Shell to shut down Batangas refinery

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PILIPINAS SHELL Petroleum Corp. is permanently closing its refinery in Batangas province, saying its operations are no longer “economically viable” as margins worsened amid the coronavirus crisis.

At the same time, Energy Secretary Alfonso G. Cusi said  Pilipinas Shell’s decision to shut down the 110,000-barrel-per-day Tabangao refinery “will not affect the oil supply in the country.”

“The regional refining margins which have been weak for some time due to the oil supply/demand imbalance in the region, have worsened due to demand destruction from the (coronavirus) crisis. As such, it is no longer economically viable for us to run the refinery,” Pilipinas Shell President and Chief Executive Officer Cesar G. Romero said in a statement.

Pilipinas Shell said the facility in Batangas will be converted into a world-class import terminal, noting the shift to an imports-based supply strategy would not affect its supply capability. Details on the planned import terminal were not available.

The refinery has been shuttered since May 24 to help the company preserve cash, and to insulate it from the further decline in refining margins.

However, Department of Energy’s (DoE) Mr. Cusi expressed concern for the workers who will be displaced because of the refinery’s closure. “I hope they will find employment with the other industry players,” he said. 

Mr. Romero said the company will ensure employees “directly impacted by the transition are well taken care of,” but did not provide details.

The planned import terminal will still supply fuel products in Luzon and the northern Visayas, while the North Mindanao Import Facility in Cagayan de Oro will cater to Visayas and Mindanao markets.

“Shell remains committed to the Philippines and will pursue opportunities where we can leverage our global expertise in line with our growth strategy,” Mr. Romero said.

The Tabangao facility started commercial operations in 1962. It is one of two refineries in the country, both of which have shuttered operations as the lockdown affected oil demand.

Demand for petroleum products plunged during the lockdown, by as much as 80% in April versus February levels.

Petron Corp.’s 180,000 bpd facility in Bataan has been temporarily shut since May 5. Petron Chairman Ramon S. Ang on Thursday said the company will resume the operations of the refinery on Sept. 1.

“We have advised the DoE that we are now doing preparatory work at the Petron Bataan Refinery, for the resumption of operations on Sept. 1,” Mr. Ang told reporters via Viber.

Q2 LOSS NARROWS

In a disclosure to the stock exchange, Pilipinas Shell said it estimated an after-tax asset impairment of P6 billion from the closure of the Tabangao facility, which will be reflected in its third-quarter profit report.

Pilipinas Shell swung to a net loss of P1.2 billion in the second quarter, from a P1.4-billion profit a year ago. However, the second-quarter loss was narrower than the P5.5 billion in the first quarter, on slightly improving prices of crude oil and finished products.

For the first six months, Pilipinas Shell’s net loss stood at P6.7 billion from a P3.73-billion profit a year ago.

The listed fuel company remains “cautious” about the slight recovery in volume and earnings given the spike of coronavirus infections in the Philippines and the recent return to a stricter lockdown in Metro Manila and adjacent provinces.

The company so far was able to save P1.3 billion from capital and operating expenditures, P700-million short of its 2020 target savings.

Meanwhile, the company also decided to cancel dividend payouts this year to preserve cash.

Shares in Pilipinas Shell fell by 4.11% to close at P16.78 each on Thursday. — Adam J. Ang

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Article and Photo originally posted by Business World last August 14, 2020 12:32am.

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