Shell defers $1-B expansion of Batangas refinery

Pilipinas Shell Petroleum Corp. will defer expansion of its refinery in Batangas due to the project's high cost, which was expected to amount to at least $1 billion. “Shell has decided to cease further work on the current study and will therefore defer any major investment decision for the Tabangao refinery in the foreseeable future," Shell Philippines chairman Edgar Chua said on Monday. The Shell Philippines chairman said the cost of services – including those for contractors – and raw materials have risen significantly. Chua said the company is now working on an alternative plan in running and maintaining its Batangas refinery but declined to disclose details. The company’s refinery in Batangas has a present capacity of about 110,000 barrels per day. Shell is one of only two oil refiners in the Philippines. The other refiner is partly state-owned Petron Corp., which is controlled by Saudi Armaco. Energy Secretary Raphael Lotilla acknowledged the likely deferment of Shell’s expansion plans. "The individual companies and countries are actually conducting their feasibility studies and what is being initially shown is that at this time, the cost of an expansion of refinery facilities has also gone up tremendously," Lotilla said. “So this will be a limiting factor, considering that within two to three years a number of analysts have forecast an overcapacity in both refinery and oil and gas production," he added. The energy secretary expressed hope Shell would embark on an expansion “at the right time. " Shell Philippines’ planned initial public offering (IPO) this year is linked to the refinery expansion. The company is mandated to offer at least 10 percent of its shares to the public as required by the Oil Deregulation Law of 1998. Rival Petron has had 20 percent of its shares listed at the Philippine Stock Exchange since 1994. -GMANews.TV