Solon presses creation of National Oil Exchange

Rep. Enrique "Tet" Garcia said yesterday he would ask President Arroyo to certify as urgent the bill creating the controversial National Oil Exchange (NOEC).

"I’m writing the President because I remember that she mentioned that the creation of an oil exchange is one of her major (economic) programs," Garcia said during a forum on oil pricing sponsored by the Asian Institute of Management (AIM).

Garcia expressed hopes the Chief Executive would favorably respond to the revised and simplified OilEx bill version which will prohibit monopoly by allowing the government to take an active part in bidding out the supply need of oil companies.

"The new version will do away with the problem of transparency and monopoly," he said, noting that the consuming public will be able to know how much the oil companies will price their products based on the results of the bidding conducted by NOEC.

He said he had removed all the provisions of the bill that received criticism from the industry such as the Subic Storage Facility. "It will basically deal on government policy to do procurement through bidding," he said.

Garcia clarified that there would be no price control once the NOEC is put in place since "this law is actually an ideal example of deregulation because it would attract new players into the oil industry and promote honest-to-goodness competition."

Under the proposed bill, the NOEC will bid out on a monthly basis to more than 40 local and foreign oil traders and refineries the country’s total requirements of gasoline, diesel, kerosene, liquefied petroleum gas (LPG) and other refined oil products.

Garcia said a NOEC board, composed of representatives from the government, oil players, transportation, and other concerned groups, will be created to oversee the bidding.

Oil companies, however, are still opposing the creation of an oil exchange even though the bill has been simplified.

"We basically opposed the creation of another layer in the supply chain. It will not reduce prices of oil products and will not lower crude importation of prices. It will just create new cost," Reynaldo Gamboa, Pilipinas Shell Petroleum Corp. communications manager said.

Gamboa said the NOEC would only bring back the government to the business of oil which will run counter to the spirit of deregulation.

He said this will send a wrong signal to international investors that the government is "flip flopping on its decision to deregulate the oil industry."

"I hope the new Congress will not consider this (NOEC), especially now that we haven’t realized the full benefit of the deregulation law," Gamboa said.

The Shell official said they would oppose the bill through public hearing and, if necessary, submit their position to President Arroyo.

Caltex Philippines Inc.’s Marian Cathedral said that while they welcome such congressional initiative they would still oppose the proposal NOEC law.

"We are opposed because of the following reasons: it will not lower prices; it constitutes government monopoly; it will impact on the product’s quality and insurance cost; it will affect foreign investment and will run counter to the liberalization act," Cathedral said.

Petron spokesperson Virginia Ruivivar, on the other hand, said the NOEC would discourage oil refiners.

Ruivivar’s sentiment was echoed by Fernando Martinez, Eastern Petroleum Corp. chairman and chief executive officer, and New Petroleum Players Association of the Philippines president.

Martinez said the creation of NOEC will threaten the security of supply as oil refiners will not be assured that their refined products would be sold in the proposed bidding scheme under the law.

"The oil refiners here will not survive. The simple act of bidding is a monopoly. The fact that they want the oil requirement to be coursed through the government is an act of monopoly," he said.