Sun, 27 Sep 2020

Pilipinas Shell shuts down refinery in Philippines

13 Aug 2020, 18:51 GMT+10

MANILA, Aug. 13 (Xinhua) -- Pilipinas Shell Petroleum Corporation (PSPC) said on Thursday that it is permanently shutting down its refinery in Batangas province, south of Manila, after decades of operations in the country due to the economic impact of the COVID-19 pandemic.

In a statement, the PSPC said it is converting its oil refinery in Tabangao town "into a world-class full import terminal to optimize its asset portfolio and enhance its cost and supply chain competitiveness."

"The regional refining margins which have been weak for some time due to the oil supply or demand imbalance in the region, have worsened due to demand destruction from the COVID-19 crisis. As such, it is no longer economically viable for us to run the refinery. It is with a heavy heart that we announce the cessation of oil refining activities in Tabangao," PSPC President and CEO Cesar Romero said.

Romero said transforming the refinery into a world-class import terminal "will sustain and grow the company's competitive advantages that have continuously evolved to stay relevant with the times ever since we started our business in the Philippines 106 years ago."

Romero added that shutting the refining operations will not affect the PSPC's capability to supply high-quality fuels as the shift in supply chain strategy from manufacturing to full import-based.

The Tabangao refinery has been on shutdown since May 24 to help insulate the company from further deterioration of refining margins, and aid in its cash preservation efforts.

According to the Philippines' Department of Energy, demand for petroleum products declined by 20 to 30 percent in March and by as much as 60 to 70 percent in April during the imposition of the enhanced community quarantine in mid-March, compared to February levels.

The demand for fuel products is not yet back to its normal levels, with many of the businesses still suspended or operating below capacity, while travel remains limited due to the varying levels of quarantine restrictions nationwide.

Decline in demand may be expected once again now that Metro Manila and key cities and provinces revert to the modified enhanced community quarantine, a lockdown level where public transport is banned and economic activities are limited.

In addition, refining margins, which saw a steep decline earlier in the year, have gone down further and may remain depressed in the medium term.

Energy Secretary Alfonso Cusi said he is saddened by the PSPC's decision to permanently shut down the refinery.

"It is unfortunate that PSPC had to permanently close its refinery operations in the country," Cusi said in a statement. However, Cusi said he respects the PSPC "management changing their oil downstream business model to adapt to the existing market or economic situation."

Cusi said the shutting of the refinery "will not affect the oil supply in the country as (the company) will continue to fill in their market share through import of refined products."

However, Cusi said he is saddened by the plight of the workers that will be displaced due to the closure.

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