Maharlika says talks ongoing for petroleum storage project
By Justine Irish D. Tabile, Senior Reporter
THE MAHARLIKA Investment Corp. (MIC) said it is in talks with the government to finance a fuel storage facility, and is working to provide working capital to fuel importers to address their ability to maintain adequate inventory.
At the Legislative Energy Action and Development (LEAD) Joint Committee hearing on Wednesday, MIC President and Chief Executive Officer Rafael D. Consing, Jr. called fuel storage one of the major challenges during the energy emergency.
He said Maharlika has been in week-long discussions with the Philippine National Oil Co. (PNOC) on building a tank farm.
“The best way to be able to participate, help and also, at the same time, generate guaranteed returns is by building the tank farm to be able to support the inventory,” he said
“If we do it that way, we are not going to take market risk on the price of the fuel, but rather we will be receiving our returns on the long-term lease,” he added.
The PNOC and Maharlika are forming a technical working group on the storage project, with Maharlika to invest in the physical facility while outsourcing operations to the private sector.
On the working capital aspect of maintaining fuel inventory, he noted that existing storage capacity is not even fully taken up.
“Whether or not that is fully utilized, we actually don’t have data. But intuitively, it could be in the area of about 60%… Now, the question is this: Why is it that knowing already that there’s a potential shortage, yet we are only utilizing 60% of the storage?” he said.
Mr. Consing added that unused storage reflects an issue with working capital on the part of fuel importers.
He added that the sovereign wealth fund manager is looking to disburse working capital assistance within 30 days at the earliest.
“We are going to the investment committee soon; maybe in about 30-45 days, we will have released the working capital facility,” he said.
He said working capital is directly tied to the industry’s ability to amass adequate supply because maintaining fuel inventories “has a financing cost,” which is why Maharlika is directing its efforts there.
“The price of landed refined fuel has gone up by about 60-70%, which means that for these retailers, just to be able to retain the old inventory, they actually have to cash out 60-100% more in working capital,” he said.
