It looks like Pilipinas Shell will now transition to becoming an importer of all of its fuel products soon as the company just announced that it will be shutting down the Tabangao refinery in Batangas. The company decided that this would be the best course of action in the long run as it trudges through the global pandemic.
“Due to the impact of the COVID-19 pandemic on the global, regional, and local economies, and the oil supply-demand imbalance in the region, it is no longer viable for us to run the refinery,” said Cesar G. Romero, Pilipinas Shell president, and CEO.
With the refinery’s closure, it marks nearly 60 years of the Tabangao facility refining oil for the Philippines. But don’t expect Shell to vacate the Tabangao facility. While refining operations will cease, Shell, is already looking at converting the facility into a “world-class import terminal to optimize its cost and supply chain competitiveness”.
Shell has yet to elaborate on how will they transform the Tabangao refinery into an import facility. More than likely, however, it could be similar to the company’s North Mindanao Import Facility (NMIF) located in Cagayan de Oro City.
The Tabangao facility actually had to suspend operations for one month last May as a result of the decline in local product demand and the significant deterioration of regional refining margins. The company then had to further extend the shut down for another month last June as demand for oil was still relatively low at the time.
The subsequent shutdown of the refinery in Batangas was mainly caused by the company suffering heavy inventory losses due to the quarantine measures imposed as early as March 2020. In the first quarter of the year, Shell was hit by a PhP 5.5 billion net loss. Then it went deeper to PhP 6.7 billion in the entire first half of the year. The company then managed to recover in the second quarter by minimizing its losses to PhP 1.2 billion when the price of crude oil and petroleum products improved.
With Shell shutting down the Tabangao facility for good, this leaves only Petron Corporation with a working refinery in the country. While Shell will still be able to supply fuel for its customers via importation, the closing of the refinery means there could be less income for the country, as well as the possibility of workers losing their jobs. Still, Shell claimed that their shift from manufacturing to full importation will help strengthen their financial resilience amid the new normal brought about by the pandemic.