Shell shutters refinery

    No longer economically viable. The Shell Batangas facility began commercial operations in 1962.

    The decision by Pilipinas Shell Petroleum Corp.’s (PSPC) to cease oil refinery operations in the country, has put on the spotlight the impact of the new coronavirus disease 2019, pushed by the supply-demand imbalance in the region, on the oil refining industry.

    PSPC announced it will transform its Tabangao facilities in Batangas into a full import terminal to optimize asset portfolio and enhance cost and supply chain competitiveness due to impact of the pandemic.

    The 110,000-barrel-per-day facility began commercial operations in 1962 and is one of two refineries in the Philippines.

    The other is Petron Corp., which is set to resume refinery operations in Bataan, on September 1, five months since its suspension since May due to low demand.

    “We have the technical capability and financial flexibility to manage and adapt to disruptive conditions. Due to the impact of the COVID-19 pandemic on the global, regional, and local economies, and the oil supply-demand imbalance in the region, it is no longer economically viable for us to run the refinery,” said Cesar Romero, PSPC president.

    Romero said in a statement the shift in supply chain strategy from manufacturing to full import terminal will further strengthen PSPC’s financial resilience amid the significant changes and challenges in the global refining industry.

    PSPC, a unit of Anglo-Dutch giant Royal Dutch Shell, said in a statement prices of fuel products have dropped to below or just almost equal to the cost of refining crude oil.

    The company has managed to narrow its net loss from P5.5 billion in the first quarter to P1.2 billion in the second quarter as crude oil and product prices slightly improved and stabilized. However, net loss in the first half totalled to P6.7 billion compared with a net income of P3.7 billion in the same period last year.

    PSPC said the Tabangao facilities will continue to cater to the fuel needs of Luzon and Northern Visayas while the North Mindanao Import Facility in Cagayan de Oro will serve demand from the remainder of Visayas and Mindanao.

    PSPC will continue to be listed in the Philippine Stock Exchange.

    Astro del Castillo, managing director of First Grade Finance Inc., said PSPC had to “bite the bullet” to lower its operating costs.
    Petron back by Sept

    Ramon Ang, Petron president and chief executive officer, said in a statement the company has advised the Department of Energy (DOE) preparatory works are being done to resume the operations of its 180,000-barrel-per-day facility in Bataan by September 1.

    “The ongoing COVID-19 pandemic has greatly affected the Philippine fuel industry. None of us are immune to its adverse economic impact and we empathize with the entire industry in the face of our current challenges. Even Petron Corp. has not been spared but we continue to be committed to serving Filipinos and doing our part in helping our country and economy manage the setbacks,” Ang said
    Supply assured

    DOE Secretary Alfonso Cusi assured the closure of PSPC’s refinery will not affect the country’s fuel supply as the company will continue to operate through the importation of refined products.

    The DOE said demand for petroleum products declined by 20 to 30 percent in March and by as much as 60 to 70 percent in April during the imposition of the enhanced community quarantine, compared to February 2020 levels.

    According to latest data from the DOE, as of first half 2019, Petron and PSPC leads the local market share with 24.6 percent and 17.9 percent, respectively.

    The country’s total petroleum demand for the period was also at 87.8 million barrels but reached 168.8 million barrels in 2018.