Petron Corp. warned Tuesday that state-owned Philippine National Oil Co. could violate three lease contracts for seeking to nullify alleged “disadvantageous” clauses.
Petron said in a statement 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.
Petron has existing lease agreements with PNOC on the sites of its $3-billion refinery in Bataan, 24 bulk plants and 67 gasoline stations.
“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, through its general counsel Joel Angelo Cruz, said in a letter to PNOC president and chief executive officer Reuben 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.
Petron president Ramon 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 that 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.
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.”
PNOC has been asking Petron to pay higher rental fees for its properties to reflect the current market valuation and generate higher revenues to the government.
