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August 13, 2020

Pilipinas Shell to Shutdown Tabangao Oil Refinery

Pilipinas Shell is shutting down its refinery operations in Tabangao after 58 years of continuous operation.

With the price of fuel products lower than or almost equal to the cost of refining crude oil, Pilipinas Shell has made the decision to covert the refinery facility into a world-class full import terminal.

“We have the technical capability and financial flexibility to manage and adapt to disruptive conditions. Due to the impact of the COVID-19 pandemic on the global, regional, and local economies, and the oil supply-demand imbalance in the region, it is no longer economically viable for us to run the refinery,” says Shell President and CEO Cesar Romero.

It was a tough decision for Pilipinas Shell to suspend refinery operations last May 24. Throughout this period, Pilipinas Shell’s supply of quality fuels remained uninterrupted.

“Pilipinas Shell has been consistently supplying quality fuels to its customers and the motoring public,” Romero says. The company’s access to the Shell global trading network ensures a continuous and reliable source of quality fuel products.

The Tabangao facility will continue to cater to the fuel needs of Luzon and Northern Visayas, while the North Mindanao Import Facility (NMIF) in Cagayan de Oro will serve the growing energy needs in the balance of the Visayas islands and the whole Mindanao region.

The fuel company says that the shift in supply chain strategy from manufacturing to full import terminal will further strengthen Pilipinas Shell’s financial resilience amidst the significant changes and challenges in the global refining industry and the change to the new normal brought about by the COVID-19 pandemic. It also prepares the company for a future that will rely on more and cleaner energy solutions.

Despite the announcement, Pilipinas Shell says they are in fighting form as it goes deeper into the second half of the year, narrowing its quarter-on-quarter net loss from P 5.5 billion in the first quarter to P 1.2 billion in the second quarter, as crude oil and product prices slightly improved and stabilized during the second quarter. Net loss booked as of end of June totaled P 6.7 billion.

According to the Department of Energy, demand for petroleum products declined by 20 to 30 percent in March, and by as much as 60 to 70 percent in April during the imposition of the enhanced community quarantine, compared to February 2020 levels.

For Pilipinas Shell, the non-fuels retailing business contributed 13 percent in gross margin, aided by partnerships forged with delivery companies to help transport non-fuels retail products to selected parts of the country. In the first half, five new Shell Select shops, 11 Shell Helix Oil Change (SHOC)+ and 14 co-locators were opened. Shell retail stations now total 1,129 nationwide.

Aviation fuels registered 43 percent decrease in volume in the first half of 2020 compared to the same period last year. Bitumen local volume decreased by 62 percent compared to previous year’s figures.

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