THE Department of Energy (DOE) will call the attention of Pilipinas Shell Petroleum Corp. for delaying a plan to hold an initial public offering (IPO) which should have happened 12 years ago.
“We will ask them again about the status of its IPO plans,” Energy Secretary Carlos Jericho L. Petilla said.
The DOE has been urging Shell for years to conduct an IPO since it received the mandate under the Oil Industry Deregulation Act of 1998 which states that an oil company must list in the local bourse at least 10 percent of its shares within three years from the effectivity of the law. This means that Shell’s IPO should have been completed by 2002.
Petron Corp. was listed at the stock exchange prior to the passage of the law, while Chevron Philippines shut down its refinery.
During the 2007 Asian financial crisis, Shell cited the volatile stock market in mulling over its IPO plans. Following the Department of Environment and Natural Resources’s 2010 directive on the upgrade of vehicle emission standards on January 1, 2016, Shell started studying the Euro IV fuel compliance. In 2013 Shell asked the DOE to give the oil firm until the year-end to decide on the IPO.
Since then, however, no IPO has been conducted. There has been no legal action taken against Shell’s noncompliance either.
Shell officials said the oil firm’s IPO plans hinge on a final investment decision (FID) that will determine whether to push through or not an expansion of its refinery business in Tabangao, Batangas. The FID will come from its parent firm.
In June Petilla was informed by Shell that it will expand its refinery business. However, there has been no development since then.
Shell was looking at expanding its 110,000-barrel-per-day refinery to meet new fuel standards that will take effect in 2016. Euro 4 is a globally accepted European emission standard for vehicles. The Euro 4 standards require fuel to have significantly low amounts of sulfur and benzene.
Petilla said earlier the DOE will review the legal matters if the oil firm fails to comply with the law.
In a May 2013 letter to Shell, Zenaida Monsada, director of the DOE’s Oil Industry Management Bureau, said Shell’s IPO is long overdue.
“While the opinion of the Department of Justice is that the three-year period under the oil deregulation law is not mandatory but prescriptive and will not prohibit an IPO to be conducted after the lapse of the said period, nearly 15-year period since the passage of the law is long overdue for Shell to implement the public offering of 10 percent of its common stocks,” Monsada said.
Besides the FID, Shell Country Chairman Edgar Chua has been citing the poor market condition as one of the reasons for the delay.
“We will start working on the IPO assuming we have a final investment decision but we also need to consider the market condition,” Chua said.
“Deregulation started in 1998. The Asian crisis hit us in 1997 so the economic landscape was not good for six years until 2003,” Chua said.
Besides this, a double-taxation case and Manila City’s order to vacate the Pandacan oil depot were taken into consideration. Chua said securing an FID on plans to upgrade its Batangas refinery from its parent firm is the major factor in the delay of its IPO plans.
In February Shell Co. of Australia Ltd., the Australian subsidiary of Royal Dutch Shell Plc., sold its Australian refinery and patrol stations for $2.6 billion to Vitol, a Geneva-based company.
“While the board has decided to close down in Australia, Shell is expanding in the Philippines,” Petilla said.