Shell abandons PH oil refinery business

Pilipinas Shell Petroleum Corp. announced Thursday it is permanently shutting down its refinery operations in Tabangao, Batangas due to the impact of the coronavirus pandemic.

“We have the technical capability and financial flexibility to manage and adapt to disruptive conditions. Due to the impact of the COVID-19 pandemic on the global, regional and local economies, and the oil supply-demand imbalance in the region, it is no longer economically viable for us to run the refinery,” Pilipinas Shell president and chief executive officer Cesar Romero said in a statement.

Share price of Pilipinas Shell fell 4.1 percent to P16.78 from P17.50 Wednesday

Pilipinas Shell, the country’s second biggest oil company, owns operates a 110,000-barrel-per-day refinery in Batangas. The company placed the refinery on “economic shutdown” on May 24 as part of  cash preservation efforts due to the low prices of oil and weak demand.

Pilipinas Shell’s refinery started commercial operations with a capacity of 30,000 barrels per day in 1962.

The company is transforming its refinery into a world-class full import terminal to optimize asset portfolio and enhance cost and supply chain competitiveness as the price of fuel products is now lower than or almost equal to the cost of refining crude oil.

Energy Secretary Alfonso Cusi said he respects the decision of Pilipinas Shell to permanently close its refinery operations in the country. 

“This, however, will not affect the oil supply in the country as they will continue to fill in their market share through import of refined products,” Cusi said.

Cusi said he was saddened with the plight of the workers who will be displaced by the closure.

“I hope they will find employment with the other industry players,” the energy chief said.

With the shutdown of Pilpinas Shell’s refinery, the Philippines will have only one refinery left operating. Petron Corp., which runs a refinery in Bataan with a capacity of 180,000 barrels a day,  is still on  shutdown since May 5. 

Petron's refinery went on maintenance shutdown for one month and shifted to an economic shutdown due to COVID-19.

Petron president Ramon Ang said the COVID-19 pandemic had greatly affected the Philippine fuel industry but assured the Petron refinery would resume and the company would work to ensure efficient operations.

“None of us are immune to its adverse economic impact and we empathize with the entire industry in the face of our current challenges. Even Petron Corporation has not been spared but we continue to be committed to serving Filipinos and doing our part in helping our country and economy manage the setbacks,” Ang said.

“We have advised the Department of Energy (DoE) that we are now doing preparatory work at the Petron Bataan Refinery for the resumption of operations on September 1,” Ang said.

Pilipinas Shell said its Tabangao facility will continue to cater to the fuel needs of Luzon and Northern Visayas, while the North Mindanao Import Facility in Cagayan de Oro will serve the growing energy needs in the balance of the Visayas islands and the whole Mindanao region.

Pilipinas Shell made the decision to secure the long-term sustainability of its business and thrive in both the ongoing energy transition and the new normal created by the COVID-19 pandemic.

The shift in supply chain strategy from manufacturing to full import terminal is a move that is seen to further strengthen Pilipinas Shell’s financial resilience amid the significant changes and challenges in the global refining industry and the change to the new normal brought about by the COVID 19 pandemic.

Pilpinas Shell said the move would translate into an estimated asset impairment of P6 billion (post tax) to be recognized in the third quarter. It will not have a cash impact on the  company.

“The pandemic has definitely posed some challenges, but we have a strong balance sheet, retained earnings, and a reasonable gearing of 40 percent. We intend to maintain financial resilience,” says Romero.

Pilipinas Shell posted a net loss of P6.7 billion in the first six months of 2020 compared with a net profit of  P3.7billion year-on-year.

Topics: Pilipinas Shell Petroleum Corp. , refinery operations , Tabangao , Batangas , coronavirus , COVID-19 pandemic
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