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Manila Standard Today: Shell to bare RP expansion

By Alena Mae S. Flores
Tuesday, March 4, 2008

Pilipinas Shell Petroleum Corp., the country’s second-largest oil refiner and a member of the Royal Dutch Shell Group, is expecting “favorable” results from a study that will determine the viability of expanding its oil refinery in the Philippines.

“Officials from [the] parent company will be in the country this month to announce the results of the study,” a source said.

Shell earlier formed a team to review options on its Tabangao facility in Batangas, which is capable of refining 110,000 barrels of oil per day.

The source said the study might recommend a “scaled-down” upgrade of Shell’s refining facilities in Batangas.

Energy Secretary Angelo Reyes said he had yet to talk with Shell country chairman Edgar Chua about the results of the study. Reyes hinted that “this will be a welcome development.”

Shell over the last two to three years had explored investment and “upgrading options” for its Tabangao refinery in Batangas.

She said two years ago that it was “too overheated to do an economic project, as the cost of raw materials and services increased substantially, resulting in abnormally escalated cost estimates.”

Shell as a result opted to defer a major investment decision for the Tabangao refinery. Shell’s refinery expansion plan was earlier estimated to cost between $1 billion and $3 billion. Sources said Shell might opt to expand its refinery at a lower investment cost.

Chua earlier said Shell would proceed with its planned listing at the stock market if the latest study yielded positive results. He said the stock market performance and the results of the refinery upgrade study would weigh on Shell’s plan to conduct an initial public offering in the Philippines.

The Oil Deregulation Law requires an oil refiner to offer at least 10 to 20 percent of its stake to the public through an IPO.

The downstream oil industry in the Philippines, based on the data of the Department of Energy, needs a new refinery with a capacity of 100,000 barrels of oil per day to ensure security of supply amid a global oil crisis.

The Philippines has an oil requirement of 330,000 barrels of oil per day. Petron Corp. and Shell are capable of refining a combined 280,000 barrels per day but both refineries are operating below capacity.

Caltex Philippines, now owned by Chevron, shut down its 72,000-barrel-per-day refinery in 2003.

Caltex said the refinery had reached the “end of its economic useful life,” adding that it was too small to effectively compete in the highly competitive oil industry.

http://www.manilastandardtoday.com/?page=business1_mar4_2008

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