Petron commits to Philippines' Bataan refinery

Philippine private-sector firm Petron appears to have secured the tax breaks it was seeking to avert the imminent shutdown of its 180,000 b/d Bataan refinery.

The refinery has been registered under the Freeport Area of Bataan, a free-trade zone (FTZ). This will improve its long-run viability and address some of the company's major concerns, Petron said. As part of its commitment to the FTZ, Petron is expecting to invest almost 3bn pesos ($62mn) to improve the efficiency of its refinery operations.

Petron last year raised the prospect of shutting the Bataan refinery if talks with the government on creating a "level playing field" for the industry did not succeed. A move by the Philippine government to impose a 10pc import tax on crude in May 2020 to raise funds for Covid-19 spending has raised costs for refiners, adding to progressive increases in taxes on transport fuel sales since 2018 to finance infrastructure spending and income tax cuts.

Some market participants said at the time that Petron might be using the shutdown threat as a negotiating chip in its talks with the government. A permanent shutdown would have left the Philippines completely dependent on fuel imports, after the country's only other refinery — Shell's 110,000 b/d Batangas plant — was closed for conversion to an import terminal in August last year.

Petron is still planning a temporary shutdown at Bataan early this year amid challenging market conditions.

The company mainly runs Mideast Gulf crude at Bataan, although it has occasionally also taken Russian ESPO Blend. It buys most of its crude on a term basis. The Philippines produces only marginal amounts of domestic crude, leaving refiners reliant on imports.

By Kevin Foster