Oil Deregulation: Success or Failure?

[jpdm]

The main objective why the oil deregulation law of 1998 was implemented by the Ramos administration was that there is a need to open the then highly-regulated oil industry in the Philippines especially the downstream oil industry.

Only three players Pilipinas Shell, Petron and Caltex (now Chevron) control the market then. Pinoy consumers have no other choice outside the three players. With the implemetation of the law, new foreign and local players came in i.e. PTT (Thailand), Total (France), and the locals i.e. Seaoil, Eastern Petroleum, Pryce Gas, Unioil, Jetti just to name a few....

This gave more Pinoy consumers more choices....

But after a decade, although the market share of the three major players was reduced, they still dominate the market and the market of the new entrants remain small...

There is also an allegation that oil companies (big and small) in the country are colluding in terms of pricing their products...

With these in mind, is deregulation a success or a failure?

[jpdm]

Business Mirror
August 12, 2008
by Wilfredo Rodolfo III

Phoenix Petroleum to Continue Expansion to Luzon this Year



DAVAO-based independent oil player Phoenix Petroleum Philippines Inc. continues its expansion by opening six more stations in July, bringing to 68 the number of stations of the independent oil company in just three years.


“This is just the start of many expansions,” Phoenix president and chief executive Dennis Uy told the BusinessMirror.“We continue to invest despite the challenges in the industry because we are confident of the prospects.”


The additional six stations opened in Davao City, Shariff Kabunsuan, Cotabato and Sultan Kudarat in Mindanao.By the end of the year, Phoenix would have expanded to the north and opened its first retail stations in Metro Manila, Northern Luzon and Cebu. Phoenix targets a total of 100 stations by year-end.


Phoenix already established retail-service stations operating in major parts of Mindanao, such as Davao City, Davao del Norte, Davao del Sur, Compostela Valley, Surigao, Bukidnon, North Cotabato, South Cotabato, Agusan del Sur and Sultan Kudarat.


[SIZE=3]The Davao-based Phoenix currently has a market share of 23 percent in the Davao region and 9 percent in Mindanao in terms of number of retail stations.[/SIZE]
[SIZE=3]To support the expansion, Phoenix will be constructing and expanding terminals and depots in strategically located sites. Its Dumaguit, Aklan, depot was inaugurated in March.[/SIZE]
[SIZE=3]
[/SIZE]
Phoenix posted a net income of P122 million in 2007, a robust growth of 65 percent compared with 2006. Revenues, likewise, grew by 59 percent to P2.377 billion in 2007, compared with the 2006 revenue of P1.494 billion.


The growth was fueled by substantial increase in sales of petroleum products and revenue in storage, logistics and into-plane services.


[SIZE=3]Phoenix Petroleum Philippines Inc. went public on July 11, 2007, the first petroleum company to list on the Philippine Stock Exchange after the passage of the 1998 Downstream Oil Industry Deregulation Act.[/SIZE]


The company is engaged in the business of trading refined petroleum products, lubricants, chemicals and an array of car-care products and accessories.
It also provides services such as depot operation, depot storage, logistics, into-plane and allied services.

Is this a sign that deregulation work?

[jpdm]

Philippine Star
Shell on the carpet
BIZLINKS By Rey Gamboa
Monday, August 11, 2008

Finally, someone from the legislative body noticed the continued defiance of Pilipinas Shell of a promulgated law of the country. In a strongly worded statement, Catanduanes Rep. Joseph Santiago put to task [SIZE=3]Shell as it continued to defy the provision in the Downstream Oil Industry Deregulation Law that calls for the Dutch oil firm to sell at least 10 percent of its equity to the investing market by listing in the local bourse.[/SIZE]


According to Catanduanes Rep. Joseph Santiago, “Shell has been openly defying the law. The company has refused to conduct an initial public offering of at least 10 percent of its shares. The firm has refused to list its shares in the local (stock) exchange despite the definite mandate of the law.”


In fact, Santiago is urging the [SIZE=3]Department of Justice to take Shell to court for violating Section 22 of Republic Act 8479, or the oil deregulation law, for not having made more decisive steps towards listing in the Philippine Stock Exchange.[/SIZE]


For starters, ever since the law took effect, the oil firm has not paid a single centavo as penalty for dodging this provision in the law. At a rate of P50,000 per day, the fine for more than seven and a half years of non-compliance already translates to a hefty P137 million.


The oil deregulation law was passed in 1998 and required that after three years from its passage, or from Feb. 1, 2001, all refiners should have made a public offer. Petron Corp., with a refinery in Limay in Bataan, had gone public years before the law was passed, and is thus in compliance.
Caltex (Philippines) Inc., now Chevron Philippines Inc., decided to shut down its Batangas refinery in 2003, two years after the effectivity of the law and likewise freed itself from that requirement of the law.

Giving Shell kid-glove treatment

It seems that on Oct. 25, 2002, the Department of Energy (DOE) issued Circular 2002-10-006, imposing the P50,000 per day fine on Shell but later suspended enforcement of its own circular and granted Shell a temporary reprieve from complying with Section 22.


Shell sought and received the approval for the deferral of the IPO requirement “in view of the prevailing market conditions, subject to quarterly review depending on the developments in the market and economy,” according to the DOE.


Rep. Santiago, however, said the DOE “had no right to allow Shell to delay its IPO, and totally disregard the mandate of the law.” In fact, he said the DOE “is supposed to demand rigorous compliance with the law.”


[SIZE=3]“The DOE should stop giving Shell the kid-glove treatment,” Santiago said.[/SIZE]
[SIZE=3]He added: “What market and economic conditions are they [Shell and the DOE] waiting for? Since the passage of RA 8479, we’ve seen oil prices climb from just $11 per barrel in 1999 to almost $150 per barrel.”[/SIZE]


Shell shares privately held At present, Shell shares are not available in the public stock exchange and remain privately held by an exclusive group of shareholders. Securities and Exchange Commission records show that Shell is 67 percent owned and controlled by Royal Dutch Shell plc based in Britain.


The remaining 33 percent of Shell is held by a select group of foreign and Filipino shareholders that include the International Finance Corp., The Insular Life Assurance Co. Ltd., LBC Properties Inc., Rizal Commercial Banking Corp., Pan Malayan Management and Investment Corp., Ayala Life Assurance Inc., BPI/MS Insurance Corp. and Aboitiz & Co. Inc.

Is this an indicator of the failure of the deregulation law?

[jpdm]

Manila Times
August 12, 2008

Eastern Petroleum sees
Revenue lift from costly oil


EASTERN Petroleum Corp. expects revenues for the year to surge in light of higher sales from its petroleum and alternative fuels businesses. Fernando Martinez, Eastern Petroleum chairman, said the company’s revenues are projected to hit the P2-billion mark this year, or 43 percent higher than last year.


[SIZE=3]He attributed the rosy sales projection to the high cost of crude that has driven a number of small petroleum suppliers to close shop, causing independent oil firms such as Eastern Petroleum to increase their market share.[/SIZE]


For the first half of the year alone, Eastern Petroleum’s revenues already reached P1.05 billion after its gasoline, diesel and liquefied petroleum gas sales jumped 63 percent, 67 percent and 1,000 percent, respectively.
Besides high crude costs, Martinez said the company’s alternative fuels business, through its unit Eastern Renewables, is expected to contribute to the group’s target revenues for the year.


“We expect our whole year to hit [the] P2-billion mark when combined with the revenues from Eastern Renewables,” he said.
The company earlier inked a $350-million five-year deal with China’s Guanxi State Farm Bureau for the development of cassava plantations in a number of areas in the Philippines, including Zambales province in Luzon and in General Santos City and Saranggani province in Mindanao.


Martinez said the company already amassed 2,000 hectares of plantations in the said areas.


Eastern Petroleum plans to jack this up further to 10,000 hectares by 2010 in anticipation of the increase in demand for ethanol, which is used as a fuel additive or substitute, both locally and abroad.


Cassava produced from the plantations will be used as a feedstock for a number of planned ethanol plants Eastern Petroleum will put up within the next five years.
Its first plant is expected to come online by late next year.
-- Euan Paulo C. Añonuevo

A sign that deregulation works?

[CVT]

From a simple consumer's point of view, I'd say that that oil deregulation law was a failure, because of the Big3 who still are in control of the market.....

6610:secret:

[niky]

The "kid glove" treatment of Shell isn't a failure of the law. Just a failure of implementation.

I think the Oil Deregulation Law has been a success. Before, people were going on and on about the taxes they were paying to support the OPSF... and we literally had to beg the government to lower prices whenever crude prices dropped.

Look at what's happening now:

In spite of underrecovery... oil companies themselves held gas prices low and raised pump prices little by little over the past few months instead of dumping it all on the people. It hurt, but the effect was similar to what was happening under the OPSF... where prices would stay low until the fund ran low and they had to gradually raise the price to whatever was market-level. Once prices hit market-level, transport groups and militant groups would be throwing rocks at oil company offices... just as they do now.

After crude prices dropped, some players started dropping... others waited, then dropped prices. Under the OPSF... prices would stay stable until the OPSF had regenerated. Labor groups and transport groups would be throwing rocks at oil company offices. Nowadays, oil companies can lower right away... no more rocks.

[uls]

oil dereg works

just look at the recent rollbacks

napa-aga ang rollback

someone started it (Unioil yata) and the others followed

that's market forces at work

--------

as for why after years of dereg, the big 3 still dominate the market and the small players remain small ---

CAPITAL.

Who has more capital?

Mega multinational companies or small local companies?

it's easier to expand when u have easy access to a lot of capital.

Small players have a harder time accessing capital... kaya mas mabagal expansion nila.

that's business.

[nicolodeon]

oh boy...here we go again...

[jpdm]

oh boy...here we go again...

May I know why sir?

[nicolodeon]

May I know why sir?

Why? Simple: this thread has a huge tendency to go around in circles just like your boycott thread and just like all the other oil-related threads here, this thread is turning out to be an extension of news feeds that a lot of people have access to - and probably read.

I'll let this thread slide for now. Watching this thread carefully.

[Monseratto]

oh boy...here we go again...

:pepsi: :popcorn:

[creepy]

IBON!! IBON!! IBON!!

(... I'm waiting for someone to quote this highly-respected (haha) outfit...)

[HyBrideVo]