Pilipinas Shell Petroleum Corp said on Thursday it will permanently shut down operations at its Tabangao refinery, blaming a slump in margins for what appears to be one of the first casualties of the pandemic among refiners in Asia.
The 110,000-barrel-per-day (bpd) Tabangao facility in Batangas province, which began commercial operations in 1962, is one of two refineries in the Philippines, both of which have stopped operations as the coronavirus lockdowns pummelled oil demand.
“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,” said Pilipinas Shell President and Chief Executive Officer Cesar Romero in a statement.
The other local refinery, Petron Corp.’s 180,000-bpd facility in Bataan province, has been on a scheduled turnaround since May for maintenance, and to mitigate the impact of poor refining margins on the company’s bottomline.
Pilipinas Shell, a unit of Anglo-Dutch giant Royal Dutch Shell, said in a statement that prices of fuel products have dropped to below or just almost equal to the cost of refining crude oil.
Shares of Pilipinas Shell slumped as much as 5.7% to 16.50 pesos, the lowest since May 26.
The company said Tabangao would be transformed into a world-class import terminal to “optimize its asset portfolio and enhance its cost and supply chain competitiveness.” It did not provide details about capacity and cost, or give a timetable.
“It also prepares the corporation for a future that will rely on more and cleaner energy solutions,” Pilipinas Shell told Manila’s stock exchange.
The company booked a net loss of 1.2 billion pesos ($24.55 million) in the second quarter, narrower than the January-March net loss of 5.5 billion pesos.
Despite seeing a recovery in volumes and earnings in the months of May and June, it remains cautious given the spike in COVID-19 cases in the Philippines and a subsequent decision to put the capital and surrounding provinces back under a strict lockdown. — Reuters