Oil price hike, logistics fears over Pandacan depot move

MANILA, Philippines – Higher oil prices and logistical problems are two of the feared repercussions of the Supreme Court decision to relocate the terminals of the country’s 3 biggest oil companies from Pandacan, Manila.

Energy Secretary Carlos Jericho Petilla said oil prices are likely to go up once the terminals are moved out of Manila since there would be a higher distribution cost, but stressed that this would be up to the oil firms.

“It’s also a free market. It’s their prerogative. They may maintain it (price) to be competitive or they may increase it to survive but it’s an open competition,” Petilla said.

Fuel prices have  gone down over the past few weeks. A feared spike in fuel prices following the High Tribunal’s order is not likely soon since it takes effect 6 months after the oil firms’ submission of an updated comprehensive plan and relocation schedule.

The oil firms could also file for a motion for reconsideration, which could further delay the transfer.

If the depot is relocated to Batangas or Bataan while a truck ban is in place , this would have an impact on the delivery of aviation fuel to the Ninoy Aquino International Airport (NAIA), Petilla said.

“Basically, it will simply be a challenge for them because there is a logistic problem of transporting,” Petilla pointed out.

Asked if he is proposing to have the truck ban lifted, Petilla said he would ask the oil firms to do a simulation first. “We have time to do a simulation. They have to coordinate with MMDA (Metro Manila Development Authority),”  he said.

Is 6 months enough?

The oil companies are given 45 days to submit an updated comprehensive plan and relocation schedule to the Manila Regional Trial Court Branch 39.

The relocation, the High Court said, “shall be competed not later than 6 months from the date the required documents were submitted.” The lower court “shall monitor the strict enforcement” of the Court decision.

But is the 6-month period enough for the oil firms to vacate the Pandacan oil depot?

Petilla thinks so. “It’s simple. I feel they can finish the supply in a month’s time if they do not replenish. It’s doable,” Petilla said.

He added that Chevron has moved out of Pandacan in June this year. “For Petron and Shell, they already have interim plans. I just don’t know how advanced their plans are. Petron has since started to move out. For Shell, I don’t know if they are going to implement it now. But what can they do if they are asked to move out?”

Petron Corporation said it would abide by the High Court’s decision. It has, in fact, started the transfer, announcing earlier that it would be out of Pandacan by end-2015.

Petron chairman Ramon Ang had announced in May that the company would spend P15 billion ($333.63 million*) for the relocation to either Rosario, Cavite; Limay, Bataan; or Navotas in Metro Manila.

Ang had assured that the relocation would not result in any fuel price increase and pointed out that Petron sees a reduction in operational costs upon relocation of its oil depot to the new areas.

Shell said, “Rest assured that Shell will observe the rule of law and good governance.” It refused to comment further until it receives a copy of the Court decision.

None of the oil firms replied when asked if they plan to file for a motion for reconsideration.

 “It will be up to them to appeal the decision. But I think in the past, they’ve seen this coming already and they have contingency plans. Personally, I think, even if you appeal it, if the LGU (local government unit) is really against you then you will have a hard time. It’s going to be difficult to relocate in other areas where you’re not welcome,” Petilla said.

The energy chief also said he will ask the oil firms to submit their contingency plans.

“We’ll now ask them what their contingency plans are for our own internal consumption,” Petilla said, adding that new permits from the concerned LGUs would have to be secured before relocation.

“Actually they have other depots now. They will just continue operations in their other depots or refineries. The thing is, their distribution cost will be more expensive,” Petilla again warned.

Welcome decision

The High Court’s decision overturned Ordinance Number 8187 of the City of Manila, which allowed the continuing stay of the Pandacan oil terminals.

Ordinance 8187 was passed and implemented in 2009 during the term of Mayor Alfredo Lim. The local council reclassified the 33-hectare site as a heavy industrial zone in order to overturn the 7-year phase-out of the terminal, initiated by Lim’s predecessor Lito Atienza and upheld by the Supreme Court.

Former president now Manila Mayor Joseph Estrada wants the oil terminals out of Pandacan, and gave them until January 31, 2016 to shut down their oil storage facilities and relocate to another area.

The City of Manila welcomed the decision.

“We have always maintained our position in the Manila City Council that the continued stay of the Pandacan Oil Depot presents a ‘clear and present danger’ to the safety and welfare of the Manileños, especially those living within the vicinity of Pandacan,” Manila Vice Mayor Isko Moreno said in a statement on Wednesday.

Moreno also echoed Estrada’s statement that the ruling could also result in an investment boom in Manila since the area was already classified as a commercial area.

Though there would be loss of income as far as taxes paid to the City of Manila, Moreno said public safety is more important. – Rappler.com