Pilipinas Shell to shut Batangas refinery permanently as pandemic bites

ABS-CBN News

Posted at Aug 13 2020 09:05 AM | Updated as of Aug 13 2020 03:52 PM

Built in 1960, the Tabangao Refinery located in Batangas City, is one of only two refineries in the Philippines. Pilipinas Shell

MANILA - Pilipinas Shell Petroleum Corp on Thursday said it would shut down its Tabangao refinery permanently due to the impact of the COVID-19 pandemic.

The oil giant said this decision is seen to secure the “long-term sustainability” of its business and thrive in the new normal and energy transition.

“We have the technical capability and financial flexibility to manage and adapt to disruptive conditions. Due to the impact of the COVID-19 pandemic on the global, regional and local economies, and the oil supply-demand imbalance in the region, it is no longer economically viable for us to run the refinery,” said Pilipinas Shell Petroleum Corp president and CEO Cesar Romero in a disclosure to the stock exchange.

Pilipinas Shell said it would be transforming the 110,000 barrel-per-day Tabangao oil refinery facility into a world-class full import terminal “to optimize its asset portfolio and enhance its cost and supply chain competitiveness,” it added.

It said the shift in its supply chain strategy to full import comes as the price of fuel products are "lower than or almost equal to" the cost of refining crude oil. 

"It also prepares the Corporation for a future that will rely on cleaner energy solutions," it added.

For the second quarter, Pilipinas Shell posted a net loss of P1.2 billion, while first half net loss reached P6.7 billion, it said.

In May, Pilipinas Shell suspended operations of the Tabangao refinery in Batangas citing poor demand and refining margins due to lockdowns intended to curb the spread of COVID-19.

The Philippines has two refineries. The other is 180,000 barrel-per-day Bataan facility owned by Petron Corp. 

Petroleum demand declined by 20 to 30 percent in March and by as much as 6o to 70 percent in April during the enhanced community quarantine, Pilipinas Shell said, citing data from the Department of Energy. 

Although "unfortunate," the closure of the refinery will not affect oil supply in the country, Energy Secretary Alfonso Cusi said in a statement.

"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," Cusi said.

Cusi said Shell should find employment for affected workers. Shell said there was no final number of affected employees yet. 

Bangko Sentral ng Pilipinas Governor Benjamin Diokno also said the closure of Shell's Tabangao refinery will have no impact on pump prices and inflation. 

"I don’t think so, the price of oil is, whether here or abroad, governed by supply and demand conditions,” said Diokno. 

The central bank chief also said that the country doesn't need a refinery anymore given the efficiency of the oil industry globally, and added that Petron can still maintain its refining operations.

"I think from my point of view, a refinery is still viable for Petron, especially with the decision of Shell to withdraw. The size of the Philippine market is large enough to support a refinery.”

Pilipinas Shell's share price fell 4.11 percent to close at P16.78 at the end of Thursday's trading. 

-- with a report from Warren de Guzman, ABS-CBN News