Pilipinas Shell Petroleum Corp. will temporarily shut down its oil refinery in Batangas for one month starting mid-May as part of “cash conservation measures” due to the coronavirus pandemic (COVID-19).
Shell, the country’s second largest oil company, disclosed to the Philippine Stock Exchange Tuesday the Enhanced Community Quarantine in Luzon and selected provinces nationwide slowed down economic activities and mobility, resulting in lower fuel demand. Shell’s refinery in Tabangao, Batangas province has a capacity of 110,000 barrels per day.
“In response to the drastic decline in local product demand and the significant deterioration of regional refining margins brought about the COVID-19 pandemic, the company will temporarily shut down its refinery operations for approximately one month starting mid-May 2020,” Pilipinas Shell said.
The Tabangao refinery started commercial operations in 1962 with an initial nameplate capacity of 30,000 bpd and completed an upgrade in 2015. The refinery currently supplies about 30 percent of local demand.
The Energy Department summoned Pilipinas Shell to a meeting today to provide “details and their supply situation” due to the impending one-month refinery shutdown.
“The temporary shutdown will help insulate the company from further potential drops in refining margins and will also aid in its cash conservation initiatives. Nonetheless, the Refinery will retain the flexibility to do a start-up immediately should market and demand conditions improve and stabilize,” it said.
Pilipinas Shell said it would reinforce financial resilience “through cash conservation measures to position the company for the subsequent economic recovery of the Philippines from the crisis.”
“The company has prepared itself by building the flexibility to switch from refinery production to full import of petroleum products, and therefore safeguard the continuous and cost-effective supply of high-quality fuels to the country,” it said.
Pilipinas Shell said the North Mindanao Import Facility in Cagayan de Oro City completed in 2016 could pursue product importation if needed.
“The joint operations of the NMIF and the refinery as import terminals, coupled with the Company’s resilient and efficient supply chain will help ensure that the supply of Shell fuels remains uninterrupted to serve the needs of the Filipinos,” it said.
The company also said it would use the refinery shutdown as an opportunity to conduct proactive maintenance activities in the refinery “while we re-assure the public that we comply with the minimum inventory requirements of the government.”
Pilipinas Shell earlier said it operated an integrated and highly efficient supply chain network, thus enabling it to delivere close to P700 million in cost savings from its Batangas refinery at the end of 2019 to counter the depressed regional refining margins.
The refinery developed the flexibility to produce low sulfur fuel oil in response to the call of the International Maritime Organization.
Pilipinas Shell has around 1,100 retail stations across the country. Itdistributes refined and imported petroleum products through fuel distribution terminals, lubricants warehouses, and bitumen import facilities throughout the country.