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Petron seeks TRO vs PNOC

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Petron seeks TRO vs PNOC

Firm goes to court after PNOC threatens to terminate lease agreement with oil refiner
/ 05:19 AM October 23, 2017

Petron Corp. has asked the Mandaluyong Regional Trial Court to issue a temporary restraining order (TRO) on the Philippine National Oil Co.’s moves to compel the oil refiner to let go of assets it is leasing from its former parent firm.

Petron said it filed in court last Friday a complaint against PNOC for “breach of a binding and compulsory sale-leaseback contract.”

This was the same day the PNOC board met, where the results included the formation of a committee tasked to talk things through with Petron.

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In a press briefing last Friday, Energy Secretary and PNOC chair Alfonso G. Cusi as well as PNOC president Reuben Lista declined to name the members of the committee, saying the concerned parties have not yet been informed.

In a statement, Petron said it had to go to court after Lista early this year told the former PNOC subsidiary that PNOC would terminate the lease agreement with Petron, “citing provisions in the contract that are allegedly disadvantageous to the government.”

Petron, which accounts for more than a third of the country’s petroleum supplies, has existing lease agreements with PNOC for the sites of its $3-billion refinery in Bataan, 24 bulk plants and 67 gasoline stations.

The oil refiner offered to negotiate the agreements with PNOC as early as 2016 until Lista’s correspondence earlier this year.

“If PNOC will continue to disregard its reciprocal obligations on the conveyance of our land, then they should return the properties to us. Petron has invested billions of dollars on these properties,” Petron said. “PNOC’s actions clearly jeopardizes the country’s fuel supply security and government’s thrust to develop key industries.”

Also, Petron said Lista sent last August two follow-up letters demanding “to nullify certain provisions of the lease agreements that pose a stumbling block before we can proceed to negotiate the renewal.”

Petron said that in the letters, dated Aug. 1 and Aug. 31, Lista called for the abandonment and cleanup of the contested sites on or before the expiration of the lease.

“Earlier, news reports revealed Lista had offered the properties covered by the subsisting leases to interested new independent oil companies, in total disregard of the rights of Petron,” the company said.

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When asked last Friday about these concerns of Petron, Lista deferred to Cusi, the PNOC chair.

“If PNOC has things which in their point of view are inequitable, they have to discuss it with Petron. They have to go back to the negotiating table. That’s what I told them (PNOC),” Cusi said.

“The PNOC board has appointed a negotiating team composed of three directors and three from the management side,” Cusi added. “They (PNOC and Petron) should talk directly rather than [make statements] through the media.”

Earlier, officials of San Miguel Corp.—Petron’s parent firm—explained that the leased properties were originally owned by Petron. But the refiner was compelled to give up its land to PNOC in 1993 to comply with the requirements of its privatization.

The SMC officials said that the transfer of the properties was enabled through a deed of conveyance and lease agreements that guaranteed its long-term and continuous use by Petron to secure foreign and local investments in Petron.

“The conveyance with lease-back transaction between Petron and PNOC involves a reciprocal obligation,” Petron said in its statement.

Such obligation involved, first, Petron conveying to PNOC the leased properties at book value and, second, in consideration of PNOC leasing the properties back to Petron on a long-term basis and according to its operational requirements.

“Hence, among the principal considerations for Petron’s conveyance of its properties to PNOC was PNOC’s obligation to lease-back the same properties to Petron,” the company said.

“By unilaterally setting aside the renewal clauses of the lease agreements and by categorically declaring its refusal to honor them, PNOC committed a fundamental breach of its lease agreements with Petron,” the company added.

Petron said PNOC disregarded the true consideration for the leasehold rights acquired by Petron over the properties, which included not only the rental payments but the properties themselves, which Petron had conveyed to PNOC pursuant to privatization.

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TAGS: Petron Corp., Philippine National Oil Co.
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