Gov’t drive vs oil smuggling seen paying off

Oil smuggling may have slightly eased in the past two months as the government’s intensified efforts to curb smuggling have started to pay off.

Edgar Chua, country chair of Shell Companies in the Philippines, said that the company’s downstream oil unit, Pilipinas Shell Petroleum Corp.,  had seen an increase in sales that “usually doesn’t happen.”

He attributed the sales increase to the measures being implemented by the government to address smuggling.

“I must say, we would like to thank and congratulate the government because since April and up to now, we have been seeing a significant drop in smuggling, as our sales increased by double digit,” Chua said.

This development bodes well for the government which, according to Chua, has been losing about

P30 billion in revenue due to oil smuggling.

He said that based on industry estimates, smuggled oil products accounted for about 30 percent of the total volume of the so-called white products (i.e., diesel and gasoline) sold in the local market.

Following an Inquirer report on oil smuggling, the Bureau of Customs heightened the monitoring of economic zones and large ports—which are entry points for imported petroleum products.

On another development, Chua disclosed that Shell might have to defer anew its initial public offering (IPO) until the company arrives at a final investment decision  for its refinery in Tabangao, Batangas. Shell is currently studying whether to keep and upgrade its refinery or convert it into an import terminal.

“If we go back to the Oil Deregulation Law, the IPO obligation is a function of an oil company with a refinery. People are saying that Shell is just delaying, but you need to understand that in 1997, the Asian crisis had hit us. The economic landscape was not good for at least six years until 2003, during which refining margins were negative,” Chua explained.

“That’s why one refinery was shut down in October of 2003. This is not something that we’re inventing or using as an excuse. After that, other issues have surfaced,” he added.

Chua disclosed that at this time, it looked favorable for Shell to keep its refinery. But the decision on whether to hold an initial public offering will be made when it finally signs the refinery investment decision.

The conversion of the 110,000-barrel per day refinery to an import terminal is “always a possibility, but we hope this will not happen because our refinery is one of the best performing refineries of Shell despite the fact that it’s one of the smallest refineries.”

Shell is presently doing a feasibility on a $150-million upgrade of the Batangas refinery.