State-run Philippine National Oil Company (PNOC) has firmly stipulated in a motion for reconsideration filed with the Supreme Court that the exclusion of land assets from the Petron Corporation shares sale is not just a legal and Constitutional nuance but a safeguard of sovereign assets, shielding national interests from the transactional tide which was first sealed with foreign buyer Saudi Aramco in 1994, then in the eventual divestment of the oil firm to San Miguel group.
The company contended that the “fair price” of P23 billion, as cited in the Supreme Court en banc resolution on Nov. 25, 2024 solely covered the oil firm's shares, arguing further that if the valuation had accounted for the landholdings, the true figure for Petron's privatization would have soared to a commanding P100 billion.
“The fair price was fair because the government sold Petron shares in 1994, excluding the parcels of land, which the government through PNOC, retained. This explains why the market currently values Petron at P23 billion, less than one-fourth of the over P100 billion value of the parcels of land – based on 2019, appraised values plus market adjustments,” the government-owned firm stressed.
Petron clinched pivotal victories in the courts, including in the SC en banc resolution, securing its claim to the oil firm's land assets as part of its acquisition 16 years ago, a win now fiercely contested by the government.
In its second motion to the Supreme Court filed this week, PNOC as represented by the Office of the Government Corporation Counsel (OGCC), prayed for a denial of the November 25, 2024 SC en banc resolution, while also asking the high court to ‘give due course’ to other earlier rulings; primarily pushing for a reversal of the December 13, 2021 Court of Appeals (CA) decision that mandated Mandaluyong RTC Branch 278 “to proceed with the trial of the case a quo on the merits."
PNOC emphasized that the CA ruling, which was later reinforced in the SC resolution, effectively overturned the original privatization terms of Petron, enabling the transfer of public assets worth over P100 billion, even if these land assets were explicitly excluded from the privatization agreement.
The state-run firm reiterated that “in the 1994 Petron privatization, the government bid out shares of stock in Petron as a company without ownership of the parcels of land that Petron had previously conveyed to PNOC as property dividends.”
It expounded that the government’s move to transfer the real estate properties owned by Petron to its parent company PNOC, a government-owned and controlled corporation (GOCC), by way of property dividends, was intended to remove Constitutional restriction to prospective bidders – including foreign companies - in Petron’s privatization; while at the same time providing Petron a lease over the properties so that whoever would be the buyer of Petron Corporation, would still be able to continue operations using those properties.
PNOC qualified that excluding land assets in Petron’s 1994 privatization was a deliberate strategy to attract foreign bidders, as their inclusion would have barred any foreign entity from securing 100 percent ownership of the oil company.
“The execution of the CA decision could result in one of the largest inequitable losses to the government and the Filipino people for private gain. This is so because the CA decision would change the Petron that was privatized in 1994 from a company that did not own any land (at P23 billion value) to a company that owns the parcels of land (at roughly P100 billion value),” the company highlighted.
PNOC underscored that the appellate ruling effectively overturned the original privatization terms of Petron, enabling the transfer of public assets worth over P100 billion, even if these are explicitly excluded from the privatization agreement; arguing that the same terms shall be applied even in the eventual sale of the Petron shares to the succeeding entity.
Three decades after Petron’s privatization via share sales to Saudi Aramco, new round of divestment had been carried out in 2009, ultimately transferring control of the oil giant to San Miguel Corporation.
“The government partially sold Petron in 1994 as a company with zero land assets. As this Honorable Court (en banc) found, Petron declared the parcels of lands as ‘property dividends’ before any sale by the government of Petron shares was effected and the purchase price paid to the government was fair because the sale was of Petron, excluding the parcels of land,” PNOC noted.
Citing jurisprudence on the Bagatsing versus Committee on Privatization et al case, PNOC restated that “the Supreme Court en banc found as fair the price paid to the Philippine government by the winning bidder for the 1994 privatization on the basic premise that government sold Petron, excluding the parcels of land, the ownership of which was retained by the government,” adding that “the CA decision would obliterate that premise.”
It added that “as a result of the CA decision, the basic terms of the publicly bidded contract for the 1994 Petron privatization would materially change,” specifying that “the object of the contract would be changed from Petron excluding the parcels of land, to Petron plus the parcels of land.”