DOE chief says Pilipinas Shell’s shut down of refinery won’t affect oil supply

Energy Secretary Alfonso Cusi said Thursday the country’s oil supply will be unaffected by Pilipinas Shell Petroleum Corp.’s shut down of its 110,000-barrel-a-day refinery in Tabangao, Batangas.

“I respect the decision of the Shell management changing their oil downstream business model to adapt to the existing market/economic situation,” Cusi said.

“This, however, will not affect the oil supply in the country as they will continue to fill in their market share through import of refined products,” he added.

In a text message, Oil Industry Management Bureau Director Rino Abad said that of the available oil supply for the first half of the year, local productions accounted for the bulk or 76% while imports comprised the remaining 24%.

Pilipinas Shell accounts for 19% of market share in the country’s petroleum sector, according to the Energy official.

In a regulatory filing, Pilipinas Shell announced it decided to permanently shut down the refinery operations in Tabangao as the price of fuel products dropped lower or almost equal to the cost of refining crude oil.

The company said the Tabangao refinery will be transformed into a full import terminal as it shifts its strategy from manufacturing to full importation amid the challenges brought by the COVID-19 pandemic to the global oil refining industry.

The Energy said Pilipinas Shell’s decision to shut down its refinery operations in the country was “unfortunate.”

“What saddens me is the plight of the workers that will be displaced due to the closure. I hope they will find employment with the other industry players,” Cusi said.

Sought for comment, Pilipinas Shell communications manager Cesar Abaricia said there are around 200 workers in the Tabangao refinery.

Abaricia, however, said the company does not yet have the specific number of workers which will be retained and retrenched.

“But rest assured we are engaging everyone to ensure their well being is addressed,” he said.

The transformation of the Tabangao refinery into a full import and storage terminal for finished products and components will translate to an estimated asset impairment of P6 billion to be recognized by Pilipinas Shell in the third quarter.

“Said impairment will not have a cash impact on the corporation,” Pilipinas Shell said.

To recall, Pilipinas Shell announced the temporary shut down of the Tabango refinery in mid-May as demand for fuel products saw a drastic decline due to lockdown measures implemented to arrest the spread of COVID-19.

Demand for petroleum products declined by 20% to 30% in March, and by as much as 60% to 70% in April during the imposition of the enhanced community quarantine, according to the Department of Energy. -MDM/BM, GMA News