Implementation of new CAA rules seen to curb oil smuggling

The Department of Energy (DOE) said yesterday the implementation of the new gasoline specifications under the Clean Air Act (CAA) will help curb oil smuggling in the country.

"It is possible. To some extent, oil smugglers will have a hard time because of the new CAA specs," Energy Industry Administration Bureau (EIAB) Director Zenaida Monsada said.

Monsada said oil companies may opt to import finished products to comply with CAA requirement. Thus, it will be difficult for oil smugglers to convince oil firms to buy from them.

"There are very few countries that offer CAA compliant fuel products. I doubt if they can still get that product and sell it at a lower price. With this, nobody will entertain the oil smugglers," she said.

In the Asian region, she said only the Philippines requires 35 percent and two percent aromatics and benzene content, respectively. "So far, we are implementing a more stringent rule on gasoline specifications in the region," she said.

Monsada also said the DOE would be concentrating its monitoring activities in "problematic areas".

"We will focus on areas where there were reports of violations and oil smuggling such as those located in the so-called dock off points," she said.

Oil companies have also been complaining that their market has become narrower due to rampant smuggling. Earlier, the DOE apprehended an owner of a dock which is being used as an entry point of smuggled oil products.

Areas where there are alleged rampant oil smuggling activities are: Subic, Cebu and Metro Manila.

As this developed, the Big "3" oil companies – Petron Corp., Pilipinas Shell Petroleum Corp. and Caltex Philippines Inc. – have opted to import blending products to comply with the new CAA requirement.

"We are using alkylates as blending agent. This is less expensive than importing the finished product," Petron corporate communications manager Virginia Ruivivar said, adding that the company’s board will decide soon whether to push through with its isomerization and hydrotreater projects. "We have yet to determine if we can still pursue our investment plan to put up infrastructure that will enable us to comply with CAA by processing the compliant fuel here in the country," Ruivivar said.

Shell external affairs general manager Roberto Kanapi, on the other hand, said the company has been bringing in blending components since the early part of December 2002.

"We believe this is more cost effective for the company," Kanapi said, adding that putting up vital facilities to process CAA compliant gasoline is not included in Shell’s medium-term plans.

"It will not happen in the near future. If we will build such infrastructure, it will take us at least five to 10 years," Kanapi said.

Caltex corporate affairs official Jorge Marco said the company bought a $5-million naphtha splitter last November to help them come up with a CAA compliant fuel.

"We see the need to comply with the CAA so we decided to get this facility to produce a compliant fuel," Marco said. – Donnabelle Gatdula