The Energy Department is studying how to resolve the controversial rental issue between Petron Corp. and state-run Philippine National Oil Co.
“I still have to study it,” Energy Secretary Alfonso Cusi, who also sits as chairman of PNOC, said.
Petron has existing lease agreements with PNOC on the sites of the $3-billion oil refinery in Bataan, 24 bulk plants and 67 gasoline stations.
Petron president Ramon Ang said he was mulling over legal remedies against PNOC for breach of three lease contracts in seeking to nullify alleged “disadvantageous” clauses.
“If they don’t want to negotiate and waive binding renewal clauses of the agreement, then we have no choice but to see legal redress to protect our rights and the interest of our shareholders,” Ang said.
Ang did not elaborate on the issue, but earlier said Petron was ready to go into arbitration if needed.
Ang said PNOC president and chief executive Reuben Lista was responsible for the breach of the agreements for insisting on the removal of a clause in the said agreements.
“For now, we reiterate he has caused PNOC to breach its agreements with Petron,” Ang said.
PNOC wants Petron to nullify a section of the lease agreement which states that “in case the parties fail to come to an agreement, the same terms and conditions shall apply except the initial rental rate for the renewal period shall be the rental rate at the time of expiration plus two percent thereof and subsequent rental rate shall be escalating by two percent per annum.”
Petron said last week PNOC was in breach of the lease contracts when it told the oil refiner in a letter to nullify binding renewal clauses ahead of expiration, threatening to jeopardize the oil company’s operations and the interest of small shareholders and other partners.
“It is Petron’s position that the lease agreements for the three properties and the renewal clauses therein are valid and binding. They are not in violation of any law nor manifestly and grossly disadvantageous to the government,” Petron general counsel Joel Angelo Cruz said in a letter to Lista.
Cruz said Lista’s letter “den[ied] without legal causes Petron’s contractual right to renew [and] constitute[d] fundamental breach of the three lease agreements.”
Petron was responding to Lista’s letter asking the oil company to waive certain provisions of the lease agreements or submit remediation plans “so that the abandonment and clean-up of the sites may already be discussed and completed” before the expiration of the lease agreements in August next year.
Petron said reports that Lista allegedly offered the properties covered by the expiring leases this early to interested new independent oil companies was a total disregard of the rights of Petron.
Ang earlier said Petron’s expansion program had been affected by government’s threat of canceling the lease agreement on retail stations and bulk plants across the country.
“Who will lend me if there is a threat of cancellation of my lease. That is bad for investors,” he said.
Ang said Petron would not waive its rights under the existing lease agreement with PNOC.
“We have an automatic renewal… We are willing to discuss… We are reasonable and agreeable to a fairness valuation but waiving any rights, not possible,” Ang said.
He said the lease agreement with PNOC when Petron was privatized aimed to entice foreign investors to acquire the oil refiner.
“The company bought it based on contract of privatization, waiving it will put at risk billions of pesos of investments… Government came out with idea to invite foreign investors to come in,” Ang said.