HERE’S our fearless forecast: Shell Pilipinas, the local subsidiary of oil and gas supermajor Royal Dutch Shell, won’t be doing an initial public offering (IPO) this year – and next year, too. Truth is, we don’t see Shell going public by the time the 6-year term of PNoy ends in June 2016 – a little over a year from now.
The failure of the Aquino administration to simply enforce the law against the Netherlands-based oil and gas giant is a case study on how PNoy and his allies bastardized the so-called “tuwid na daan” principle. It will be the legacy of PNoy’s twisted sense of doing right by our countrymen.
Under the Downstream Oil
Deregulation Act of 1998, oil refiners like Shell are required to list at least 10 percent of its shares at the Philippine Stock Exchange (PSE). But for the past decade and a half, Shell has managed to put off its IPO for a variety of reasons.
“Deregulation started in 1998. The Asian crisis hit us in 1997 so the economic landscape was not good for six years until 2003. In fact, refining margins were negative from 1997 up to 2003. That’s why one refinery was shut down in October of 2003,” said Shell’s country chairman Edgar Chua.
Besides the Asian crisis, a double-taxation case and Manila City’s order to vacate the Pandacan oil depot have likewise kept the company busy through the years, Chua added.
Chua has also cited the volatility at the PSE for postponing the IPO, saying “Maganda ba yung market? Ibang issue yung timing.” This was sometime in 2013 when the stock market dropped from record highs and shed some three-fourths of its value.
But the major reason for the delay in Shell’s IPO, Chua said, is its parent firm’s final investment decision on plans to upgrade or retain the refinery in Tabangao, Batangas.
Unknown to many folks, the “major reason” cited by Chua had already been resolved months ago. Last June 2104, Department of Energy (DOE) Secretary Jericho Petilla announced that Shell has finally decided to upgrade its 110,000 barrel-per-day refinery in Tabangao, Batangas province.
The Tabangao refinery upgrade was even confirmed by no less than the Chief Financial Officer of Royal Dutch Shell Simon Henry, during the meeting of Shell executives (including Shell Pilipinas’ Edgar Chua) with PNoy at the Hotel Sofitel in Brussels, Belgium on September 16, 2014.
At the time, Shell boasted that the Tabangao Asset Renewal–Tabangao Refinery Euro IV Compliance Project (a.k.a. refinery upgrade) will cost an estimated US$150 million. The upgrade will enable the Tabangao refinery to produce lower-sulfur diesel in compliance with Euro IV emission standards by January 2016.
With the issue of the refinery upgrade finally settled, one would think Shell has run out of excuses and that the oil deregulation law-mandated IPO would finally be happening, right? Wrong.
Almost six months after that fateful Brussels meeting, Shell has yet to take any step to list its shares in the PSE.
And what has Petilla done about it? Nothing. Nada. Zilch. Petilla merely asked Shell to explain the status of its IPO. “With only two months to go before 2014 ends, we wanted to inquire on the status of Shell’s IPO,” Petilla said. Susmariosep naman!
As the regulator of these oil companies, Petilla is responsible for implementing and enforcing the law. He should have given Shell a deadline within which to comply with the required PSE listing a long time ago. Unfortunately for the Filipino people, Petilla seems to enjoy swallowing the oil giant’s BS, allowing the latter to circumvent and evade its legal obligations with countless excuses.
And talking about excuses, never underestimate the capacity of Shell’s Chua to churn out more BS.
One reason that Shell will most likely cite for again postponing its IPO this year is the large drop in the price of energy stocks. For the past several weeks, energy stocks have tumbled due to concerns that a worldwide oil glut would dampen profits of oil and gas industry players.
That excuse, however, will not hold water. Why? Because the benchmark Philippine Stock Exchange index (PSEi) vaulted to its ninth record close this year. Last Friday, the PSEi closed at 7,728.18 points – the highest ever in PSE history. Stock market analysts all agree that it’s the best time for an IPO.
But the stock market’s performance isn’t really important for Shell. What the oil supermajor obviously wants is have its cake and eat it, too. That is, to keep on operating the Tabangao refinery – and rake in huge profits – without having to share it with Filipino consumers or to open its books to scrutiny by consumer watchdogs.
In our book, that’s plain and simple greed.
Question is, what’s in it for Petilla?