Eastern Petroleum blasts Petron attempt to block opening of gas station in Subic

MANILA, Philippines—Small player Eastern Petroleum Corp. has again accused oil giant Petron Corp. of harassment, monopolistic tendencies and “restraint of trade” for attempting to block, for the third time, the opening of a retail gas station across the Petron outlet in Subic.

Eastern Petroleum chairman Fernando Martinez told reporters on Wednesday that Petron wanted to nullify the waiver signed by the oil giant’s officials as this contract allowed Eastern to put up its P50-million gas station within the Petron’s so-called 800-meter radius exclusivity.

Martinez pointed out that Petron officials actually signed the waiver twice—first by the retail manager, and the second by senior officials of the company. Petron now, however, is claiming that the parent company (Petron Corp.) has no right to agree to such waivers since its wholly owned subsidiary Petron Freeport is managing the station.

Petron filed last June 14 its complaint before the Regional Trial Court Branch 72 of Subic. The country’s largest oil refiner and retailer wants “to restrain Eastern Petroleum from… opening its gas station and sell or distribute fuel, oil and other petroleum products.”

Petron, however, failed to secure a temporary restraining order (TRO), which meant that Eastern Petroleum will be able to push through with the opening of its Subic station on July 28. The opening of this mega station, Martinez claimed, has already been set back by eight months because of Petron’s moves.

“They did this in bad faith. They knew we were going to open in July yet they filed last minute, last June. This was meant to inflict damage not only to small oil players,” Martinez said.

Eastern Petroleum is fighting back the country’s largest refiner and retailer as Martinez is set to file on Thursday before the joint task force of the Department of Energy and Department of Justice a complaint-affidavit, claiming that Petron violated Section 11 of the Oil Deregulation Law.

“We are seeking state intervention… so that the rule of law will be observed,” Martinez said.

Petron SVP and CFO Emmanuel E. Eraña, meanwhile, welcomed this action taken by Eastern Petroleum so as to “settle this issue once and for all.”

“The contract in question remains valid and should be enforced as agreed upon by both parties. One simply cannot change the rules of the game in midstream to suit one’s interests,” Eraña said in a statement.

“Martinez was well-aware of this limited exclusivity contained in the 25-year lease agreement, which started in 2003 between Petron and SBMA and still he pursued the construction of the facility…(The) case was filed by Petron and Petron Freeport to protect their contractual rights that are being violated by Eastern Petroleum and SBMA,” Eraña explained.

But in the complaint-affidavit of Eastern Petroleum, an advance copy of which was given to reporters, Martinez claimed that “Petron and Petron Freeport committed the crime of cartelization when they, by their own admission, contracted with the Subic Bay Metropolitan Authority (SBMA) a lease contract agreement with an 800-meter exclusivity radius from Petron/Petron Freeport gas service station.”

“Per their own admission, the market for petroleum products within the so-called 800-meter area is allocated to Petron and Petron Freeport and no competitors or persons trading motor fuels and lubricants are allowed to do business within said exclusive area,” the complaint read.

According to Sec. 11 of the Republic Act No. 8479, or the Oil Deregulation Law, cartelization refers to “any agreement, combination or concerted action by refiners, importers and/or dealers of their representatives, to fix prices, restrict outputs or divide markets, either by products or by areas, or allocate markets, either by products or by areas, in restraint of trade or free competition…”

“Our case will test the effectivity of the Oil Deregulation Law… we will see if they will kill competition… Eastern Petroleum accounts for less than 1 percent of the market while Petron controls around 40 percent,” Martinez said.

Eraña, however, said the complaint of cartelization “takes the issue completely out of context.”

“The issue here is a basic contractual agreement between two parties namely Petron and SBMA for a limited exclusivity of 800 meters. Again, this was an incentive provided for when the area was underdeveloped and Petron invested taking a gamble in Subic,” Eraña explained.

“SBMA is and was free to lease its property to a private party like Petron along with exclusivity within a certain radius. Subic Bay has a huge area beyond the 800-meter radius of our station, which our other competitors have availed of. There is nothing that prevents Eastern or any other party from putting up service stations within SBMA beyond that 800-meter radius,” Eraña further said.