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Pilipinas Shell confirms smuggling

Says ‘plunder’ happens in special economic zones, out at sea

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Pilipinas Shell Petroleum Corp., the country’s second biggest fuel provider, identified two ways of smuggling petroleum products into the country aside from bringing them in through special economic zones and selling them tax-free outside the zones.

“There are also schemes where volume and value are grossly understated resulting in very small tax payments,” Edgar Chua, country manager of Pilipinas Shell, said on Tuesday.

Chua said another scheme “is to have a large ship floating some distance out at sea and smaller ships withdrawing from the mother ship for direct delivery to various customers or small storage facilities.”

No documents are used so no taxes are levied, he said.

“The common smuggling schemes are the entry of finished products in special economic zones like those in Subic, Bataan and Phividec (which operates a 3,000-hectare complex in Misamis Oriental),” Chua added.

They are brought in tax-free and then they are withdrawn tax-free using fake documents supposedly for export, but in reality are sold in the local market.”

Pilipinas Shell itself has been charged by the Bureau of Customs (BOC) with “intentional misdeclaration” of its premium gasoline. (See list of firms sued by the BOC on this page.)

Chua affirmed Petron Corp. chair and CEO Ramon S. Ang’s estimate of some P30 billion in forgone government revenue every year from fuel smuggling.

Ang said one in every three liters of gasoline or diesel sold in the country was smuggled.

The Petron chief noted that smuggled oil products accounted for at least a third of the total volume sold in the market.

“(Our) retail or service station volumes have remained flat despite the fact that registered vehicles increased from 5.5 million to 7.1 million over the period from 2007 to 2011,” Ang said.

Petron and Pilipinas Shell are the country’s oil refiners.

39.3M barrels smuggled

Citing data from the Department of Energy, Finance Secretary Cesar V. Purisima said in a statement that the demand for petroleum products amounted to 106.9 million barrels in 2011.

But Bureau of Customs data for the same year showed that 67.6 million barrels were officially brought in, suggesting that the remaining 39.3 million barrels were smuggled into the country.

Plunder

Chua said oil smuggling amounted to plunder because of the massive damage to government and private capital investments.

“Smuggling should be considered plunder given the huge amounts involved and the damage to the economy it causes, sucking the lifeblood out of government revenue that should have been used for social services to benefit the public, especially the poor,” he said.

“The ‘savings’ that end users enjoy due to the lower price of smuggled products are nothing compared with the benefits like schools, hospitals, farm-to-market roads and housing that would have been built if the government was able to collect the taxes due,” said Chua.

 

Investor interest dampened

 

He said the government’s failure to stem fuel smuggling had dampened investor interest in expanding their production capacity in the country.

“Oil smuggling constrains the expansion plans of legitimate oil companies. The country’s two oil refineries (Petron and Shell) can only supply 60 percent of the country’s finished product requirements. So, theoretically, investments in additional refining capacity can be justified.

“But rampant oil smuggling prevents oil companies from expanding manufacturing capacity,” said Chua.

Pilipinas Shell, an Anglo-Dutch firm, has been in the Philippines for the last 99 years.

Since deregulation in ’98

Oil smuggling has flourished in the country since the deregulation of the industry in 1998, Chua told the Inquirer. The deregulation allowed small companies to sell petroleum products to the public, ending the oligopoly earlier enjoyed by Petron, Shell and Caltex (now Chevron).

Petron accounted for 35.9 percent of the market as of June 2012; Shell, 22.5 percent; and Chevron, 9.6 percent. Other firms like Phoenix, Total, Liquigaz, Unioil, Seaoil and Jetti held 29.7 percent of the market.

Rice, vehicle smuggling

Chua said the oil industry’s problems were typical of the smuggling woes faced by other industries such as rice, vegetables and vehicles.

While Chua acknowledged that the government had made efforts to curb smuggling, the prospects of windfall profits were too big to ignore.

“There is big money involved, around P20 billion to P30 billion per year. It is not easy to curb this disease,” he said. With a report from Ronnel W. Domingo


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Tags: Bureau of Customs , Edgar Chua , oil smuggling , Petron , Pilipinas Shell , Pilipinas Shell Petroleum Corp. , Plunder , Ramon S. Ang , special economic zones

  • concerned

    The DOF, as far as I know, has a fuel marking program to address the problem on smuggling of fuels. They add a certain chemical on duty free fuels which serves as a marker. They use this marker to identify duty free oils smuggled or those duty free oils being sold outside the duty free zones. As far as I know, there were cases filed already against some oil smugglers caught with the aid of the said marker. FYI

  • feargo

    smuggling grows where prices are high – either due to excessive taxes or excessive profits. if these taxes and profits are in line with the region’s, then there’ll be no market for smugglers.

  • Handiong

    BIR must investigate all oil companies and track down all their sources of oil products. Let’s see how they will match inventories with suppliers.

    • Bulagas

      so your solution is to hunt down the legitimate oil companies and how about the smugglers?

      hindi nanaman naintindihan ng mga yellow communication group ang issue… bobs talaga

      • Handiong

        Sinong nagbebenta ng mga smuggled oil products kung hindi ang mga “legitimate oil companies”? Ikaw ba makakabili ng gasolina na hindi sa gasoline station? Mag-isip ka nga.

      • Bulagas

        ah kuya sa gasolinahan lang ba ginagamit ang oil? bunker fuel, corporations, etc. etc. etc.

      • Handiong

        The bulk of the smuggled products is gasoline. That’s why Ramon Ang was wondering why, despite the increase in the number of PRIVATE MOTOR VEHICLES, the sale volume of local refineries have remained flat. Phoenix Petroleum is one “legitimate oil company” that has a smuggling charge filed against it.

        By tracking down the suppliers of “legitimate oil companies”, we want to know if they are getting supplies from illegal sources. What’s wrong with going after, or in your words “hunting down” legitimate oil companies if they are violating the law? Are they “sacred cows”?



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