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INQ7.net – Philippines: Shell says performance will determine fate of refinery

Shell says performance will determine fate of refinery
Posted: 3:26 AM | Apr. 22, 2006

Abigail L. Ho
Inquirer

THE ROBUST financial performance of Pilipinas Shell Petroleum Corp. last year may prompt it to upgrade its refinery and even expand it with a fresh capital infusion, Shell country chairman Edgar Chua said.

The unit of Royal Dutch Shell is to decide on whether to close down or expand its Philippine refinery, and last year's strong performance will weigh heavily on its decision, Chua said.

Shell recorded an after-tax 2005 profit of P5.7 billion, up 102 percent from P2.84 billion in 2004, despite reduced gross sales.

“Hopefully it's a sign of things to come,” Chua said. “It helps in having a positive outcome for the refinery. We should have something more concrete towards the end of the year.”

“After many years of delivering return which are below market performance, 2005 saw a return on equity (appraisal basis) of 10.3 percent with our P5.7-billion net income after tax,” he said.

Chua attributed the strong results to positive refining margins, increasing export revenue, increased lubricant sales, and better performance of its in-station convenience stores.

Since the downstream oil industry was deregulated in 1998, Shell's average return on equity had been at a low 3.7 percent. Average return on capital employed was 4.2 percent.

Shell earlier said in a statement: “Company officials are hoping that last year's financial turnaround could serve as an indication that Shell's Philippine operations can deliver fair and reasonable returns to its shareholders on a sustained basis.

“This could also strengthen Shell's confidence in further investments in the downstream Philippine oil industry, where it has been an active player since 1914.”

Chua said that if Shell would decide to infuse additional capital into its Philippine operations, the money would initially be earmarked for upgrading facilities so it can produce fuels compliant with the Clean Air Act.

The country's other oil refiner, Petron Corp., partly owned by Saudi Aramco, recently invested around $100 million in such facilities and another $300 million for new refinery units. With INQ7.net

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