Pilipinas Shell shuttering Tabangao refinery ‘permanently’

MANILA: Citing that it its crude oil refinery is no longer feasible, energy company Pilipinas Shell is ceasing its refinery operations in Tabangao, Batangas and is instead converting the facility into a “world-class full import terminal to optimize its asset portfolio and enhance its cost and supply chain competitiveness.”

On the firm’s website pilipinas.shell.com, Pilipinas Shell President and CEO Cesar Romero said, “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.”

Construction commenced on the Tabangao crude oil refinery back in 1960, and was completed two years later. Commercial operations initially had a nameplate capacity of 30,000 barrels per day (bpd), an output that grew to 110,000 bpd in 1995.

In a media release, the company underscored that “the price of fuel products (had become) lower than or almost equal to the cost of refining crude oil.” Last May 24, Shell had to suspend the Tabangao refinery operations.

The shift in strategy was apparently brought about by significantly diminished fuel consumption due to the quarantine restrictions necessitated by the COVID-19 pandemic. Pilipinas Shell pointed to a Department of Energy report showing that demand for petroleum products had fallen “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, compared to February 2020 levels.”

Continued the release, “This is reflected in the company’s performance, as Shell ended the first half of 2020 with a P6.7B net loss, compared to P3.7B income in the same period last year.” Shell also suffered P5.8 billion in inventory holding losses, “as the price of crude oil plummeted from $67 per barrel at the end of December 2019 to $20 per barrel in April.”

Pilipinas Shell assured that the converted Tabangao facility will continue serve Luzon and Northern Visayas in its fuel needs, while the North Mindanao Import Facility (NMIF) in Cagayan de Oro will meet the demand of the rest of the Visayas and the Mindanao regions.

“The pandemic has definitely posed some challenges, but we have a strong balance sheet, retained earnings, and a reasonable gearing of 40%. We intend to maintain financial resilience,” insisted Romero. The company reported that it is “making headway in its cash preservation efforts to deliver sustainable cash flow, achieving a total of P1.3 billion (P800 million in operating expenditures and P500 million in capital expenditures) against the P2 billion savings target for 2020.”

“Pilipinas Shell has been here for more than 100 years, and we’re here for the long haul,” Romero concluded.

Photo from Pilipinas Shell

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