The Philippine National Oil Co. (PNOC) breached three lease contracts with Petron Corp. when the former moved to nullify binding property lease renewal clauses ahead of their expiration, the country’s largest petroleum firm said on Tuesday.
In a press statement, the oil refining and distribution giant said PNOC’s move may jeopardize the operations of the publicly-listed firm as well as the interest of its small shareholders and partner stakeholders.
Petron has existing lease agreements with PNOC for the sites of its $3-billion refinery in Bataan, 24 bulk plants and 67 gasoline stations.
In a letter to PNOC president and CEO Reuben Lista, Petron — through its general counsel Joel Angelo Cruz — said “it is [our] position that the lease agreements for the three properties and the renewal clauses therein are valid and binding.”
“They are not in violation of any law nor manifestly and grossly disadvantageous to the government,” the firm said. “Accordingly, your letters — because they deny without legal causes Petron’s contractual right to renew — constitute fundamental breach of the three lease agreements.”
Petron was responding to Lista’s letter which encouraged the oil firm — owned by conglomerate San Miguel Corp. — to waive certain provisions of the lease agreements because they are inequitable, or submit remediation plans “so that the abandonment and clean-up of the sites may already be discussed and completed” before the expiration of the lease agreements next year.
It was also reported that Lista had offered the properties covered by the expiring leases this early to interested new independent oil companies, in total disregard of the rights of Petron.
“As you very well know, the long-term lease by Petron of the subject properties and the properties denominated as refinery properties which are the subject of a third lease agreement between Petron and PNOC was the primary consideration for Petron’s conveyance of said properties at book value to PNOC,” the company said.
“Hence, the consideration for Petron’s leasehold rights is not only the rental payments provided for in the Lease Agreements but the conveyance of the properties to PNOC,” Cruz told Lista in the same letter.
Petron had earlier asked PNOC to honor the terms of a long-standing property lease— a deal drawn up by the government itself—amid a move by Lista to raise the rent to being charged to the petroleum firm.
Petron’s lease with PNOC provides 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.