Shell may miss profit target on soaring costs

ABS-CBNNEWS.com: Shell may miss profit target on soaring costs

By LENIE LECTURA

TODAY Reporter

Posted 10 June 04

Due to higher marginal costs of soaring fuel prices in the world market, Pilipinas Shell Petroleum Corp.’s full year net profits for this year may fall short of its P3-billion target.

At the sidelines of the launching of a new oil product, Shell country chairman Edgar Chua said on Tuesday night that as of end-May, the company achieved only 25 percent of its full-year target. “By this time, we should have been registering 41 percent to meet our target for 2004,” Chua said.

Despite this, the country’s second-largest oil company, which posted a net income of P2.6 billion last year, would still proceed with its expansion plans unlike the industry’s smaller players, which have decided to forego similar plans due to the prevailing volatility of crude prices.

“We have already set our short-term and long-term plans. We have been pursuing all our marketing efforts to boost our products’ viability. We want to offer different products and we cannot afford not to give our customers the best products and services. We still want to grow despite the ongoing situation in the local oil industry,” he said.

Shell has programmed P2 billion for capital expenditures this year.

“There is a misconception that when oil prices go up, it is more profitable to the oil firms. During these times that prices are shooting up, costs are also going up. There is a marginal squeeze,” he pointed out.

Shell has yet to conclude its yearly review of the viability of its refinery business. There have been rumors that Shell will also close down its refinery plant — similar to what Caltex Philippines Inc. did last year.

“We have not yet finished our review on our refinery operation. It is a continuing process. The oil refining market this year, I think, would be better but we are not sure until when the good times will last,” Chua said.

He also called on the government to continue its support on the oil firms, particularly on incentives. “Other refineries in the region are getting a lot of perks. They tend to get incentives when they export products unlike here [where] the government favors those that imports oil products. We need a long-term vision on this.

Various government agencies like the Department of Energy, Department of Trade and Industry and the Department of Finance have been very helpful in resolving our concerns such as the local crude process and tax issues. We are very appreciative of their support,” Chua said.

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