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PHL may attract oil traders after loss of refining sector

PILIPINAS SHELL Petroleum Corp. shut down its refinery in Tabangao, Batangas this year. — PHILIPPINE STAR/MICHAEL VARCAS

MORE oil traders might see the Philippine downstream market attractive with the impending loss of its oil refining industry, according to an oil executive.

The coronavirus pandemic exacerbated the already challenging fuel retail competition in the Philippines, leading its last standing refiner to consider shutting down “very soon.”

Petron Corp., the country’s remaining petroleum refiner, recently disclosed that it will shut down its 180,000 barrel-per-day (bpd) refinery in Bataan “very soon” to prevent further losses due to poor refining margins and uneven playing field, according to its president, Ramon S. Ang.

Losing the domestic refinery may attract oil traders to enter the Philippine market, said Raymond T. Zorrilla, senior vice-president for external affairs of Phoenix Petroleum Philippines, Inc.

“If there is no refinery in the [Philippines], it might be very attractive for traders to target [the country] and this could impact the importers too — [they could be] in direct competition with other importers,” he said in a message.      

A consumer group said earlier that the Philippines would be completely “at the mercy” of oil traders and suppliers without its refining sector.

“The supply and prices will make the country dependent [on] foreign supply and prices,” Victorio A. Dimagiba, president of Laban Konsyumer.

As the Philippines becomes more dependent on fuel imports, it will also be tied to fluctuations of supplies and prices in the global oil market, Fitch Solutions said in a recent research note.

Still, there will be no adverse impact on fuel security if Petron would turn to full importation like its rival Pilipinas Shell Petroleum Corp., according to Rino E. Abad, director of the Department of Energy’s (DoE) Oil Industry Management Bureau.

Pilipinas Shell, owner of a 110,000-bpd refinery in Tabangao, Batangas which permanently closed in August, will convert the facility into an import-receiving site.

“Finished products are abundant almost all over the world. Importation within Asia-Pacific is not an issue,” Eastern Petroleum Chairman Fernando L. Martinez said in a mobile message. He also said that the loss of domestic refineries won’t impact the country’s fuel supplies.

To allay fuel insecurity from uncertainties in the global oil market, the Philippine government should invest in strategic oil stockpiling and encourage more investments in local gas and oil exploration.

“The government should invest in strategic stockpiling of products or encourage investment in oil exploration for our own needs,” Mr. Zorrilla said. “That [will make] us independent [from] global supply disruption.”

State-led Philippine National Oil Co. in a recent Senate hearing said it has deferred to next year the conduct of a feasibility study on the formation of a strategic petroleum reserve program, which the DoE says will help secure the country’s fuel supply in instances of volatility and disruptions.

But Petron’s Mr. Ang said that without local refineries, a stockpiling program won’t be possible. He claimed that the government cannot sell products that are stored for months since their quality will deteriorate unless reprocessed in a refining facility.

“You can only stockpile kung may refinery ka kasi pwede mong i-reprocess ang gasoline mo, diesel,” he said. (You can only stockpile if you have a refinery that will allow the reprocessing of gasoline and diesel imports.)

Ideally, the country should retain its refining sector for the sake of supply security, “as petroleum in its crude state can be stored for a longer period [versus] finished product,” Mr. Martinez said.

The country must maintain at least 150,000 bpd of petroleum coming from refiners, or 30% of the country’s total fuel demand, he added.

Mr. Martinez said he expects a better refining environment in the country in the future.

“It can just be a temporary shutdown until the economics of refining is achieved, which may also happen In the future, in which case the owners may decide to revive it,” he said. — Adam J. Ang

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