Petron considers shutdown of its Bataan refinery

There is a possibility that Petron may shutdown its Bataan refinery. This may however proceed if the president and CEO of the largest oil refiner in the country, Mr. Ramon Ang, won’t succeed with his supposed talks with the government. This mainly concerns its tax troubles with the government. Proceeding with this plan would let Petron follow in the footsteps of Caltex Philippines, which closed its Batangas refinery in 2003, and Pilipinas Shell just last month.

Related: Shell closes Tabangao refinery and will soon transition into an import terminal

Under the Tax Reform for Acceleration and Inclusion or TRAIN law, there was a tax application P2.50 per liter for diesel back in 2018. By 2019, the tax imposed rises to P4.50 per liter in 2019, and P6 per liter in 2020. As for unleaded gasoline, there was a P7 per liter tax imposed last 2018. Fast forward to 2019 and the tax saw by about P9 per liter and was later on turned into P10 per liter in 2020.

As based on the current tax regime, it is perhaps more viable or practical for oil refining companies to just import refined petroleum products, given that importers only have to pay tax once, which is done by the time their products exit their terminals. Although, refiners are still given excise taxes to pay upon the arrival of the crude, raw materials, and on the finished product.

We are in talks with the government, the Bureau of Customs, the Bureau of Internal Revenue, etc. We are paying taxes upon arrival of crude and we are paying so many taxes upon arrival. We are in discussion with Customs and BIR to give us a level playing field. Importers pay taxes when the products exit their compounds. In our case, we pay taxes on raw materials, crude oil, chemicals and advanced tax etc upon arrival.

Ramon Ang
President and CEO, Petron Corporation

Petron’s refinery in Limay, Bataan is the biggest and pioneering refinery in the Philippines. Given that it supplies 40% of the country's fuel requirements. In 1961, the refinery started at just a capacity of 25,000 barrels per day, Petron is now proudly at 180,000 barrels per day.

Sadly, due to the ongoing pandemic, Petron is also facing a difficult business environment. In fact, the oil company consolidated net loss of P14.2 billion in the first six months of the year, which is quite a heavy chapter in comparison to last year's P2.6 billion net income it booked during the same period. Hopefully, Petron will get by these stormy encounters once the pandemic slowly subsides and once those tax issues are properly discussed with the government.