Independent oil players hold off expansion plans

Some independent oil players are holding off plans to expand their operation this year due to the continuing rise in global oil prices that causes an increase in working capital requirement, industry officials said over the weekend.

"We are holding back our expansion plan which was supposed to be carried out in the next three to five years," Independent Philippine Petroleum Companies Association (IPPCA) chairman Fernando Martinez, who is the president of Eastern Petroleum Corp., said.

Martinez said based on the plan, EPC is supposed to invest some P150 million in the near-term.

"It is very hard for us to expand our business. Most of the existing dealers are not so aggressive because of the high marginal costs. Prospective dealers are having second thoughts," he said.

The EPC official said they have no idea when they can revisit their expansion plans. "This will continue until such time that the situation becomes favorable or until the condition is better,"Martinez said.

Though he could not quantify yet the impact of the current rising global oil price scenario on the local front, Martinez said, "the overall effect (of the rising oil prices) is dampening the investment appetite particularly in downstream oil industry or the retail sector."

But Martinez said this scenario may be "good" for the upstream oil development sector. "This could serve as an incentive for oil developers since oil is expensive right now," he said.

For his part, Seaoil president Glen Yu said the company would finish its expansion program for the year but will have to review plans for 2005. The company has allocated some P100 million for expansion program for 2004.

"We have to complete the ongoing project since we are already in the middle of it but we have not made any commitment yet for next year," Yu said.

An official from Pryce Gases shared the same sentiment, saying that while the company had recently concluded a P50 million expansion program, it has no plans yet to expand further their network.

Since the passage of the oil deregulation law in 1998, the new oil players‚ share in the industry pie has grown to about 14 percent accounting to over P13 billion worth of investment in the downstream oil sector or representing about 650 retail stations.

Energy Secretary Vincent S. Perez, for one, had warned that the continuous climb of oil prices could hold back growth of the world economies.