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MANILA, Philippines – The initial public offering (IPO) of Pilipinas Shell Petroleum Corporation may happen soon as the company mulls expanding its refinery business in the country.
DOE Secretary Carlos Jericho Petilla noted that he met with the company about 3 weeks ago, and was told that the company would need to raise capital for the expansion of its refinery in Tabangao, Batangas.
A final investment decision (FID) determining whether the expansion will push through will come from the company’s parent, however.
Shell wants to expand its 110,000 barrel per day refinery to meet 2016’s new fuel standards. Euro 4, a globally accepted European emission standard for vehicles, requires fuel to have significantly low amounts of sulfur and benzene.
Accoring to Petilla, Shell didn’t say if it has secured the FID from its parent yet, but based on his conversation with Shell country chairman Edgar Chua, the oil firm was pushing through with the expansion. Petilla added, “While the board has decided to close down in Australia, Shell is expanding in the Philippines.”
Chua noted that the company would have to consider the market condition before undertaking the IPO.
The DOE has been urging Shell to conduct an IPO since it received the mandate to do so with the passage of the Oil Industry Deregulation Act of 1998. The law states that an oil company must list on the local bourse at least 10% of its shares within 3 years from the time of the law’s effectivity. This means that Shell’s IPO should have been completed by 2002.
Petron Corporation was on the stock exchange prior to the passage of the law, while Chevron Philippines shut down its refinery.
During the 2007 Asian financial crisis, Shell cited a volatile stock market as reason for postponing its IPO plans. Following the Department of Environment and Natural Resources 2010 directive regarding updating vehicle emission standards by Jan. 1, 2016, Shell started studying Euro 4 fuel compliance. In 2013, Shell asked the DOE to give the oil firm until the end of 2014 to decide on the IPO.
No IPO has been conducted since then, with no legal action taken against Shell’s non-compliance.
Aside from these issues, a double taxation case and a Manila City order to vacate the Pandacan oil depot were taken into consideration. Chua stressed, however, that securing the FID on plans to upgrade the Batangas refinery was playing a part in the IPO’s delay.
“Unless they have a valid reason for not complying then we have to impose that they undergo an IPO,” Petilla said earlier, adding that the DOE will look at the legal matters of this situation if the oil firm fails to comply with the law.
“Let’s wait for them to finish their preparation. They have a request. We will grant their request. After that we will see if they can comply or not,” Petilla added.
Zenaida Monsada, director of the DOE’s Oil Industry Management Bureau, sent a letter to Shell in May 2013, saying the company’s IPO was long overdue.
“While the opinion of the Department of Justice is that the three-year period under the Oil Deregulation Law is not mandatory but prescriptive and will not prohibit an IPO to be conducted after the lapse of the said period, nearly 15-year period since the passage of the law is long overdue for Shell to implement the public offering of 10 percent of its common stocks,” Monsada said. – Rappler.com