Looming LPG crisis


Department of Energy (DOE) Secretary Jericho Petilla must make a very important decision RIGHT NOW to stop the impending increase in liquefied petroleum gas (LPG) prices.

LPG prices in the global market has been declining because the Northern Hemisphere’s winter season is about to end. (Though this does not seem to be happening if you are in the US right now.). But our domestic LPG prices are almost sure of moving against the international trend if Sec. Petilla does not address (in the words of our columnist Atty. Brigido Dulay in his most recent piece) “the supply chain disruption resulting from the scheduled maintenance shutdown of Pilipinas Shell Petroleum Corporation (Shell)’s oil refinery and the permanent closure of its LPG import terminal, both in Tabangao, Batangas.”

Shell’s Batangas refinery reportedly produces some 10 million kilos of LPG monthly. The Shell LPG import terminal (capacity up to 47 million kilos of LPG) is the largest in our country. It accounts for 66 percent of Luzon’s combined LPG storage capacity of 71.8 million kilos.

House Deputy Minority Leader and LPG Marketers’ Association (LPG-MA) party list Representative Arnel Ty has warned that “the maintenance shutdown, coupled with the decommissioning of Shell’s LPG import terminal…will effectively cut down Luzon’s LPG supply by around 25 million kilos per month.”

Domestic consumption, per Dulay, is from 100 to 110 million kilos per month. That means the Shell terminal accounts for about 25 percent of monthly Philippine supply.

“Of the 25 million kilos of LPG that used to come out of the Shell terminal every month, 15 million kilos were brought in by Shell from abroad, while the balance of 10 million kilos came from the local production of Shell’s adjacent oil refinery,” Ty has said.

Until it was “decommissioned” last September, Shell’s LPG import terminal was the primary source of vital cooking gas for Southern Luzon.

The other LPG import terminals in Luzon are all located in Luzon’s north and center, where they can’t do much for the impending supply deficit from Calabarzon to the Bicol Region.

With the Shell import terminal gone, the country’s available inventory of LPG will be reduced to just 10 million kilos every month – the volume produced by Shell’s oil refinery. But that’s if the refinery does not have any disruptions. The refinery is scheduled to have a maintenance shutdown this month. That will tighten cooking gas supply even more. Dulay quotes Rep. Ty saying, this precarious situation “is slowly but surely putting tremendous upward pressure on cooking gas prices at the expense of Filipino consumers, ironically, at a time when LPG prices are going down in the world market.”

That’s because some of the supplies meant for Metro Manila and other parts of Luzon are now being diverted to Southern Luzon at higher prices to cover the extra transport costs from the LPG terminals in Bataan, Ty pointed out.

Dulay fears that “this tightening cooking gas supply also makes it very tempting for the few remaining major players in the LPG industry to manipulate the price of this essential commodity, just as some electricity suppliers did when Malampaya shut down.”

Congressman Ty is urging the national government, through DOE, “to take over Shell’s mothballed LPG terminal for a limited period of 12 to 36 months until substitute import facilities can be put up.”

Dulay says there is sound legal basis for Rep. Ty’s proposal.

“Under Section 14 (e), Chapter IV of the Downstream Oil Industry Deregulation Law of 1998 (RA 8479), the DOE under Sec. Petilla may, ‘in times of national emergency, when the public interest so requires…temporarily take over or direct the operation of any person or entity engaged in the industry.’ “

This is consistent with the provision of the 1987 Constitution, which similarly authorizes the national government to temporarily take over or direct the operation of any privately-owned business affected with public interest, such as Shell’s LPG import terminal business, “in times of national emergency, when the public interest so requires.”

We wholeheartedly agree. Government should take over the Shell LPG import terminal to prevent another crisis.


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