Oil groups dismiss refinery closure’s impact

By Adam J. Ang

THE upcoming closure of one of the country’s biggest fuel refineries will not affect pump prices, industry officials said, but they still see a need to monitor whether the conversion of the facility to a full import terminal will have an immediate impact.

Their views come after listed oil company Pilipinas Shell Petroleum Corp. announced on Thursday the permanent shutdown of its 110,000-barrel-per-day (bpd) Tabangao refinery in Batangas, citing the crash in regional refining margins. It has been closed since May 24.

The Department of Energy-Oil Industry Management Bureau (DoE-OIMB) sees no possible change in the oil retailer’s fuel prices as the local industry, in general, adheres to the price movements in the benchmark Mean of Platts Singapore (MOPS).

“We are largely dictated by the movement in international price for the effect on pump price, even when they are using product[s] from refiner[ies] to be competitive with other direct importers in the market,” Rino E. Abad, the bureau’s director, told BusinessWorld.

“So, I expect that there will be no change of approach when Shell uses imported [fuel]; still, they will be guided by the movement of MOPS,” he added.

Fernando L. Martinez, chief executive officer of independent oil player Eastern Petroleum Corp., also does not see an impact on the prices of petroleum products in the country.

“I don’t see any effect on local pricing as we all use MOPS as the common price reference points,” he said.

“[The refinery’s closure] will probably not push MOPS prices higher, as Shell’s share of the local market likely is not that big to influence fuel prices,” consumer group Laban Konsyumer, Inc. said in a position paper.

The country’s oil players base their product prices on MOPS, which shows the daily average of trading transactions of diesel and gasoline.

The Philippine unit of Royal Dutch Shell will not leave Tabangao as its facility there will be converted into what it described as a “world-class” import facility, so it can continue to supply the fuel needs in Luzon.

Laban Konsyumer said such a move should be studied, especially its impact on local supply and prices.

“There must be an in-depth study into the shift from (running a) refinery to (becoming a full) importer,” said Victorio Mario A. Dimagiba, the group’s president.

“We hope consumers are still protected, as well as their welfare, in terms of prices, as Shell will continue to fill in their market share through the importation of refined products,” he said, citing the impact of foreign exchange movements on the prices of imported fuels.

The group urged the Energy department to ensure that the refinery shutdown will not lead to fuel prices distortion and give Pilipinas Shell “undue” advantage on pricing over independent oil traders, importers and consumers.

“There must be close watch if there is any advantage for Shell as an importer now of finished fuels on the matter of pricing, especially on weekly adjustments of similar amounts versus [competitors], including Petron, and the consumers,” Mr. Dimagiba said.

Presently, fuel supply in the country remains sufficient, Energy Secretary Alfonso G. Cusi said. The refinery’s closure “will not affect” supply, he said.

While Pilipinas Shell is closing its refinery, Ramon S. Ang’s Petron Corp. plans to reopen its 180,000-bpd Bataan refinery on Sept. 1 after the facility went on a maintenance shutdown since May 5.

In the first week of August, MOPS gasoline prices went up by $0.70 per barrel, while MOPS diesel declined by $0.60 per barrel. These were reflected in the Philippines’ pump price adjustments last week with gasoline increasing P0.25 per liter and diesel decreasing P0.20 a liter.