Petron offers Bataan refinery for gov't buyback

MANILA, Philippines - Petron Corp., the country’s largest oil refiner, has offered to sell back to the government its Limay refinery in Bataan as it seeks ways to counter the adverse effects of oil price volatility on consumers.

In a letter addressed to Energy Secretary Jose Rene Almendras, a copy of which which was submitted to the Philippine Stock Exchange yesterday, Petron chairman and chief executive officer Ramon Ang said it is high time for the government to “reinvest” in Petron.

“Public opinion urging the government to reinvest in Petron as a means to attain effective participation in the industry has reached us. The company is open to this idea. In particular, we are ready to offer our refinery assets (the Petron Bataan Refinery Complex in Limay, Bataan) for possible re-acquisition by government if this will assist in attaining the government’s objectives at this time,” he said.

Ang said the company is willing to commission a third party for the valuation of the Limay asset.

“As a way to get the process underway, we are ready to discuss the appointment of a mutually acceptable third party to establish a valuation basis and transaction structure,” he stressed.

The Petron official said government would be put in a better position to “influence” oil prices if it will acquire Limay.

“Having control of the largest petroleum refining assets in the country will place the government in a better position to develop and devise comprehensive and long-term programs and solutions. Through this acquisition, the government will enjoy significant influence on the prices of petroleum products and in securing the supply of petroleum products in the country,” he said.

Ang noted that “the recent trend of rising prices of petroleum products has led to the ongoing discussions in Congress and in media to revisit the Downstream Oil Industry Deregulation Law (RA8479) and a loud clamor for more government participation in the industry.”

“In fact, a number of bills have been proposed in both Houses of Congress aimed at implementing measures for government to stabilize prices and secure continuous supply of petroleum products in the country.”

In the same letter, Ang said reverting back to a regulated oil industry will not solve the issue of continuing increase in oil prices.

“Petron, for its part extends its full support and cooperation to the thrust of the government to counter the adverse effects of high oil prices in the Philippine economy. However, Petron believes that reverting back to the regulated regime is not the solution. The recent increases in oil prices are dictated not by the oil companies but by worldwide market forces,” he said.

According to Ang, “the company believes that deregulation has been most beneficial to the economy as well as the downstream oil industry and should thus be continued to be implemented by the government.”

In the first half of 2011, Petron recorded revenues of P134.90 billion, up by nearly a fifth from the P115.4 billion sales it registered a year earlier.

Petron earlier embarked on a major upgrade of its Bataan refinery, committing an estimated P75 billion over the next few years to upgrade its 180,000 barrel-per-day capacity.

Called the Refinery Expansion Project or RMP-2, the upgrade will ensure the country’s supply security as it will give Petron’s refinery the flexibility to “digest” a wider array of crude oil types from various supply points.

Earlier in 2009, the government’s share, through Philippine National Oil Co. (PNOC), in Petron was sold to the Ashmore Group which was later purchased by San Miguel Corp, the largest food and beverage conglomerate in Southeast Asia.

Petron also has the largest service station network in the country, numbering 1,700.

Almendras, for his part, said they have not yet discussed the proposal.

Independent Philippine Petroleum Companies Association (IPPCA) chairman Fernando Martinez, asked to comment on Petron’s offer to the government, said: “This is a welcome development as long as the government will “not buy the asset (Bataan refinery) more than what it (PNOC) gained when it sold the asset years back.”

“It may be a good alternative for the government to re-establish its balancing act in oil pricing,” he said.

Martinez, however, pointed out that if this transaction pushes through, the valuation must be made known to the public.

“The public must be aware of the valuation which will eventually be shouldered by the taxpayers,” he said.

“Unfortunately, the government has a very poor track record in acquiring and in selling assets just like what’s happening in the power sector where consumers are made to pay the highest power rates,” the IPPCA official added.