PNOC-EC to defer diesel importation for now

Published December 2, 2018, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2018/12/02/pnoc-ec-to-defer-diesel-importation-for-now/

With oil prices on a precipitous slide in the world market, the board of directors has instructed state-run Philippine National Oil Company-Exploration Corp. (PNOC-EC) to temporarily defer the planned importation of P2 billion worth of diesel products.

But according to Energy Secretary and PNOC-EC Board Chairman Alfonso G. Cusi that does not mean that the importation had already been shelved totally, instead, the deferment will allow the government-owned firm to further study its oil sourcing plan.

“I told the Board, you can defer the importation, but while at that, you should continue to evaluate the mechanics and policies relating to oil importation so it becomes a viable proposition for the country and consumers when we finally need to do it,” he said.

Cusi qualified that the instruction to PNOC-EC “is not to pursue the importation this time, because it appears that there’s a lot of companies unloading their oil imports… and price competition had gone too intense in the past weeks, and that is good for the consumers.”

The energy chief surmised that some oil companies may even be on a panic mode of unloading their inventories, “because our sense is, they might have procured at higher prices, so they will unload now to cut their losses.”

Cusi indicated that based on their monitoring of supply and demand balance in global markets, the clear trajectory is for prices to continually go down.

Relative to diesel importation that may still be enforced eventually, Cusi noted that instead of just looking at the usual template of trading, the government’s plan is to transform that into having a “strategic reserve” that could then advance the energy security goals of the country.

“In terms of energy security, we need to have a strategic reserve. But how do we do that? That’s the one we need to study further,” he stressed.

Cusi said one country experience they are now closely looking at is that of Japan, especially the policies and the design that had been pursued for them to come up with their oil stockpile or strategic reserve. It has to be culled that under Japan’s petroleum stockpiling law, its oil strategic reserve has to be pegged at 90 days – consistent with the level prescribed by the International Energy Agency.

Withdrawal from the stockpile is also strictly enforced – only on extreme emergency situations and when global oil prices would hit record-high levels.

Japan similarly shared constantly to other global energy players that it has not been an easy decision to establish a stockpile – because design phase and construction of the facility alone stretched over five years.

At the same time, the country needed to mandate additional taxes to their consumers so they could continually inject funds for the stockpile’s sustained operations.