MOSCOW (MRC) -- The closure of Petron Corp.’s refinery in Bataan is imminent if all industry players will not be accorded a level playing field, reported The Manila Times with reference to the company's top executive statement.
“Kailangan maging level playing field. Kung hindi maging level playing field ang Petron refinery with the importers, magsasara na rin kami sigurado. Kailan iyon? Very soon (We should be on a level playing field. If Petron will not have a level playing field with the importers, we will close our refinery for sure. When? Very soon),” Petron President and Chief Executive Officer Ramon Ang said in a virtual briefing.
Ang told reporters the listed oil company “will go to that direction” if the same situation persists.
Energy Secretary Alfonso Cusi said the Department of Energy (DoE) is yet to receive a notification from Petron on its supposed plan to permanently close its refinery in Limay town.
In a statement, Cusi said, “whatever business measures Petron will arrive at in the course of its discussion with the concerned parties, we at the DoE will respect the management’s decision.”
The point of contention, according to Petron’s top executive, is the double imposition of taxes: one on the imported crude oil upon its arrival and another on the finished product. On the other hand, importers are taxed once for selling petroleum products.
Sought for comment, Finance Secretary Carlos Dominguez 3rd said the refinery business is “a supply chain issue rather than a tax issue.”
But for Laban Konsyumer Inc. President Victorio Mario Dimagiba, the imposition of fuel excise taxes under the Tax Reform for Acceleration and Inclusion law makes refinery operations in the country no longer viable.
“We note that in the refinery, there might be market and timing issues including the importation of crude at a high price, then after refining the world crude prices might be lower, thus, refining margins could be lower,” Dominguez said in a message to reporters.
“On the other hand, an importer, who imports finished products can sell these products right away, making him less vulnerable to oil price movements,” he added.
Dominguez explained the excise tax (and duties) on importation of finished products is imposed upon importation and on locally refined products, it is imposed upon removal from place of manufacture.
So, at the time of marketing or sale, the excise tax in both instances should have already been paid, he added.
“Petron and Shell should have read this in 2018 that Train was not equitable tax policy at their end of the business,” said Dimagiba, a former Department of Trade and Industry undersecretary, referring to the Tax Reform for Acceleration and Inclusion law.
The 180,000 barrel-per-day oil refinery in Bataan, inaugurated in 1961, is now the lone refinery in the Philippines.
In August this year, Pilipinas Shell permanently shut its refinery in Tabangao, Batangas that would be transformed into a full import and storage terminal for finished products.
Chevron was the first to close its refinery in Batangas in 2003 and was subsequently converted into a finished-import terminal.
Should Petron decide to halt operations of the Bataan refinery for good, the country “will be at the mercy of foreign suppliers,” according to Petron.
Dimagiba shares the same sentiment, saying this “will make the country make us dependent to foreign supply and prices.”
Ang said the only way to achieve a level playing field is to go to Congress and have the existing tax laws amended even though this is a long and tedious process.
“The only way to save this is if we can go to Congress at ma-level playing field,” Ang said, adding all questions to be raised by legislators have to be addressed.
But Dominguez thinks otherwise.
“We don’t need to change our tax on this. It’s happening worldwide, refinery margins are getting squeezed. Big oil companies have been shutting down their refineries in various parts of the world,” he said.
Ang said, “iyong refinery business today nakapahirap talaga. Makita mo sa buong mundo marami na ang nagsasara (it is difficult to manage a refinery business today. Around the world, a lot of refineries have already shut down).”
Cusi said the Energy department is looking into the taxation concerns raised in coordination with the Department of Finance. “At the same time, we are also evaluating how a closure scenario would impact pricing, as well as the country’s energy security.”
Dimagiba is proposing that the government should mull buying back Petron, which he said was once a state-owned entity through Philippine National Oil Co.
“The environment where Covid-19 (coronavirus disease 2019) will linger should be a driving criteria. We should offer to buy back Petron from Ramon Ang,” Dimagiba said.
As MRC informed before, Royal Dutch Shell plc. said earlier this month that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plant's costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.
Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).
According to MRC"s ScanPlast report, Russia's estimated PE consumption totalled 1,594,510 tonnes in the first nine months of 2020, up by 1% year on year. Only high denstiy polyethylene (HDPE) shipments increased. At the same time, PP shipments to the Russian market reached 880,130 tonnes in the nine months of 2020 (calculated using the formula: production minus exports plus imports, exluding producers" inventories as of 1 January, 2020). Supply increased exclusively of PP random copolymer.