Pilipinas Shell Petroleum Corp.
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Pilipinas Shell signs P9-b loan deal with BPI

Pilipinas Shell Petroleum Corp. signed a medium-term loan worth P9 billion with  Bank of the Philippine Islands to take advantage of lower interest rates and refinance old loans.

Pilipinas Shell disclosed to the Philippine Stock Exchange on Wednesday it signed the agreement with BPI on March 9, adding its “gearing ratio will remain the same.”

Pilipinas Shell, the country’s second biggest oil company, recently reported that it fully utilized the gross proceeds of P1.842 billion from its initial public offering in November 2016.

The company used the bulk of the proceeds or P732.6 million for retail network, P305.3 million for refinery maintenance, P182.3 million for turnaround and upgrade  and P135.7 million for supply and distribution network enhancement, working capital and other corporate expenses.

The government required the company to conduct an IPO in compliance with the Oil Deregulation Act of 1998.

Pilipinas Shell owns the country’s second biggest oil refinery with a capacity of 110,000 barrels per day in Batangas. 

Its retail network reached 1,014 stations nationwide as of end September last year.

Pilipinas Shell recorded P6.633 billion in profit for the first nine months of 2017, up 4 percent from P6.359 billion year-on-year, despite two months of refinery maintenance shutdown and slightly lower inventory holding gains.

Earnings were bolstered by retail business growth, high V-Power penetration and robust refinery performance.

The company’s earnings performance translates into a 20 percent return on average capital employed, demonstrating the company’s ability to effectively utilize capital to generate superior returns.

Gross revenues reached P124.119 billion, up nine percent from P101.625 billion on year, while expenses rose to P113.946 billion from P92 billion.


Shell, Phoenix Petroleum win supply contracts for PSALM plants

Pilipinas Shell Petroleum Corp. and Phoenix Petroleum Philippines Inc. won the oil-based fuel supply contracts for two power plants of state-owned Power Sector Assets and Liabilities Management Corporation (PSALM) for 2018.

In a statement on Friday, PSALM said it issued the notices of award to Shell and  Phoenix as winning bidders for the procurement of supply and delivery of oil-based fuel for Ilijan Natural Gas Power Plant (INGPP) and Malaya Thermal Power Plant (MTPP).
“Shell and Phoenix passed the post-qualification process that PSALM conducted that determined the existence, authenticity and sufficiency of the eligibility and technical documents they submitted,” it said.

Shell submitted the lowest bid for the supply and delivery of neat diesel oil for INGPP amounting P961,161,000.00 during a bidding on April 30, PSALM noted.

For the supply of industrial fuel oil for MTPP, Phoenix emerged as the lowest bidder at P1,138,767,000.00, according to PSALM.

“Phoenix also submitted the lowest bid for the supply and delivery of diesel oil for MTPP, calculated at P47,701,220.00,” it said.

Other bidders that competed for PSALM’s three procurement contracts were Petron Corp., Petrotrade Philippines, Inc., Seaoil Philippines Inc., and SL Harbor Bulk Terminal Corp.


Shell looking for local partner in renewable venture

Royal Dutch Shell Plc. expects to set up a renewable energy company in the Philippines in partnership with a local partner within the year, a top executive said over the weekend.

“Before the end of the year or earlier, we are hoping the company is already there. So by January we can start approaching customers or earlier,” said Pilipinas Shell Petroleum Corp. president and chief executive Cesar Romero.

“Renewables is something we’re excited about similar to LNG [liquefied natural gas]. Everybody knows that the country is suitable for RE. We have a lot of sun and we’re island based. We’re really excited about the prospects of renewables in the country,” Romero said.

He said the company would need a local partner under the 60-40 ownership rule of the Constitution.  Shell is a British–Dutch multinational oil and gas company headquartered in the Netherlands and incorporated in the United Kingdom.

“What makes it a little bit tricky for us is there’s a 60-percent nationality requirement.  Therefore, we can’t do it just on our own being classified still as a foreign company despite us being here for 104 years. Therefore we need to work with a partner by its very nature.  We have to look for a 60-percent local partner,” Romero said.

Romero said the Shell Group was committed to “participate and enter the renewable sector in the Philippines.”

Romero said the company had not yet come out with the partnership structure and commercial arrangement for the renewable energy venture.

He said Shell Group had yet to decide on whether to invest in greenfield renewable energy projects or acquire existing projects.

“We have not gone to that level of discussions. Our priority is setting up of the company.  We cannot do anything without the company in place, with 60-percent Filipino entity,” he said.

He said potential partnership should have an “alignment of values.” 

“We are a firm believer of our business principles, good governance, talent development secondly. A company that also believes in our aspiration for renewables in the country to help grow the islands and improve air quality,” he said.

Shell announced plans to venture into renewable energy in December 2016 which would signal  a new phase in its business in the Philippines.

“Our vision is not anchored on setting up a generation facility. Being a renewable energy provider, it includes hybrid. It’s a blended energy provision with renewable component,” Romero said earlier.

He said Shell Group would provide “a combination of hybrid” renewable energy solutions, and not just solar installation. 

“The intention is to to have a very good and differentiated offer.. We won’t be traditional solar installer,” he said.

Romero said  the company was in the ‘”scouting phase” for renewable energy projects in the Philippines.  “But globally, we have declared that as a global priority for us,” he said.

“[We are] scouting for RE, in general. We’re prepared to use a number of platforms depending on what maybe commercially viable opportunity. Common start is solar but then you can explore various combinations―solar, gas, hydro, usually very location-dependent. [It would be a] combination with gas, or even diesel genset, [but it] depends on what is suitable,” he said.


Shell income drops to P2.3 billion in Q1

On leaner refining margins, the net earnings of second biggest oil player Pilipinas Shell Petroleum Corporation had declined to P2.3 billion in this year’s first three months from a heftier profit level of P2.89 billion in the same period last year.

The Philippine subsidiary of the Anglo-Dutch energy giant said “softer regional refining margins during the quarter contributed to the roughly 20 percent decrease in overall earnings.”

On a positive note though, Pilipinas Shell noted that its P2.3-billion income within the quarter “translates to an industry-leading return on capital of 27 percent on a trailing 12-month basis.”

It emphasized that such manifests “the company’s continuing prudent and effective utilization of shareholder capital.”

Pilipinas Shell has logged 4.0 percent hike on sales volume during the first quarter, and this partly contributed to the 23 percent jump on operational cash flows that reached P3.5 billion year-on-year. The other factors shoring up performance on this sphere had been higher premium fuel penetration and better working capital management.

Fundamentally, as reckoned by Pilipinas Shell President and Chief Executive Officer Cesar G. Romero, the company’s first quarter financial outcome “demonstrates the strength of our brand. Amidst the challenges brought by higher excise taxes, customers continue to patronize our products.”

The oil firm, he said, “saw an increase in V-Power uptake of 2.0 percent versus first quarter of 2017,” adding that “we remain pleased with our marketing businesses which continue to demonstrate strong underlying performance both financially and operationally.”

In particular, Shell’s non-fuels retailing business maintained its double-digit growth with an impressive 21 percent expansion. This was generally backed by addition of 11 new Shell “Select” stores; seven new deli2Go offers; and nine new lube bays.


COA orders Malampaya consortium to settle P146.8-B unpaid taxes

The Commission on Audit (COA) has affirmed its ruling that ordered the Malampaya consortium to settle P146.8 billion in taxes that were charged against the government’s share in the the gas-to-power project.

The consortium members are Shell Philippines Exploration B.V., Chevron Malampaya LLC, and Philippine National Oil Company Exploration Corporation (PNOC EC).

COA found no legitimate basis to its April 2015 ruling, and denied the motions for reconsideration of the consortium members and the Department of Energy (DOE). The decision was released on Tuesday.

“This Commission denies the MRs for failure of the movants to raise any new or substantial legitimate ground or basis to justify the reversal of the assailed decision. The pleadings and documents submitted by the movants, as well as the discussions during the oral arguments, contain no sufficient evidence to warrant reconsideration,” it said.

The consortium said it has filed an appeal before the Supreme Court to review the COA decision.

“We can confirm that the Malampaya Joint Venture partners, together with the Department of Energy (DOE), filed a Petition for Certiorari with the Supreme Court after receiving the Commission on Audit decision denying the consolidated Motion for Reconsideration by the Malampaya consortium,” it said in a statement.

The statement was sent by Shell media manager Cesar Abaricia via text message to GMA News Online.

The commission issued a notice of charge in 2015, saying the government is entitled to receive more than P53 billion in income taxes from the consortium from 2002 to 2009.

It said the amount ballooned to P146.8 billion due to continued underpayment or “tax assumption scheme” of the consortium from 2010 to 2016.

“If this Commission will not put an end to this illegal ‘tax assumption’ scheme, the government will continue to bleed billions and billions of funds that can and should be used for the very purpose intended by law,” it said.

Consortium maintains compliance
Presidential Decree No. 910 states that revenues from the Malampaya project should be used "finance energy resource development and exploration programs and projects of the government and for such other purposes as may be hereafter directed by the President."

“We maintain that the Malampaya joint venture has fully complied with its payment obligations under the law and Service Contract No. 38 (SC 38). In particular, all income taxes due to the government for which the consortium is liable under SC 38 have been paid,” the consortium noted.

“The SC 38 consortium shall avail of all legal remedies to protect their rights, including arbitration,” it said.

The commission ruled that the income taxes of the consortium was charged against the government’s 60 percent share in the gas project, in violation of Presidential Decree (PD) 87 and 1459, while the consortium received its full share.

Presidential Decrees 87 and 1459 set the government’s share of revenues from Malampaya at 60 percent while the share of the consortium was pegged at 40 percent.

Considering this charge, COA said the actual share of the government dipped to 34.03 percent while the Malampaya contractors had a share of 65.97 percent.

Shell Philippines and Chevron Malampaya argued that the notice of charge “violates the principle of separation of powers” as it seeks to amend the provisions of PDs 87 and 1459 and breach the express provisions of Service Contract 38 signed by the government and the consortium.

PNOC  EC said the consortium members in fact paid their income taxes in line with provisions of the service contract.

The DOE, through the Office of the Solicitor General, claimed COA “totally overstepped and exceeded the legal bounds” of its mandate when it ruled against the Malampaya contractors. It called the notice of charge an interference of DOE’s authority.

Irreparable harm
The decision “will cause irreparable harm to the country’s long-term interest, as it will further erode the confidence of foreign petroleum industry investors.”

The Energy department claimed “it is the policy of the administration of President Rodrigo Duterte to honor the government’s contractual obligations” under teh service contract.

But COA said it is not usurping the DOE and is in fact acting on its mandate to ensure that the government is receiving its fair share from the natural gas project.

“As the guardian of public funds, this Commission sees to it that all collections of the government are correct, proper and complete, and that the best interest of the government is secured and protected,” the decision read.

“Certainly, it cannot be said that the government is receiving its fair share under an agreement that is not in accordance with law. This is not an undue interference with the powers of the DOE, but a check on the propriety and legality of the agency officials’ conduct in relation to the management of government funds and property,” it said.

COA argued that Section 18(b) of PD 87 and Section 1(a) of PD 1459 enforced the denial of the consolidated motions for reconsideration, both of which stated that the government’s share should not be less than 60 percent.

“That in no case shall the annual net revenue of the Government including all taxes paid by or on behalf of the contractor, be less than sixty percent of the difference between the gross income and the sum of operating expenses and Filipino participation incentive,” according to Section 18(b).

Section 1(a) of PD No. 1459 states:
“The share of the Government, including all taxes, shall not be less than sixty percent of the difference between the gross income and the sum of operating expenses and such allowances as the Secretary of Energy may deem proper.”

"All told, since movants failed to present clear and convincing proof that the payment of the income tax by the government for the account of the contractors under SC No. 38 has clear legal basis under the applicable laws, this Commission is constrained to deny the consolidated MRs,” COA said. 


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