Petron can sell gas to PNOC at discount

By Lenie Lectura - October 19, 2018

https://businessmirror.com.ph/petron-can-sell-gas-to-pnoc-at-discount/

PETRON Corp., the country’s largest oil company, said on Thursday that it could extend to the Philippine National Oil Company-Exploration Corp. (PNOC-EC) as much as P17 discount per liter in diesel or gasoline prices instead of importing the finished products from Singapore.

As such, Petron President Ramon S. Ang strongly encourages the government to purchase from them instead of importing from Singapore an initial 50,000 metric tons (MT) worth P1.3 billion.

PNOC President Pedro Aquino said the Philippines received an offer of “above $500 per metric ton,” lower than the current price of “around $725 per metric ton.” If the sale happened now, Aquino said the other day that motorists could buy diesel that is cheaper by as much as P5 per liter than the current pump price. This is more than three times higher the discount that Petron can extend to PNOC-EC. Based on current retail prices, diesel is sold anywhere between P48 and P50 per liter.

When sought for comment, Ang provided four reasons PNOC-EC should reconsider its plan to import from Singapore.

First, Petron is already exporting gasoline and diesel. Ang said this is what makes Petron prices “very competitive.” Should government buy from Petron, Ang said PNOC-EC would no longer have to pay for freight cost.

Second, PNOC-EC would no longer have to pay for excise tax and value-added service tax.

Third, Ang said Petron’s petroleum products are already Euro 5 and 6  compliant. PNOC-EC’s specification for the fuel is a sulfur content of 50 parts per million, or the standard for Euro 4.

Fourth, PNOC would not have to worry about logistics.

“Definitely, our price is very competitive. Why do they have to import? That’s dollar outflow. Petron is already exporting gasoline and diesel. If their reason is that they won’t pay excise tax and vat [value-added tax], then why not buy from us? We can say we sold it to PNOC, and they will get a certification from BIR [Bureau of Internal Revenue], then there won’t be VAT and excise tax anymore,” said Ang on the sidelines of the 44th Philippine Business Conference and Expositions.

Minus the freight cost, impact of currency fluctuation and world price movements, Ang said Petron could extend a P5 discount per liter.

On top of this, an P11 to P12 discount per liter can still be added with the exemption of the imposition of excise tax and VAT.

In all, Petron could be able to provide very cheap diesel, P12 less than the current prices.

This is much bigger than the P5 discount per liter if PNOC-EC buys diesel from Singaporean oil traders who earlier made offers.

When sought for comment, Aquino said late Thursday that the PNOC-EC will study Petron’s offer.

“Yes, it is worth considering,” he said in a text message reply.

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.