Petron to build $2.5-M blending plant

Petron Corp., the country’s largest oil refiner, will build a $2.5-million fuel additive blending plant in Subic Bay Freeport by the end of this year.

In a disclosure to the Philippine Stock Exchange, Petron said it has entered into two new agreements with the Nasdaq-listed Innospec Inc., the company’s fuel additive and technology partner since 1995.

The project, Petron said, is consistent with the company’s strategy of developing non-traditional revenue sources and taking advantage of overseas market opportunities.

Innospec is a leading global fuel additives supplier whose products are used in Petron’s world-class fuels, namely Blaze, XCS Plus, Xtra Unleaded and DieselMax. These products have been widely acclaimed for their efficiency, power and environmental benefits.

Under the fuel additives blending agreement, Petron will construct and operate the blending plant that will serve the fuel additives requirements of Innospec’s customers in the Asia-Pacific region, including Petron. 

Based on the 10-year contract, it guarantees that Petron will be Innospec’s exclusive toll blender in the region.

The blending plant will serve as Innospec’s supply hub in the Asia-Pacific region, as it positions itself to tap the fast growing regional market and bring its products and services closer to Asian customers. Traditionally, Innospec products used in the region have been sourced from Europe.

"This strategic partnership will produce numerous synergies since it fuses Petron’s technical services, marketing capability and strategic location with Innospec’s fuel additive technologies and strong presence in the Asian region," Petron president Khalid D. Al-Faddagh said.

"Having an Asian supply hub will further strengthen our fuel additives business in the region by accelerating our response time and enhancing our supply capability," said Paul W. Jennings, Innospec’s president and chief executive officer.  "The market for fuel additives in Southeast Asia is already huge, and this strategic partnership with Petron could help us jointly open significant new markets such as China and India ." 

The other agreement between the two companies is for technology services and marketing of fuel additives. 

Under this agreement, Petron will be providing technology support services to Innospec and its customers in the region, including customer technical programs, laboratory services, product development, field tests and consultancy services.

Petron will also be able to tap the customer base of Innospec in the region to broaden the market for Petron’s own lubricant brands.  Innospec already serves a wide variety of power plants, refiners and manufacturers throughout the region, many of which are also users of lubricants.  Petron-branded lubricants are already being sold in Cambodia and Indonesia.

"We now have an opportunity to further diversify our customer base by leveraging on Innospec’s presence in Asia ," Petron chairman Nicasio I. Alcantara said. 

Aside from lubricants, Petron has been exporting petroleum products in the region including industrial fuel oil, diesel and the petrochemical mixed xylene.

Petron has embarked on refinery upgrading projects worth $300 million which will allow it to produce more high value petrochemicals (propylene, benzene and toluene) from its existing production streams.

At present, Petron, aside from being the largest oil refining firm, is also the industry leader in oil products marketing in the Philippines .

It operates an ISO-14001 refinery in Limay, Bataan with a rated capacity of 180,000 barrels per day. Through more than 1,200 service stations nationwide, Petron retails gasoline, diesel and kerosene to motorists.

It also operates a state-of-the-art lube oil blending plant at its Pandacan terminal, where it also manufacture lubes and greases.