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Oil and gas at the crossroads

When Pilipinas Shell Petroleum Corp. (PSPC) President and CEO Cesar Romero announced last month that the PSE-listed firm was permanently closing its refinery in Batangas City, he said the company “remains committed to the Philippines and will pursue opportunities where we can leverage our global expertise in line with our growth strategy.” A unit of multinational giant Royal Dutch Shell, PSPC is the country’s second largest petroleum firm next to homegrown Petron Corp.

The oil and gas sector consists of three major stages: upstream (exploration and production); midstream (processing, storage, and transporting); and downstream (refining, marketing, and distribution). PSPC’s cessation of oil refining activities is an offshoot of the pandemic-induced crisis that affected the economic viability of running its refinery.

Instead, the 58-year-old Shell Tabangao Refinery is being converted into a world-class import terminal that will sustain and grow PSPC’s competitive advantages. Romero gave an assurance that the importation-based supply shift will not affect the company’s fuel delivery capability, and the employees “directly impacted by the transition are well taken care of.” 

Meanwhile in the liquefied petroleum gas (LPG) industry, the rising star is a Filipino-owned company called South Pacific Inc. (SPI). Since it opened in 2015, SPI has consistently increased its share of the country’s LPG market, which grew 7% year-on-year in January to March 2020 with a total output of 469,830 metric tons despite the start of the COVID-19 pandemic.

Based on the first quarter industry report from the Department of Energy, SPI increased its market share to 18.7% from 16.6% during the corresponding period last year. This has bolstered its industry ranking after Petron and Liquigaz both declined in terms of market share.

SPI is, in fact, closing in on second-ranked Liquigaz’s 21.3% share of the total Philippine market. In Luzon, SPI’s 22.8% market share has overtaken Petron for the number two spot since the latter dropped to 19.2% in the first three months of 2020.

Though still a small player in the Visayas and Mindanao, SPI doubled its market share in the central Philippine regions to 5.2% in the first quarter this year versus 2.6% in 2019. This could be attributed to the opening of its terminal in Cebu that also serves the neighboring islands of Negros, Bohol, Leyte, and Samar.

SPI’s storage facility inside the Arctura Petroterminal in Mandaue City complements its two other terminals at the Calaca Industrial Seaport in Batangas and the San Simon Industrial Zone in Pampanga that sell LPG products to bulk customers. To date, the company has 11 operational surface-mounted storage plants with a total capacity of 22,000 metric tons. Expansion is in full swing within its existing terminals, and it plans to construct five more in the country’s southern islands.

As of 2015, the global LPG market size has reached 278 million tons, with the Asia Pacific region comprising more than one-third of the net demand. The major contributing factors toward market penetration are government initiatives and subsidies to promote the product as an alternative fuel to conventional counterparts such as coal and wood. LPG is also replacing fluorocarbon as a refrigerant due to its minimal contribution to ozone depletion.

During this pandemic, the Asia Pacific market is anticipated to witness the highest growth because of increasing product demand for LPG as a major cooking fuel among urban and suburban households in almost all key regional economies. Future growth will also be propelled by the expanding petrochemical capacities in India, China, South Korea, and Thailand.

According to Canadian media conglomerate Thomson Reuters, the COVID-19 crisis has sent the oil and gas industry spiraling into turmoil coupled with a savage price war. Its latest market report titled “Future of Oil & Gas 2020” provides strategically critical insights on how strong leadership is required to overcome the challenges that lie ahead in driving this pivotal sector forward.

nextgenmedia@gmail.com


Source: Manila Bulletin (https://mb.com.ph/2020/09/07/oil-and-gas-at-the-crossroads/?utm_source=rss&utm_medium=rss&utm_campaign=oil-and-gas-at-the-crossroads)

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