Government losing P50 billion in taxes as oil smuggling persists

Oil smuggling persists in the Philippines, resulting in P30 billion to P50 billion worth of lost revenues for the government each year, a top executive of an oil refiner said based on information gathered by the company’s consultants.

“We only rely on external sources, consultants. The number we read is anywhere between 20 to 30 percent of volume. We have some studies that support this. That’s P30 [billion] to P50 billion, annually. That’s an estimate. That’s revenue lost for the government,” Pilipinas Shell Petroleum Corp. president Cesar Romero said.

Pilipinas Shell is the country’s second-biggest oil company that owns a 110,000-barrel-per-day refinery in Batangas province.

Romero said smuggling remained a major concern for oil industry players, “because at the end of the day, it’s not only loss for us but also lost income for the government.”

Pilipinas Shell expressed support for the fuel marking program of the government to curb smuggling but raised concern over the integrity of the fuel market, operations, and actual deployment.

Romero said quality assurance should be in place in terms of the integrity of the fuel marker, the operations or the process.  The winning contractor will be in charge of installing the fuel marker in the facilities of the oil companies.

“So discussions there [include] how do you time it, the engineering standards to be used to ensure that this is safe in operations and that the supply will not be disrupted,” Romero said.

He said the minimum requirement for testing should also be clarified such as the code of conduct expectations of various testers.

“Those [are the] kinds of things that need to be established to make sure there’s proper implementation,” he said.

Under the program, the fuel marking providers―Sicpa SA of Switzerland and SGS Philippines―are expected to provide a unique chemical marker capable of being embedded at a molecular level to petroleum products such as gasoline, diesel, and kerosene. 

The contract covers services and equipment necessary to administer and inject the marker into the fuel and the administration of confirmatory tests, both in the field and in laboratories.

Romero also urged the government, specifically the Energy Department, to carefully study the planned unbundling of oil prices, adding that oil companies data were readily available, especially those that are publicly-listed.

“That has to be very carefully studied because of the legal implications associated with the deregulation.  If and when that circular comes up, it has to be ensured that it is legally compliant because of the deregulated nature of our industry,” he said.

The local oil industry is deregulated which means any movement in oil prices does not require prior government or regulatory approval.