Slack in demand forces Petron to reduce capex

Petron Corp., the country’s largest oil refinery, is likely to trim its P830-million budget for capital expenditures this year following the expected slowdown in oil demand.

"It (capex) could go lower depending on the demand," Petron president and chief executive officer Motassim Al-Ma’ashouq told reporters over the weekend. He did not say how much the cut would be.

Al-Ma’ashouq said they implemented the same strategy last year when they deferred some capital expenses due to poor financial performance.

The company incurred a net loss of P1.1 billion in 2000, a complete turnaround from the P2.4-billion net income in 1999. The company blamed the peso depreciation and volatility of crude oil prices in the world market for its losses last year.

At the same time, Al-Ma’ashouq said they would implement a conventional phase investment program for the planned upgrading of the company’s oil refinery in Limay, Bataan.

For instance, he said they would be pushing for their $1.2-billion petrocoke project in gradual manner to ensure that their investment in this project would translate to reasonable returns.

The petrocoke or fuel conversion project involves the modification of low priced black residue products in the refinery to high-value light products through the use of hydrocracking and delayed coking process.

He said they would also take into consideration the impact of the natural gas production by the Malampaya project by October this year on their capital investment program. According to the official, they expect the Malampaya project to bring down further the oil demand. – Donnabelle Gatdula