Petron Corp., the country’s lone refiner, will shut down its 180,000-barrel-per-day Bataan refinery “very soon” amid a “difficult” environment brought about by the coronavirus pandemic and an uneven playing field, its top executive said Tuesday morning.
“Nakakaawa lang empleyado kasi libo libo yan na mawawalan ng trabaho pero dun pa din tayo patungo,” Petron president Ramon Ang said in a virtual briefing.
“The refinery business today is very difficult. Around the world, a lot have shut down,” Ang said.
Petron’s competitor, Pilipinas Shell Petroleum Corp., also closed its 110,00-barrel-per-day refinery in Batangas in August.
Ang said Petron was suffering from an uneven playing field compared to oil importers in terms of tax payments, compounded by inventory losses amid low demand at the height of the community lockdown.
He said once imported crude arrives in the country, it is slapped with value added tax and excise tax and once the processed petroleum product is sold, it is levied again by another round of taxes.
Finance Secretary Carlos Dominguez III, however, said, there was no need to change the current taxation system for fuel refiners and importers.
“We note that in the refinery business, there may be market and timing issues—such as importing crude at a high price, then after refining the world crude prices might be lower, thus refining margins could be lower,” he said.
Dominguez said an importer of finished products could sell the products right away, making it less vulnerable to oil price movements. He said it was actually a supply chain issue, instead of a tax issue.
“We don’t need to change our tax laws on this. It is happening worldwide. Refinery margins are getting squeezed. Big oil companies have been shutting down their refineries in various parts of the world,” Dominguez said.
Ang said refiners were also required to have a 70-day inventory, putting them at risk when oil prices go up.
“There has to be a level playing field. If Petron will not have a level playing field with the importers, we will shut down for sure. When? Very soon,” Ang said.
“Our competitors, those without refinery, when they deliver diesel and gasoline directly there is no tax, they will just pay the tax once they sell,” he said.
Ang said Petron suffered billions of pesos in inventory losses because of the fluctuation of oil prices in the world market amid the pandemic.
Petron suffered a consolidated net loss of P14.2 billion in the first six months, a turnaround from the P2.6-billion net income a year ago, as the company reeled from the impact of the COVID pandemic.
Petron’s inventory losses reached nearly P15 billion in the six-month period from the combined slump in demand, poor refining margins and collapse in prices.
Ang said they have informed the Department of Energy and the Department of Trade of the tax issues but the agencies’ hands were tied.
Energy officials also not issued a comment on the impact of the Petron refinery shutdown to fuel supply.
“The only way to save this is if we go to Congress to make it a level playing field. Other than that, it will shut down,” Ang said.
Ang admitted that convincing Congress to amend the law would take time.
“We have to amend the law or Malacanang will come out with an executive order,” he said.
Ang assured Petron and San Miguel Corp. would continue to honor their obligations to creditors and the employees even if the refinery stopped operations.
“We can keep the gas stations and pay the debts forever…We will pay all obligations and we have enough to pay all the obligations,” he said.
Petron invested $2 billion in its Refinery Master Plan 2 project, which was completed in 2016, that allowed the refinery to produce more high-value products.
Petron has a network of 2,400 retail stations nationwide which captured about a third of the domestic market.
Ang said, however, that without a refinery, the Philippines “will be at the mercy of foreign suppliers”.
Ang said Petron’s 88,000-barrel Port Dickson Refinery in Malaysia would likely survive because of the even playing field created by the Malaysian government. With Julito G. Rada