Petron Corp. has asked the state-run Philippine National Oil Corp. (PNOC) to honor the terms of a long-standing property lease— a deal drawn up by the government itself—amid a move by the agency’s new head to raise the rent to be paid by the country’s largest petroleum firm.
The call for PNOC to stick to the terms of its own lease agreement was made by Petron president Ramon Ang amid statements from PNOC president Ruben Lista that the government firm, under whose name many of Petron’s properties are lodged, wanted to “renegotiate” the contract ahead of its expiration in August 2018.
Ang—who also heads the country’s largest conglomerate San Miguel Corp.—pointed out that Petron’s lease with PNOC provided for an “automatic renewal” of the contract with the state firm over an aggregate land area of 200 hectares covering separate properties on which the petroleum giant built its Bataan oil refinery, oil depots and various gasoline stations.
“If they don’t want to honor that [contract], they can make the move to settle [the dispute] by arbitration,” Ang said, referring to the provisions of the deal. “We don’t need to do anything. [The agreement is] covered by an automatic renewal [provision].”
The property deal between Petron and PNOC stemmed from the former’s privatization in the 1990s when its real estate assets were transferred to its then-parent firm PNOC for a nominal fee of P2 million. The agreement allowed half of Petron’s shares to be sold to petroleum giant Saudi Aramco, which, as a foreign entity, was prohibited by law from owning real estate in the country.
In exchange for its P2 million investment, PNOC would earn fees from the long-term lease on the properties lodged under its name. The automatic lease renewal provision was included in the deal by the government itself as an assurance to Saudi Aramco and future foreign and local investors ahead of the firm’s 1994 initial public offering that Petron’s operations would be unhampered by the government’s privatization move.
Nonetheless, Ang said Petron was “open and willing” to sit down with PNOC to discuss the issue as well as any proposals that would emerge to settle the issue.
Any changes that PNOC wants to propose on the terms of the lease agreement “should be put in writing” and backed up officially by a resolution from its board of directors, he said.