said.
LKI also suggested that government buy back Petron, which used to be fully owned by the Philippine National Oil Company. “We recommend that this be a policy decision—to buy back Petron,”said Dimagiba.
Ang cited excessive taxes slapped by the government, saying Petron is being put in a situation wherein it makes sense to just import finished petroleum products rather than import crude oil and have it refined in the country.
“When crude oil arrives in the Philippines, we pay VAT and excise tax. You’re just going to take it out of the terminal, you pay tax again. And then, for how much can you sell it only? That’s why there are inventory losses in the actual oil price and the tax that we’re paying. Meanwhile, the competitor that doesn’t have a refinery, pays tax only when they bring out the supply from their terminals,” explained Ang.
The current tax regime, he stressed, is weighing heavily on Petron’s finances. The company suffered a whopping P14.2-billion net loss in the first half of the year, from P2.6 billion in the same period a year ago.
“We should also be paying tax only when we’re already selling to the domestic market. If the playing field with importers is not leveled soon, we will also shut down. Very, very soon, if this arrangement stays as is,” warned Ang.
He said Petron’s concern on tax imbalance in the country was already raised to the Bureau of Customs, the Bureau of Internal Revenue, Department of Trade and Industry, Department of Energy, among others.
Amend the law
But the only recourse he could think of is for Congress to amend the law.
“To change a law, you have to go to Congress, and that’s a long process. You have to amend the law or have Malacañang craft an Executive Order which many disdain. If I lobby and get this approval now, the next administration can revoke this and call me a crony,” said Ang.
Senate Energy Committee Chairman Sherwin Gatchalian, for his part, said there may be a need for Congress to review existing laws on taxes. “It is a sad news that Petron is thinking about. A refinery is a basic foundation for any industrialized nation. Refinery is part of a bigger supply chain. There are many related industries that will be affected, not to mention the employees that will be affected at a time like this.”
The total number of direct jobs lost as a result of the closure of the Caltex and Pilipinas Shell refineries stand at 380. The figure does not include indirect jobs pertaining to suppliers and contractors providing services to the oil refiners.
Petron employs in its refinery nearly 1,000 organic personnel and over 2,500 additional personnel through over 25 local third-party service providers.
Image credits: Nonoy Lacza