Pilipinas Shell to shut Batangas oil refinery for a month

PILIPINAS Shell Petroleum Corp. (PSPC) will suspend the operations of its Batangas oil refinery for a month starting May 15, citing the decline in demand for fuel products and falling refining margins during the lockdown.

In a disclosure sent to the stock exchange on Tuesday, the Philippine unit of Royal Dutch Shell said it is set to switch from local refining production to fully sourcing petroleum products abroad to continue supplying cost-effective fuel in the country.

“In response to the drastic decline in local product demand and the significant deterioration of regional refining margins brought about [by] the COVID-19 [coronavirus disease 2019] pandemic, the Company will temporarily shut down its Refinery operations for approximately one month starting mid-May 2020,” PSPC said.

The pandemic crisis has caused global demand for oil to drop as oil-dependent industries closed, leading to a supply glut that brought down prices in the world market.

Lately, Energy Secretary Alfonso G. Cusi noted that around 10% of oil retailers in the country had temporarily shut down their fueling stations in areas under the enhanced community quarantine (ECQ).

PSPC said it had enforced cash conservation measures to stay afloat until the local economy recovers.

“The temporary shutdown will help insulate the Company from further potential drops in refining margins and will also aid in its cash conservation initiatives,” it claimed.

According to Mr. Cusi, oil prices will remain volatile up to the end of the third quarter, along with lower demand, as the mobility of people will still be restricted.

“I don’t think the price of oil will immediately change after the ECQ because of what is happening abroad,” he also said.

Oil demand is projected to decline by 9.3 million barrels per day in 2020 due to lockdowns, based on the outlook of the International Energy Agency.

PSPC will conduct maintenance activities at its 110,000-barrel-per-day Tabangao refinery during its temporary shutdown.

“Nonetheless, the refinery will retain the flexibility to do a start-up immediately should market and demand conditions improve and stabilize,” it added.

Meanwhile, the company’s North Mindanao Import Facility, which can house 90 million liters of fuel products, will continue to operate.

On Tuesday, shares in PSPC went up 1.19% to close at P18.74 each. — Adam J. Ang