By
Lenie Lectura - October 18, 2018
The Philippine National
Oil Co.-Exploration Corp. (PNOC-EC) Board has approved a plan on Wednesday to
import lower-priced diesel fuel, primarily for the public- utility vehicle
(PUV) market.
The plan is for the
PNOC-EC to buy diesel from oil traders in Singapore, have this delivered to the
Philippines in five days, select an aggregator, which, in turn, will distribute
the cheaper diesel to the local oil firms’ service stations where drivers and
operators of PUV would be given priority to purchase.
If this pushes through,
PNOC-EC President Pedro Aquino said that motorists could buy diesel that is
cheaper by as much as P5 than the current pump price. Based on
current retail price, diesel is sold anywhere between P48 and P50 per liter.
“We will push through
with the plan,” said Aquino after the board meeting on Wednesday afternoon.
Aquino said the
aggregator must strictly comply with the terms and conditions to be set by the
PNOC. “We can cancel them if they will not prioritize the PUV drivers, or if we
receive complaints that diesel price is not sold to motorists at the price agreed
upon,” he said.
Without revealing the
identities of the seller in Singapore, Aquino said the Philippines received an
offer of “above $500 per metric ton,” lower than the current price of “around
$725 per MT.”
“The offer we received
is not the price that we are looking for. We agreed during the board meeting
that if we can get a better offer, then we will go for it.
“If our basis would be
the current offer price that we received, then we can bring down the price of
diesel by as much as P5 today. But if we can get a much better offer lower than
the $500 per MT, then we can bring down further diesel price at the pumps,”
said Aquino.
Based on PNOC-EC’s
published letter of intent, it has set the quantity at 50,000 MT for the
trial shipment. Aquino said this would cost roughly P1.3 billion.
Subsequent shipments of
up to four shipments per month and up to one year are to be mutually agreed
upon by the seller and the buyer.
“If the offer price for
the succeeding shipment is lower, then there is this possibility that the
diesel will be sold by more than P5 cheaper,” he said.
The PNOC-EC’s
specification for the fuel is a sulfur content of 50 parts per million (PPM),
or the standard for Euro 4.
The payment term is
through letter of credit, while the delivery term is within 15 days after
signing of the contract.
The PNOC-EC is
targeting to execute the plan within the month. “It would take five days
to deliver it here. We are still preparing for the depot, receiving terminal
and the agreement with the aggregator. But yes, it can still happen within the
month,” Aquino said.
Initially, the PNOC-EC
was eyeing importing petroleum products from Russia and other countries
that are not members of the Organization of the Petroleum Exporting Countries
(Opec) “to establish a strategic petroleum reserve [SPR] [and] to cushion the
impact of the rising price of oil in the international market.”
However, there are
problems that could be encountered by the banks with regards to the issuance of
letter of credit to Russia.
When sought for comment, Independent
Philippine Petroleum Companies Association (Ippca) President Bong Suntay said
oil firms will support the PNOC-EC by buying cheaper diesel that PNOC would be
able to source.
“We will be happy to
support. We buy from the retail outlets where this cheaper diesel will be
sold,” said Suntay in a phone interview.
Ippca has at least 16
members, mostly the country’s leading independent oil players, such as Eastern
Petroleum, Unioil Petroleum Philippines Inc., Seaoil Philippines, Flying V,
City Oil, Pryce Gases and LPGMA, among others.
However, Suntay would
like to know where and to whom will the PNOC source the cheaper
diesel. “All of us, we trade in Singapore. We have been in this
business for so long and we have already exerted efforts to look for cheaper
prices. We would have already done that if we knew [about] this,” said Suntay.
He said the only way
for the PNOC-EC to source cheaper diesel is from a government-to-government
arrangement, coupled with subsidy.
“Assuming its P5
cheaper, there is still the freight cost, taxes, logistics and distributors
cost to take into consideration,” he said.
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