Shell: Price discrepancies indicate oil smuggling on the rise

Oil smuggling reared its ugly head last year as Shell Companies in the Philippines noted discrepancies in its computations and the actual retail prices.

“There was a movement last year. Toward the end of the second quarter and then third quarter of 2013, smuggling came back. We suspect that people were anticipating the revamp [at the Bureau of Customs],” said Shell country manager Edgar O. Chua. “Our sales fell and the retail prices fell. But if you compute it, and you compute the supposed landed cost, you’ll see that some players are selling at much lower prices. That’s because they don’t have the 12-percent value added tax.”

Chua expressed optimism on the BOC, now under a new leadership. But he urged the government to continue to pursue changes in systems and procedures.

It is estimated that the government foregoes revenues of up to P60 billion a year due to oil smuggling.

Also, Shell said work on its much awaited initial public offering (IPO) would start once the company makes its final investment decision (FID) for the upgrade of its refinery in Tabangao, Batangas.

Chua said that the company hopes to secure in two to three months’ time the approval of parent firm Royal Dutch Shell Plc. for the P6-billion planned investment to upgrade its refinery, which has the capacity to turn out 110,000 barrels a day. The upgrade will allow Pilipinas Shell to meet the more stringent quality specifications for Euro IV fuels in the near future.

“Assuming that we already have the FID, we will start working on the IPO. As to when we will do that will depend on market conditions. We will push through with the public offering because we have to comply with the law,” Chua said.

The company is pushing for the refinery upgrade to ensure the country’s energy supply and security, Chua said. It will also benefit the country in terms of technology transfer and job generation.