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WHEN
there was a great clamor from the public, including the
Senate, for transparency in oil pricing, the Department
of Energy committed itself to examine the books of oil
companies to find out if the increases in domestic
prices of petroleum products were based on increases in
the prices of their suppliers, as they claimed.
That was
last year when it enlisted the support of SGV & Co. and
the University of Asia and the Pacific to open the oil
companies’ books and make a report.
At the
time, the price of regular gasoline was hovering above
P35 a liter. And now it’s getting close to P50 a liter,
and we have yet to receive that report.
I can’t
understand the delay. I don’t even know if the oil
companies’ books were actually opened—given the Energy
department’s claim that it has the authority to
investigate domestic oil pricing.
The
current high oil prices and the issue of transparency
add significance to the sale of the 40 percent of Petron
Corp. held by Aramco Overseas Co. (Saudi Aramco) to the
Ashmore Group Ltd. of the United Kingdom.
Aramco
was a welcome investor in Petron because it implied an
assurance of oil supplies from the Middle East. The
prospective new owner is an investment group, whose
primary interest is making money, not producing oil.
Nothing wrong with that, but we’re talking of energy
security here, especially in the face of a global energy
crisis.
Several
ideas have been floating around since the news about
Aramco’s divestment—for reasons undisclosed—about what
the government, through the Philippine National Oil Co.
(PNOC), should do.
When
PNOC sold 40 percent of its stake in Petron to Aramco in
1994, it retained the right of first refusal. That is,
it has the first crack at buying Aramco’s holdings in
case the latter decides to get out of Petron.
Ashmore
offered $550 million for the shares of Aramco, which the
latter accepted. Can the PNOC match that? At an exchange
rate of P41 to the dollar, the $550 million is
equivalent to P25.55 billion. That’s big bucks any way
you look at it.
But
there’s logic in getting back control of Petron, which
accounts for 38 percent of the retail petroleum market.
The sale of more than half of Petron (40 percent to
Aramco and 20 percent to the public through an initial
public offering) was in line with the twin policies of
privatization and deregulation that the government has
been pursuing in the past two decades primarily to
attract investments.
For the
oil industry, privatization and deregulation were meant
to achieve market-related pricing of petroleum products,
but not to allow the few players to operate like a
cartel, which seems to be happening as they raise and
lower prices almost in unison. (Until they open their
books, they will have to accept that perception.)
At this
point, I am inclined to support the idea of the
government getting back control of Petron, especially
with the increasing prospects of further rise in oil
prices. But I don’t think we should buy and keep
Aramco’s 40 percent. We don’t need 80 percent to have
effective control of Petron.
What the
government can do is buy Aramco’s 40 percent, and then
sell most of it, say, 29 percent, while the PNOC retains
11 percent. With its existing 40 percent, the 11 percent
will give PNOC a 51-percent interest. That’s enough for
the government, through the PNOC, to control Petron,
without sacrificing professional management of the
company.
As a
business entity, Petron should be allowed to continue
operating for profit. Right now, it is not only the
leader in the oil industry, but also the most
profitable. Its expansion into petrochemicals as well as
high-value petroleum products, and its pioneering
efforts in the development of biofuels, must be backed
up by good financials.
At the
same time, the government, as majority owner, can use
Petron to promote transparency in the domestic oil
industry, at least in retail pricing.
I
believe we would not have this problem about opening the
books of oil companies if the government controls Petron.
Once it opens its books, the other industry players will
have no recourse but to follow.
Petron
does not have to sell diesel or gasoline at a loss, even
with the government holding majority control. We don’t
want more losses than we are incurring now from
subsidizing government corporations like the National
Food Authority.
But
Petron can be used to make sure that domestic prices of
petroleum products really reflect prices in the world
market, and that oil companies are now allowed to use
increases in world oil prices to widen their profit
margins. As it is, they are already among the most
profitable companies in the country.
And so,
we should take effective control of Petron without
spending too much, we exercise some control over oil
pricing and we continue with the twin policies of
privatization and deregulation.
This
way, we are able to protect the interest of our people
and, at the same time, continue to attract investments.
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