Petron Corporation announced that its oil refinery in Bataan will be closed starting January 2021. This means that the country’s remaining oil refiner that has the capacity to produce 180,000 barrels per day will be halting its operations.
The fuel company said in a disclosure to the Philippine Stock Exchange that its refinery in Limay, Bataan will be on an economic shutdown starting in the second half of January 2021. Petron said that it will be conducting “maintenance activities on key process units” during the Bataan refinery’s economic shutdown.
Petron Bataan refinery has the ability to produce 180,000 barrels per day
Last October 2020, Petron President and CEO Ramon S. Ang hinted that the company’s refinery in Bataan would be closed due to economic losses brought upon by the high cost of operations. Ang also mentioned that the uneven playing field between importers and refiners significantly contributed to Petron’s decision to close its refinery in Bataan.
Ang shared that the hefty taxes imposed by the Philippine government is forcing Petron to shift its strategy. Instead of importing crude oil and refining it in its facility, Petron said that it makes more sense to just import finished fuel products because it’s more cost-efficient.
To put things in perspective, oil refiners are given a 12 percent value-added tax (VAT) for imported crude oil that will be refined and sold to the market. Then, the finished products also come with a 12 percent VAT and excise tax.
Petron Fuel Station
In a report by Business Mirror, Ang raised this point saying that it results in Petron’s inventory losses when you consider the actual oil price and the tax the fuel company has to pay.
“When crude oil arrives in the Philippines, we pay VAT and excise tax. You’re just going to take it out of the terminal, you pay tax again. And then, for how much can you sell it only? That’s why there are inventory losses in the actual oil price and the tax that we’re paying. Meanwhile, the competitor that doesn’t have a refinery, pays tax only when they bring out the supply from their terminals,” Ang said.
Petron's refinery in Bataan
However, it seems that Petron is not yet looking to permanently shut down its refinery in Bataan. Ang mentioned that the Petron Bataan refinery would resume commercial operations once the economy improves.
As a review, Pilipinas Shell Petroleum Corp. decided to permanently shut down its refining operations in the country after 58 years of service. Shell transformed its refining facility in Tabangao, Batangas into a full import terminal as this move is more cost-efficient.
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