Leading oil firm Petron Corporation rescued the country’s only petroleum refining facility from near-shutdown after securing approval on its application as registered enterprise of the Authority of the Freeport Area of Bataan (AFAB).
The non-closure of its refinery business was confirmed by Petron in its disclosure to the Philippine Stock Exchange (PSE), hence, saving much-needed job for its employees and this will also entail additional investment for its host community in Bataan.
“As part of its commitment to AFAB, the company is expecting to undertake in the next five (5) years several capital investments amounting to nearly P3.0 billion to further improve the efficiency of the integrated operation of its Petron Bataan refinery,” the oil firm stated.
Petron added its accreditation as freeport zone locator “will help make its refining business more competitive by improving its financial viability in the long run and address some of its major concerns.”
Despite the approval of its AFAB application though, Petron said it will proceed with its planned temporary refinery shutdown of four months, “considering that the refining business remains challenging both here and around the world.”
It was in October last year when Petron President and CEO Ramon S. Ang sounded off to the media the company’s planned refinery closure, citing inequitable tax regime that have been rendering refining facility operations less viable compared to the business model of finished product importers.
With crashing oil prices in the world market during the pandemic-stricken 2020, Petron suffered financial hemorrhage in the first half of the year, mainly due to inventory losses – which the oil firm attributed to cost mismatch when the crude commodities were processed at the refinery until the time that they were turned into finished products and retailed at the pumps.
The company indicated the lag time typically takes 2-3 months; and the crude cost from the time of procurement to the sale of the products could induce financial losses to refinery operators – and the compounding factor would be the taxes that are paid upon importation of products, when in the end, the finished products may end up being retailed at lower prices.
“We have several tax-related concerns which we have already raised with the government. Under the current regime, refiners are faced with the burden of paying so much more taxes than importers, making it more difficult for us to preserve the viability of operating a refinery in the country,” Ang stated.
The 180,000 barrels-per-day Bataan refinery resumed operations in October last year, following an interim downtime at the height of the pandemic lockdown in May. This year, it will go through another round of shutdown from February to May.