Small oil firms may join forces to compete with major players

MANILA, Philippines - Some independent oil players may opt to join forces within the next couple of years to survive the stiff competition in the oil industry, a top industry official said.

Eastern Petroleum Corp. chairman Fernando Martinez, who is also the chairman of the Independent Petroleum Philippine Companies Association (IPPCA), said the small players may be compelled to band together to be able to compete with major oil players.

“I am sure there are some in the horizon that are talking with each other either I buy you or you buy me, ultimately there will be some, like in telecommunications industry, deregulation then consolidation because you need economies of scale, same issues of removing redundancies, inefficiencies,” he said.

He noted that the petroleum business in the Philippines is so competitive that it had already reached its saturation point.

Martinez said at present, the independent oil companies’ share of the market is at 20 percent from only 14 percent some years back.

“I think it will continue to grow, today independent players account for 20 percent of the market share. That is a thing to watch who will gobble up what but to me in a year or two, there will be some mergers. I can see that somebody will buy out somebody,” he said.

As for EPC, he said they will opt to undertake an initial public offering (IPO).

This is not the first time that mergers and consolidation were considered by small players.

In 2007, four independent players, including EPC formed Enerfuse Holdings Inc., which will serve as an investment vehicle of four independent oil firms. Aside from EPC, the other companies party to the Enerfuse are Seaoil, Unioil and Flying V.