Metro Manila (CNN Philippines, August 13) – Plunging fuel prices and depressed demand for oil products pushed Pilipinas Shell Petroleum Corp. to shut down its refinery in Batangas for good.
The local arm of the multinational firm said Thursday that its oil refinery in Tabangao town will be permanently closed, months after halting operations.
Lockdowns to contain COVID-19 infections in the past few months kept oil consumption lower than usual as people work and study from home. Public transportation has also been limited and are off the streets again in Metro Manila and nearby provinces, which returned to strict stay-at-home rules for two weeks this August.
“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,” Pilipinas Shell President and Chief Executive Officer Cesar Romero said in a disclosure.
Apart from the Batangas facility, Pilipinas Shell runs a major oil import depot in Cagayan de Oro City that serves customers in Mindanao.
Pilipinas Shell said the facility will then be transformed into a “world-class full import terminal,” which would process and store processed fuel products which are ready to be distributed to retail stations.
Shell’s pullout leaves only one local refinery in business: Petron’s facility in Limay, Bataan. All of Shell’s gas stations will be pumping imported fuel products for customers.
Pilipinas Shell trimmed losses in April-June amid a slight improvement in fuel prices, ending the quarter at a ₱1.2-billion loss versus ₱5.5 billion in the first quarter. Sales volumes also recovered in May and June as more business activities were allowed. However, the listed company said it will remain “cautious” as the Philippines sees a sustained climb in COVID-19 infections.
The company ended with a ₱6.7 billion loss from January-June, reversing a ₱3.7 billion net income during the same period in 2019. Inventory holding losses ate into the bottom line after the price of crude oil plunged in April. Aviation fuel also saw a steep drop in demand, leading to a 43 percent decrease in sales.
To preserve its cash position, Pilipinas Shell will not pay out dividends for its 2019 operations.
RELATED: Low oil prices ‘not great’ news as economies collapse — expert
Despite this, Energy Secretary Alfonso Cusi says he is unbothered as Shell is expected to continue filling its market share by importing refined products.
Instead, Cusi worried about workers who may be displaced as the plant switches business operations.
For his part, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said pump prices are unlikely to shoot up because of Shell’s decision.
“The price of oil, whether here or abroad, is governed by supply and demand conditions and at the moment, we do not see the price of oil going up back to pre-COVID level anytime soon,” Diokno said. “The price of oil will be muted for a long time.”
