THE oil-price cuts that were implemented from middle of last year to early January this year are going to hurt Pilipinas Shell Petroleum Corp.’s 2014 earnings.
“Very bad,” Chairman of Shell Companies in the Philippines Edgar Chua said when asked of the oil firm’s financial performance last year.
He declined to provide details of the company’s losses for 2014 but said the numbers could increase from last year’s losses. Shell is not compelled to publicly report its financial standing since it is not yet listed in the stock exchange.
Since the start of the second semester of 2014 when international oil prices started to drop until the first week of February 2015, gasoline and diesel have decreased between P18 and P19 per liter.
And since the year started, gasoline prices have decreased four times totaling P3.60 per liter, while diesel has been rolled back five times amounting to a total rollback over P4 per liter.
Chua said the sustained fall in crude prices is expected to result in weak margins as higher-priced inventory was sold at lower prices.
“We have a certain level of inventory. It’s going to really affect us financially,” said the Shell official on the sidelines of Powering Progress Together-Asia forum.
Another oil price cut is expected to happen next week, possibly by less than P1 per liter on gasoline and diesel products.
“The average for the last three days has been lower than last week. If the trend continues, hopefully, prices will be lower next week,” said Chua, who added that finished products were lower by more than $1 a barrel.
Aside from possibly posting a net loss for 2014, Chua warned of a possible closure of its oil depot in Pandacan if it does not win in an ongoing court battle.
“We filed a motion for reconsideration last January 5. We must be given an opportunity to present expert witnesses. If ever we lose then we shutdown the facility. We have no relocation plans. We will simply close the facility and people will be jobless,” Chua said.
The oil firm does not have an alternative location where it can transfer its oil depot. It has a refinery in Batangas but Chua said it will be too costly for the oil firm to transfer its facility there.
“It’s a major expense. The country will be challenged. The biggest problem that will arise from this if ever we will close down is the jet fuel which is supplied to the airlines.
“The good thing about Pandacan is that it is near Naia [Ninoy Aquino International Airport] terminals. The storage facilities of Naia are good for one day only. If the supply will be coming from Batangas just imagine the delay and additional operating costs,” Chua said.
The Supreme Court (SC) earlier ordered Shell, Petron Corp. and Chevron Philippines to move out of Pandacan. The SC gave them 45 days to submit an updated comprehensive plan and relocation schedule. After which, they are given six months within which to move out of Pandacan.
A city ordinance, however, states that they have to move out not later than January 2016.
“Pandacan oil depot is a safe facility. If it’s unsafe we will be the first one to close it down,” the Shell official said.
Chevron Philippines has vacated the place since June last year.
Petron, for its part, said it is committed to leave Pandacan by end of 2015. In fact, it has started to transfer portions of its oil depot in Manila to other areas.