Oil refiner Petron Corp. is pursuing the expansion of its Bataan refinery by leasing land at PNOC Alternative Fuels Corp.’s industrial park in Limay, Bataan, its top executive said over the weekend.
Petron president Ramon Ang said the company offered to lease the property from state-run Philippine National Oil Co. which now operates the industrial park.
“The plan is to expand the refinery from 180,000 barrels a day to 300,000 barrels a day,” Ang said. Petron owns a 180,000-barrel-per-day refinery in Limay which recently underwent a $2-billion upgrade.
Ang said expanding the existing refinery would be “faster and cheaper” for the company.
“Land required for this expansion is about 100 hectares, of which some can come from PNOC and most of the other properties are owned by other people. If we can acquire it by lease or acquisition from other people, we will consider to expand the refinery,” he said.
Ang said a 200,000-barrel-a-day refinery at a new site would cost around $15 billion to $20 billion while a 100,000-barrel-per-day refinery at the existing site would cost only $5 billion to $10 billion.
Petron is currently leasing 294.8 hectares in Limay, Bataan where the existing refinery is located. The lease agreement for the refinery has already been extended.
Ang, however, said Petron’s expansion program was affected by government’s threat to cancel the lease agreement for the retail stations and bulk plants across the country.
Petron’s lease rental with PNOC covers 67 stations and 24 bulk plants around the country and is set to expire by August next year.
“Who will lend me if there is a threat of cancellation of my lease. That is bad for investors,” he said.
He said Petron would not waive its rights under the existing lease agreement with PNOC for its retail stations and bulk plants.
“We have an automatic renewal…We are willing to discuss…We are reasonable and agreeable to a fairness valuation but waiving any rights [is] not possible,” Ang said.
He said that when Petron was privatized, the lease agreement with PNOC was meant to entice foreign investors.
“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 wanted Petron to nullify Section 2 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 asked Petron to pay higher rental fees for its properties to reflect the current market valuation and generate higher revenues for the government.