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Shell Philippines refinery closure to result in massive job, revenue losses

Manila Bulletin

By MYRNA M. VELASCO
January 17, 2010, 1:01pm
Consequent moves to close the refinery of Pilipinas Shell Petroleum Corporation in Tabangao, Batangas due to seizure of its product imports will result in revenue losses for the company to the tune of P11 billion monthly, and will likely render worse collateral damage on its 823 employees who lurk at the danger of losing their jobs.

In a statement sent by the company’s law firm CVC Law, the company warned on the adverse impact of the threatened seizure of P43 billion worth of its raw materials and product imports by the Bureau of Customs (BoC) – the worst case scenario of which, would be the oil firm’s refinery closure.

“The potential closure of Shell Batangas refinery as a result of the seizure by BoC of imported raw materials processed in the refinery means that 823 workers in the refinery alone stand to lose their jobs while the company expects to lose P11 billion a month,” the company said.

In the same vein that “allied industries depending on the refinery for business as well as the local economy in Batangas will be severely affected by the closure.”

The products’ seizure is purportedly BoC’s way of compelling the oil firm “to answer for a disputed deficiency tax assessments covering its importation from 2004-2009.”

The tax deficiency reportedly arose due to differing tariff classification set for catalytic cracked gasoline (CCG) and Light Catalytic Cracked Gasoline (LCCG) as compared to imported finished products.

Pilipinas Shell contends “that the BoC assessment has no basis since excise taxes are supposed to be levied only on finished products for consumption and sale in the domestic market.”

The oil firm was able to secure a 60-day temporary restraining order versus the products’ seizure attempts. It is due to expire this February 9.

The Court of Tax Appeals is currently conducting hearings on Shell’s prayer for a suspension order.

A refinery business is considered a strategic component of the oil industry, and if government-sanctioned moves to close Shell’s refinery would prevail, the country will be left with only one refinery.

When that happens, the country’s bid for energy security will be forever threatened. The arbitrary rule-changing being enforced by government, or the BoC at that, will also serve as a disincentive for any investor to even think of pursuing any further investments in refining business in the country.

Energy Secretary Angelo Reyes fears there will be supply disruptions if the Bureau of Customs seizes P43 billion worth of importations of Pilipinas Shell Petroleum Corporation.

The BoC vowed to seize, all future shipments of Shell amounting to $923 million arriving for February 2010 to May 2010 alone, to answer for alleged deficiency tax assessments covering its importations from 2004-2009 of Catalytic Cracked Gasoline (CCG) and Light Catalytic Cracked Gasoline (LCCG).

Shell is disputing the tax assessments before the Court of Tax Appeals (CTA) where it contends that its CCG and LCCG imports are merely raw materials for the production of unleaded gasoline.

It contends that the BOC assessment has no basis since excise taxes are supposed to be levied only on finished products for consumption and sale in the domestic market.

“Shell cant operate as usual, BOC may have to go the process of bidding for the sale of the cargoes. But the buyer may not have the capacity to store the cargo,” noted Reyes in a message to reporters.

He explained that “Shell has a share of over 30 percent of the market—second only to Petron.”

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