Petron threatens legal case against PNOC

By Lenie Lectura - October 11, 2017
https://businessmirror.com.ph/petron-threatens-legal-case-against-pnoc/

BUSINESSMAN Ramon S. Ang on Wednesday said Petron Corp., the country’s largest oil refiner and retailer, may resort to available legal remedies should the Philippine National Oil Co. (PNOC) continue to breach contracts.

“If they don’t want to negotiate, unless we waive binding renewal clauses of the agreement, then we have no choice but to seek legal redress to protect our rights and the interest of our shareholders,” Ang, Petron president, said in a text message.

On Tuesday Petron accused PNOC of having breached three contracts when the state firm wrote the oil firm to nullify binding renewal clauses ahead of expiration of the contracts.

When sought for comment, PNOC President Rueben Lista said on Wednesday he maintains his stand that certain provisions in the contracts were deemed “onerous, burdensome and disadvantageous” to the government.

“The Office of the Solicitor General [OSG] has said so,” Lista added.

A March legal opinion from the OSG states that, if PNOC will comply with the terms in the present lease contract, it will be in violation of provision of Republic Act 3019 (Anti-Graft Corrupt Practices Act) “since the lease price is way too low and is highly disadvantageous to the government”.

Petron has existing lease agreements with the PNOC for the sites of its $3-billion refinery in Bataan, 24 bulk plants and 67 gasoline stations. The contracts will expire in August next year.

There is a provision for renegotiation in the contract that, in case of failure of parties to come to an agreement, the same terms and conditions shall apply.

Section 2 of the lease agreements for service stations properties, as well as the lease agreement for the bulk pant properties between PNOC and Petron, provides that “in case the parties fail to come to an agreement, the same terms and conditions shall apply except the initial rental rate for the renewal period shall be the rental rate at the time of expiration, plus 2 percent thereof, and subsequent rental rate shall be escalating by 2 percent per annum.”

Meanwhile, Section 3 provides that “should the lessee decide to reduce the area of the leased premises due to business or operational reasons, the rentals shall be reduced correspondingly on a per square meter per location basis. The reduction of rental for each affected property shall be effective on the succeeding month, following the receipt by lessor of a written notice regarding the reduction of the leased properties”.

Lista said the state firm is also preparing for its next move.

Ang on Wednesday also said that Petron has yet to receive a reply or comment from PNOC after it accused the state firm of breach of contracts.

“We have not been apprised of the official position of PNOC on the matter other than Lista’s letter and news statements,” Ang added. “For now, we reiterate that he has caused PNOC to breach its agreements with Petron.”

Petron’s general counsel Joel Angelo Cruz wrote PNOC’s Lista and told the latter that the lease agreements for the three properties and the renewal clauses are valid and binding.

“They are not in violation of any law nor manifestly and grossly disadvantageous to the government,” Cruz said. “Accordingly, your letters—because they deny without legal causes Petron’s contractual right to renew—constitute fundamental breach of the three lease agreement.”

Petron was responding to Lista’s letter where he nudged the oil company to waive certain provisions of the lease agreements because they are inequitable, or submit remediation plans “so that the abandonment and clean up of the sites may already be discussed and completed” before the expiration of the lease agreements next year.

“As you very well know, the long-term lease by Petron of the subject properties and the properties denominated as Refinery Properties, which are the subject of a third lease agreement between Petron and PNOC, was the primary consideration for Petron’s conveyance of said properties at book value to PNOC,” Cruz told Lista in the same letter. “Hence, the consideration for Petron’s leasehold rights is not only the rental payments provided for in the lease agreements but the conveyance of the properties to PNOC.”