PNOC wants Petron to decide on land lease

MANILA, Philippines — State-run Philippine National Oil Co. (PNOC) wants Petron Corp. to immediately decide on renewing and raising rental fees in its land lease contract for its service stations and bulk plants, which will expire in August 2018.

PNOC is looking to raise rental fees by over 700 percent this year for facilities leased to Petron to reflect current fair value of the properties where its 24 bulk plants and 67 service stations are located.

In a letter to Petron president and CEO Ramon Ang, PNOC president Reuben Lista said the oil firm’s lease agreements will expire on Aug. 31, 2018 and should be decided soon whether it will be renewed or not.

A year before the expiration of the contract, Petron should have conducted environmental impact studies (EIS) and submitted remediation plans for its service station and bulk plant properties.

PNOC has also asked Petron to nullify certain provisions of the existing lease agreements “that pose a stumbling block” before proceeding to re-negotiate the renewal.

The provision in the agreement is “the rental rate at the time of expiration plus two percent thereof and subsequent rental rate shall be escalating by two percent per annum.”

Being a government-owned and controlled corporation, that provision is disadvantageous to the government, Lista said in an interview.

“Petron is a private partner of government and we don’t want to put additional burden to them but the contract is really onerous, burdensome and disadvantageous to the government,” he said.

In an opinion, the Office of Solicitor General (OSG) said PNOC should renegotiate the terms of the contract for a higher price.

It said the previous contract with Petron was negotiated at a time when PNOC still owned half of the oil firm. Petron was owned by PNOC until it was privatized in a public offering in 1994.

The OSG also said the provision in the lease agreement is “contrary to the provisions of Republic Act 3019 or the Anti-Graft and Corrupt Practices Act.

“Clearly, if PNOC will comply with the terms in the present lease contract, it will be in violation of… RA 3019,” it said.

Earlier in February, PNOC said Petron only pays around 13 percent for the bulk plants and around seven percent for the service stations of the fair market values of the properties being leased.