By Fernan Angeles
ONE of the country’s strongest oil companies seemed no match to the highly-infectious coronavirus strain as Pilipinas Shell Petroleum Corporation has decided to permanently shut down its 60-year-old refinery facility in Batangas.
In view of the permanent closure, Pilipinas Shell hinted at transforming the facility into a “world-class full import terminal” seen to optimize its asset portfolio and enhance its cost and supply chain competitiveness.
“We have the technical capability and financial flexibility to manage and adapt to disruptive conditions,” said President and Chief Executive Officer Cesar Romero in a report to the Philippine Stock Exchange.“Due to the impact of the COVID-19 pandemic on the global, regional and local economies, and the oil supply-demand imbalance in the region, it is no longer economically viable for us to run the refinery.”
A publicly-listed corporation, Pilipinas shell ceased operations of the refinery last May 24 as an integral part of the company’s cost-cutting measure amid heavy losses incurred during the onslaught of the pandemic – when demand was radically reduced due to government-imposed strict lockdown protocols.
A statement issued by Pilipinas Shell said that they would suspend operations and embark on “the shift in supply chain strategy from manufacturing to full import terminal is a move that will further strengthen Pilipinas Shell’s financial resilience amidst the significant changes in the global refining industry and the change to the new normal brought about by the COVID-19 pandemic.”
Pilipinas Shell claims to have incurred a P5.5 billion net loss during the first quarter of the year but narrowed it to P1.2 billion losses in the second quarter as crude oil and product prices slightly improved.
Pilipinas Shell’s total net losses for the first half of 2020 pegged at P6.7 billion.
Demand for petroleum products declined by 20 to 30 percent in March, and by as much as 60 to 70 percent in April during the imposition of the enhanced community quarantine compared to February 2020 levels, according to the Department of Energy.
Despite seeing volume and earnings recovery in May and June, Pilipinas Shell said it remains cautious given the spike of COVID-infected cases in the country and the consequent decision to place Metro Manila, and surrounding provinces back to modified enhanced community quarantine (MECQ).
The company also said that the refinery shutdown will not have any effect on supply and ensured that fuels and other products will remain uninterrupted.
Constructed in 1960, the Tabangao refinery facility produces 110,000 barrels of oil per day (b/d). It is one of only two oil refineries in the country. The other is in Bataan owned by Petron. Pilipinas Shell said the Tabangao facility will continue to cater to the fuel needs of Luzon and Northern Visayas, while the North Mindanao Import Facility (NMIF) in Cagayan de Oro will serve the energy needs in the balance of the Visayas islands and Mindanao.
The company has also announced that, to ensure it remains financially resilient and to preserve cash, it has also decided to cancel 2020 dividend payouts for its 2019 financial results.