13-08-2020

Shell boosts import capability with refinery transformation

Pilipinas Shell is transforming its Tabangao Refinery into a world-class full import terminal to optimize its asset portfolio and enhance its cost and supply chain competitiveness. This move will further strengthen the Company’s financial resilience amidst the significant changes and challenges in the global refining industry and the shift to the new normal brought about by the Covid-19 pandemic. 
 
“We have the technical capability and financial flexibility to manage and adapt to disruptive conditions. The regional refining margins which have been weak for some time due to the oil supply/demand imbalance in the region, have worsened due to demand destruction from the covid crisis. As such, it is no longer economically viable for us to run the refinery. It is with a heavy heart that we announce the cessation of oil refining activities in Tabangao.” says Pilipinas Shell President and CEO Cesar Romero.

“Nonetheless, it is with an equally invigorated spirit that we reveal our plans to transform Tabangao into a world-class import terminal — one that will sustain and grow Pilipinas Shell’s competitive advantages that have continuously evolved to stay relevant with the times ever since we started our business in the Philippines 106 years ago”.

Romero assures that the conclusion of refining operations will not affect Pilipinas Shell’s capability to supply high-quality fuels as the shift in supply chain strategy from manufacturing to full import-based. “Shell remains committed to the Philippines and will pursue opportunities where we can leverage our global expertise in line with our growth strategy,” Romero says.

The Tabangao Refinery has been on shutdown since May 24 to help insulate the Company from further deterioration of refining margins, and aid in its cash preservation efforts. “During this time, Pilipinas Shell has been consistently supplying quality products to its customers and the motoring public”, Romero points out.

According to the Department of Energy, demand for petroleum products declined by 20 to 30 percent in March and by as much as 60 to 70 percent in April during the imposition of the enhanced community quarantine, compared to February levels.

The demand for fuel products is not yet back to its normal levels, with many of the businesses still suspended or operating below capacity, while travel remains limited due to the varying levels of quarantine restrictions nationwide. Decline in demand may be expected once again now that Metro Manila and key cities and provinces revert to MECQ.

In addition, refining margins, which saw a steep decline earlier in the year, have gone down further and may remain depressed in the medium term.

The Tabangao facility will become a world-class import terminal and will continue to cater to the fuel needs of Luzon and Northern Visayas. Meanwhile, the North Mindanao Import Facility (NMIF) in Cagayan de Oro will serve the growing energy needs in the balance of Visayas and Mindanao region.

The transformation of the refinery means that Pilipinas Shell will maintain its presence in Tabangao, likewise preserving the support to its stakeholders, particularly the communities that benefit from its corporate social responsibility programs.

The Company will ensure that employees directly impacted by the transition are well taken care of. “I salute all the men and women whose sacrifices and contributions over the years have made the Tabangao Refinery an icon for Shell in the Philippines, and most especially in Batangas”. Romero says. “We will be guided by our core values of Honesty, Integrity and Respect for People in safeguarding their well-being, addressing their needs sensitively and preparing them for their next journey ahead.”

“As we embark on this new exciting chapter for Pilipinas Shell, we wish to reiterate that we are here to stay, and we remain to be a partner in nation-building. We have been serving Filipinos for 106 years and we intend to continue to do so for the next 100 years or more,” says Romero.