Shell still undecided on IPO

MANILA, Philippines - Pilipinas Shell Petroleum Corp., the local unit of the Royal Dutch Shell Group, said it is still undecided on the timetable for its initial public offering (IPO), a top company official said.

Shell country chairman Edgar Chua told reporters that they have “the usual answer” to the IPO question.

“We continue to review that option. Remember, the law requires an IPO if you are an oil company with refinery. And so we, of course, continue to review that. We continue to review the future of our refinery. At the moment, we still have not made a firm decision either way,” he said.

Chua said the company is currently faced with some pressing issues that need to be addressed before they could pursue their IPO.

“Remember for a while, when we had the ATIGA (ASEAN Trade in Goods Agreement), the refinery was at a disadvantage. How can anyone in his right mind tax a component (raw material), put excise tax and another excise tax on the finished product. Whereas, if you’re a finished product importer you only do it once. These are issues which need to be sorted out,” he said.

But he said the company never ceased to explore the IPO plans whenever needed.

“Though we have been studying it for a long time, things continue to be changing,” he said.

But Chua reiterated that the deciding factor for Shell to push through with the IPO, such as the refinery expansion, has yet to be firmed up.

“We have not made a decision to close or to further invest into it (refinery). Like any facility, you are needed to invest every so often, as the product specifications change, among others. There are different options of investment,” he said.

For several years now, Shell has been holding back on its IPO plans despite receiving frequent orders from the Department of Energy (DOE).

In August 2008, former Energy Secretary Angelo T. Reyes ordered Shell, one of the country’s oil refiners, to submit its IPO plan, reminding the company that under Sec. 22 of the Downstream Oil Industry Deregulation Act of 1998, any person or entity engaged in the oil refinery business shall make a public offering through the stock exchange of at least 10 percent of its common stock within a period of three years from its effectivity.

Reyes emphasized that the three-year period under the oil deregulation law was not mandatory but rather should serve as a guideline on how the oil refineries should conduct their IPOs.

However, he also stressed that the 10-year period since the passage of the law is too long a time for Shell in implementing the public offering of 10 percent of its common stocks.

Reyes said the law was passed to liberalize and deregulate the downstream oil in order to ensure a truly competitive market under a regime of fair prices, adequate and continuous supply of environmentally-clean and high-quality petroleum products. 

The country’s top oil refiner, Petron was listed on the stock exchange way back in 1994. It is then partly owned by the government through the Philippine National Oil Co. (PNOC) and Saudi Aramco, the world’s largest oil producer.

Reyes said though they recognize the Department of Justice (DOJ) opinion that the three-year period under the oil deregulation law is not mandatory but prescriptive, the department should determine how Shell would like to implement such provision in the law.

The DOE is also uncertain if the DOJ opinion has clarified the issue of whether Shell will list its company as a refinery or as an entire company.