DOE says Caltex, Shell not yet off the hook in mandatory IPO issue

The Department of Energy (DOE) is still keen on compelling oil firms Pilipinas Shell Petroleum Corp. and Caltex Philippines Inc. to offer their shares to the public through the initial public offering (IPO) route.

"We are not neglecting our obligation to implement the law. We are just waiting for the Department of Justice’s opinion," Energy Secretary Vincent S. Perez said.

Perez said both Shell and Caltex will still have to undertake their respective IPOs, even as the latter has decided to close its oil refinery.

"We believe Caltex will still have to undergo an IPO through Calserv, its marketing arm. We are still studying this," he said. Calserv is engaged in direct retailing market through eight retail stations and convenience stores under the Caltex and Star Mart brands, respectively.

Under Republic Act 8479 or the Oil Deregulation Law, "any person or entity engaged in oil refinery business shall make a public offering through the stock exchange of at least 10 percent of its common stock within the period of three years from the effectivity of the Act or the commencement of its refinery operations." The oil refiners should have carried out their respective IPOs way back in February 2001.

The DOE has been seeking the DOJ’s opinion whether the government can now enforce the provision of RA 8479. Caltex and Shell have been using a previously issued DOJ opinion as a shield to skirt the IPO provision of the Oil Deregulation Law.

The DOJ opinion said "based on the prevailing economic conditions, it is expected that an IPO at this time may well fall short of the norms of a successful offering both in terms of pricing and distribution if undertaken within the period."

"There is no sanction provided in the law for non-compliance with the IPO requirement within the prescribed period," the DOJ said, noting that the intention of the law is "to broaden the base of ownership" of oil companies, and this intention or purpose of the law will definitely be served by construing the three-year period liberally.

But in October 2002, the DOE issued a circular mandating the imposition of a hefty P50,000 penalty for each day of delay from the date determined by the Secretary of Energy for the holding of said IPO.

Petron Corp., the country’s largest oil refiner, is the only oil firm listed in the local bourse. Even before RA 8479 was passed in 1998, Petron, used to be wholly-owned by the National Government through the Philippine National Oil Co. (PNOC), had sold at least 20 percent of its stake to the public in 1994. Shell, a member of the Royal Dutch/Shell Group of Companies, is currently operating in more than 135 countries around the world. Over the years, Shell has established in the Philippines a group of companies engaged in different businesses namely, exploration and production (Shell Philippines Exploration B.V.),oil products (Shell Gas Eastern Inc.), chemicals (Shell Chemical Philippines Inc.) and renewables (Shell Renewables Philippines Corp.).

Caltex, on the other hand, is a subsidiary of Chevron Texaco Corp. formed in October 2001. Just like its operation in the Philippines, Chevron Texaco is the third largest global energy company in total oil reserves.