Petron Plots Restart Of Idled Philippine Refinery

- Mar 16, 2021-

Petron Corp., Mandaluyong City, Philippines, plans to resume commercial refining activities at its 180,000-b/d Bataan refinery—now the country’s only—at Limay, about 150 km southwest of Manila, after a late-2020 decision to indefinitely suspend operations at the site amid poor economics exacerbated by the coronavirus (COVID-19) pandemic (OGJ Online, Dec. 18, 2020).

Based on its outlook of a notable recovery in demand for petroleum products during the remainder of the year, Petron plans to resume refining operations at Limay sometime during second-half 2021, the operator said in its Mar. 10 release reporting earnings for fourth-quarter 2020.

The proposed restart follows the Authority of the Freeport Area of Bataan’s (AFAB) late-December 2020 approval of the Bataan refinery as a registered enterprise, which entitles the manufacturing site to take advantage of fiscal incentives—including better timing on payment of value-added taxes (VAT) on products—under the Philippines’ Special Economic Zone Act of 1995 or Omnibus Investment Code of 1987, according to Petron.

Announcement of the potential refinery restart comes alongside two straight quarters of growth in the operator’s consolidate revenues and despite refining margins remaining soft during fourth-quarter 2020, which Petron confirmed challenged the economic viability of its Philippine operations.

“We have been working hard to minimize the impact of the pandemic on our business, and our performance in [second-half 2020] proves that we are moving in the right direction,” said Ramon S. Ang, Petron’s president and chief executive officer. “We look forward to sustaining our recovery as we anticipate higher demand and a more stable industry situation with an end to this crisis finally in sight.”

While expectations of improved demand following the height of the pandemic lend support to the refinery’s planned restart, Ang stressed the complex’s registration as an AFAB enterprise plays a major role the decision.

“We continue to implement various cost saving efforts, but tax efficiency is another critical area that should improve. Our AFAB registration will help make our refining business more competitive and financially viable as soon as demand recovers,” Ang said.

In a Jan. 11, 2021 filing to Philippine Stock Exchange Inc. (PSE) confirming its approval as an AFAB enterprise, Petron said—as part of its commitment to AFAB—that it will undertake several unidentified capital investments amounting to nearly 3 billion Philippine pesos to further improve efficiency of its integrated Bataan refinery operations.

The operator, however, confirmed to PSE it would proceed with its previously proposed idling of the refinery—referred to as an “economic shutdown”—in January 2021, during which time it planned to execute maintenance activities on unidentified key process units at the site.

Petron, which maintained steady operations during the thick of the COVID-19 outbreak, was in the process of carrying out a project to expand and upgrade production capacity at the Bataan refinery (OGJ Online, Mar. 23, 2020Jan. 3, 2020July 24, 2018). The operator, however, has yet to reveal details regarding how or if the proposed project has been impacted by recent events.

Restart of operations at Bataan would return the only operational refinery to the Philippines, which lost Royal Dutch Shell PLC subsidiary Pilipinas Shell Petroleum Corp.’s (Pilipinas Shell) 110,000-b/d Tabangao refinery in Batangas City to permanent closure in 2020 (OGJ Online, Aug. 14, 2020). Pilipinas Shell is proceeding with plans to convert the site into an import terminal as part of its commitment to continue supplying high-quality fuels to the regional market.