That’s the question being asked by many of our readers and friends who are wondering why President Benigno Aquino 3rd has not cracked down on Pilipinas Shell Corp. (Shell) despite the oil giant’s flagrant violation of the law requiring oil refiners to like Shell to publicly list “through the stock exchange . . . at least ten percent of its common stock.”
They point out that under RA 8479 or the 1998 Downstream Oil Industry Deregulation Act, Shell should have already completed its initial public offering (IPO) as early as 2001. For the past 12 years, however, the oil giant has managed to hold off the IPO of its shares for one reason after another.
In 2002, then Shell outgoing chairman Oscar Reyes claimed they couldn’t push through with their IPO allegedly because the Philippine market was not ready for such an offering.
Seven years later, Shell’s new country Chairman Edgar Chua said they couldn’t come up with a concrete plan to list their shares because their IPO plan was tied to their Tabangao, Batangas refinery expansion program which they were supposedly finalizing.
When the Aquino administration took over in 2010, Chua claimed they still hadn’t made a decision to list its shares because they weren’t done “reviewing the future of [their Tabangao]refinery.”
Last June, Chua again asked the DOE to give it more time – not for an IPO – but only to submit the plan for an IPO. Why? Because the oil giant was (again) still finalizing the study on upgrading their Tabangao refinery.
It’s the same old tired excuse that Shell has been dishing out to the public for the past four years. With the time it has taken Shell to finalize the refinery upgrade study, it’s on track to break the Guinness Book of World Records title for the world’s longest-running research ever.
Besides, some people ask, if Shell can finish the feasibility study on the more costly and complicated liquefied natural gas (LNG) regasification plant project in Batangas in less than a year, why couldn’t it finish a simple upgrade study after four years?
Obviously, Chua is seeking to delay the IPO as long as legally and humanly possible – and the so-called “study” on its Tabangao refinery expansion/upgrade was the means to achieve that delay.
Shell’s reluctance to do an IPO shouldn’t really surprise anyone.
As a public company, Shell will not only be exposed to competitors and government regulators. It will also be forced to open up its books to the scrutiny of potentially hostile and inquisitive Filipinos unhappy with skyrocketing gas prices amidst the company’s burgeoning profits.
And unlike public utilities whose profits are regulated by the government, oil companies like Shell are free to squeeze as much profit as they can from Filipino consumers.
It’s no wonder Shell is the country’s third largest corporation by revenue. Controlling more than one-fifth of the local market for fuel products, Shell reported a net profit of P4.694 billion on gross revenues of P190.086 billion in 2011. That’s a humongous profit which Shell’s exclusive group of local and foreign shareholders may have difficulty sharing with other Filipino investors if the company goes public.
Based on Securities and Exchange Commission records, Shell is 67-percent owned by the Netherlands-based Royal Dutch Shell Plc., with the remaining 33-percent owned by select foreign and Filipino shareholders such as the International Finance Corp., The Insular Life Assurance Co. Ltd., LBC Properties Inc., Rizal Commercial Banking Corp., Pan Malayan Management and Investment Corp., Ayala Life Assurance Inc., BPI/MS Insurance Corp. and Aboitiz and Co. Inc.
Some folks, however, attribute a more sinister motive to Shell’s hesitance to go public, saying that while the oil giant doesn’t want to do an IPO, it nevertheless wants to keep its oil refinery business because it provides a convenient vehicle for the company to import petroleum products at lower duties and taxes.
They cite the P24-billion tax evasion case filed by the Bureau of Customs (BOC) against Shell in 2010 for intentionally misdeclaring its 2005-2009 shipments of catalytic cracked gasoline (CCG) as raw materials used in Shell’s refinery instead of finished petroleum products, in order to evade payment of excise taxes and VAT.
According to the BOC, Shell admitted that CCG is the same as unleaded gasoline and was paying the corresponding excise tax for unleaded gasoline on its previous importations of CCG.
So they ask: “If Shell can evade the legally-mandated IPO requirement without being sanctioned by the Aquino administration, what’s stopping it from circumventing other laws?”
Although we believe that such a ballsy scheme is farfetched, we can understand why some of our countrymen are skeptical of Shell’s IPO delaying tactics as well as PNoy’s tepid response.
After all, the only thing PNoy has to do is to enforce the law, plain and simple.