Petron cancels diesel order
by Paul Anthony A. Isla, Business Mirror | 11/02/2009 12:17 AM
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MANILA - With the government asking oil companies to peg their fuel prices at a level relatively lower than current costs, even major oil refiner Petron Corp. had to “tighten” its belt and cut its order of diesel supply, in what is seen as the first confirmation of warnings of a local supply problem.
A Platts Global Alert report furnished by an industry source to reporters noted that “belt-tightening measures among local oil companies had already been seen as early as Wednesday last week.”
The report added that Petron only bought one of the two cargoes it originally sought via a tender it released on October 23, the same day the government issued Executive Order 839 telling oil firms to freeze prices at October 15 levels, until further notice, in light of the calamity situation in Luzon caused by back-to-back storms Ondoy and Pepeng.
The Platts Global Alert report also noted that Petron had initially stated it was seeking two 250,000-barrel cargoes of diesel over November 9-13 and 22-26, but that it canceled the latter.
In a disclosure to the Philippine Stock Exchange, Petron said last week it estimates a net loss of as much as P1.5 billion in the fourth quarter of the year, mainly because it has to comply with EO 839—rolling back prices by P1.25/liter for its premium gasoline, P0.85/liter for regular gasoline, P2/liter on diesel and P1.50/liter for kerosene on Tuesday morning, to reflect fuel prices prevailing on October 15.
Petron noted the price cuts were done despite the rising costs of crude oil and finished petroleum products in the world market.
Petron reiterated the oil players’ warnings of a possible supply shortage as some companies may opt to stop selling fuel products altogether instead of selling at a loss.
Petron said it would be impossible for them to supply the shortfall if this happens.
Malacañang had responded to this line by saying oil companies can be accused of economic sabotage if they squeeze the local supply.
“With this price control, we estimate to incur a net loss of P1.5 billion in the fourth quarter of 2009 alone, as it begins to digest higher-priced crude-oil inventory in November and December,” Petron said in its PSE disclosure.
Petron recalled having suffered a loss of P3.9 billion in 2008, and said it is only beginning to recover from this record loss.
Petron said it has also made substantial investments (over $400 million) in the past five years alone at its Bataan refinery to ensure the local production of fuels that are Clean Air Act-compliant, and boost the country’s economy through the domestic manufacture of petrochemical feedstocks.
Petron added that EO 839 also does not state any duration for the price freeze, specific areas affected (for instance, Palawan is considered to be in Luzon) or list of fuel products covered.
“We seek a clarificatory supplement to EO 839,” said Petron, adding that this would have a negative effect on future investments in the capital-intensive oil industry.
Meanwhile, almost the whole of Luzon island is already under a “price war,” which means that actual pump prices of fuel products are well below suggested retail prices (SRP), Petron noted.
In Metro Manila, for instance, diesel prices are P5 liter lower than the SRP, according to Petron.
It underscored the need for the government to share the burden by lowering the tariffs to mitigate losses that will be incurred.
“Amid the difficulties that may arise from our compliance with this EO, still the company will do its best to ensure a reliable and consistent supply of fuel products,” Petron said.
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