Nearly fifteen years after the passage of the Downstream Oil Industry Deregulation Act of 1998 (Republic Act No. 8479), Pilipinas Shell Petroleum Corporation, the local unit of global oil giant Royal Dutch Shell Plc., continues to thumb its nose at the Department of Energy (DOE).
According to news reports, DOE wrote a letter to the oil company on May 14, 2013 regarding its “long-delayed initial public offering [IPO] as mandated by Section 22 of RA 8479.”
Section 22 of the oil deregulation law, which came into effect in 1998, provides that companies engaged in the oil refinery business like Shell “shall make a public offering through the stock exchange of at least ten percent of its common stock within a period of three years from the effectivity of this Act or the commencement of its refinery operations”.
Shell, headed by country chair and president Edgar Chua, is the only remaining oil refinery which has yet to list its shares in the Philippine Stock Exchange (PSE). Petron Corp., the country’s largest oil refinery and market leader, has been listed in the local bourse since 2004, while Chevron Texaco’s Caltex Philippines stopped its oil refining operations and converted its Batangas refining facility into a product terminal in 2003.
Energy Secretary Carlos Petilla said the letter would act as a “reminder” to Shell that its IPO has “long been delayed.” Petilla also says the DOE is merely “reminding” the oil company to comply with the law.
What?! Is Petilla serious?! His department is supposed to be the regulator of all private sector activities in the energy industry and here he is essentially “requesting” Shell to please follow the law?! Unbelievable!!
The DOE’s kid-glove treatment of Shell is in stark contrast to how it deals with the smaller players in the energy industry.
For instance, the DOE is quick to raid and shut down independent liquefied petroleum gasoline (LPG) refilling plants for supposed violation of safety and product standard laws and regulations. Yet it appears reluctant to take the same forceful action when Shell and other oil major players fail or refuse to comply with equally significant laws.
For the past several years, Shell has repeatedly appealed to the government and obtained the approval of DOE to delay its IPO due to alleged “unfavorable market conditions and negative developments in the Philippine downstream oil industry.”
Soon after the Aquino administration took over in 2010, then DOE Secretary Rene Almendras was quoted by media as saying he would look into Pilipinas Shell’s overdue IPO but nothing happened.
This time, Shell is (again?) requesting the DOE to give it until the end of this year to decide on listing its shares supposedly because it’s still finalizing the study on upgrading its Tabangao, Batangas refinery for the new fuel standards set to take effect in 2016.
But many folks aren’t buying Shell’s storyline. It is, some say, another “delaying tactic.”
That’s because as far back as January 2007, the oil company announced that it had already shelved plans to expand its Tabangao refinery allegedly due to increased costs. In fact, it’s been widely reported in media that the oil company was putting off any major investment for the Tabangao refinery.
Apparently, Shell doesn’t feel any pressure to list its shares in the PSE because it has been able to indefinitely postpone its IPO after securing a favorable Department of Justice (DOJ) ruling in 2001.
In its Opinion No. 6, the DOJ ruled that the three-year period fixed by the oil deregulation law for oil refineries to make a public offering is not mandatory but merely directory (or non-obligatory), which in effect gives Shell the choice whether or not to list its shares.
The way we see it, Petilla should impose a deadline on Shell or file a case in court to force Shell to list its shares as required by RA 8479. After all, the Supreme Court ruled in several cases that DOJ opinions interpreting the law are neither conclusive nor controlling since the power to make a final interpretation of the law lies with the courts not with any government entity.
Will Petilla succeed where other DOE top honchos have failed? That’s the 64-dollar question. Others are not so optimistic, citing the DOE’s track record in addressing complaints against oil majors like Shell for overpricing, cartelization and predatory pricing, among others.
So why does Shell seem so “allergic” to listing its shares?
Is Shell afraid of opening its books to the public? Or is it just unwilling to share its huge profits with ordinary Filipinos? Just asking.
More on Shell’s stalled IPO in our future columns.