Petron assures stable supply amid legal battle with PNOC

MANILA, Philippines — Petron Corp., the country’s largest oil refiner and marketer, has assured steady fuel supply nationwide despite the ongoing legal tussle with the state-run Philippine National Oil Co. (PNOC) over leased properties.

The company currently provides nearly 40 percent of the country’s petroleum requirements through its 180,000 barrel-per-day Bataan refinery, 30 terminals, and 2,400 stations nationwide.

“So far, we continue to enjoy undisturbed possession of the leased properties that are vital to our operations, pending resolution of the issues we raised in court against PNOC and its president, so there is nothing to worry about. We remain committed to providing the kind of services we provide our consumers all over the country,” Petron president and CEO Ramon Ang said.

The oil firm has existing lease agreements with PNOC for the sites of its $3-billion refinery in Bataan, 24 bulk plants and 67 gasoline stations. These lease agreements are set to expire on Aug. 31.

In early 2017, PNOC threatened to terminate the lease agreement and bid out the leases to other entities unless Petron waives the contract provision on automatic renewal.

Petron filed a case against state-run PNOC for breach of a binding and compulsory sale-leaseback contract.

Prior privatization in 1993, Petron owned and developed the land it is leasing from PNOC since the 1930s for its refinery, distribution and sales operations.

But the company was compelled to give up its land to PNOC in 1993 to comply with the requirements of its privatization to make way for foreign partner Saudi Aramco with the primary condition that the government-run corporation leases back the property to Petron over the long-term.

The properties were conveyed by Petron to PNOC at book value of P150 million through a sale-and-lease-back agreement that provided for an “automatic renewal” of the contract upon expiry of the first 25 year-term.

Since 1993, Petron has already paid an average of about P140 million annually under the lease agreement. The lease at that time represented a yield of 64 percent. Total payments to PNOC amounted to P3.4 billion at the end of 2017.

“We hope that PNOC lives up to its reciprocal obligations for the conveyance of our land. Otherwise, said properties should be returned to us. We have invested billions of pesos on these properties and PNOC’s actions clearly weaken the country’s fuel supply security and the government’s thrust to develop key industries, ” Ang said.