Petron: Fuel disaster or fuel success?

The disaster that recently happened in Guimaras, leading to the worst oil spill in the country’s history, is unforgivable in terms of its resulting environmental damage.

The spill has desecrated a quiet province known for its sweet export mangoes and white sand beaches, lovely corals and reefs and a cacophony of sea and mangrove creatures that enabled Guimaras to attract more tourists and pull itself out of the list of the country’s 20 poorest provinces.

The spill has so far polluted 220 kilometers of coastline, destroyed 454 hectares of mangroves and 58 hectares of seaweed farms in Guimaras, and killed the hopes of 40,000 people relying on the island’s marine reserves for their livelihood. The sludge will also likely wipe out the island’s estimated P400-million fishing industry.

The tragedy has transformed Guimaras overnight into an island of despair. Meanwhile, the pollution of the sea and shores of Guimaras and neighboring Panay Island’s marine biodiversity continues. Latest word from the Coast Guard is that sludge has already been sighted off the beaches of Iloilo.

Selection process flaw or greed for profit?

As the country galvanizes its resources to clean up the black sticky mess, the big question is not so much as who will foot the bill, but rather how this tragic situation came about? Repairing the damage to the environment is a must, and definitely huge costs will be incurred whoever the parties will eventually pay. What is more important now is how this tragedy can be prevented from occurring again.

Bad weather and rough sea are common occurrences in Philippine waters and are commonly cited excuses for many of the sea tragedies that had caused the loss of lives and properties. What about the sea-worthiness of vessels and standards of ship operations? Looking back, many of the ships involved in local sea disasters were questionable in terms of complying with international maritime standards covering vessel condition and maintenance, as well as shipping operations and management.

With the Guimaras tragedy, many questions are begging answers: What was the basis of Petron’s decision to charter M/T Solar I, an 18-year old single hulled vessel, with Sunshine Maritime Development Corp. as registered owner? Are vessel owners and operators meeting the international standards of ship management and operations? Was the Petron selection process objective enough to consider the sensitivity of the products handled (bunker fuel), or was the criteria heavily biased towards low cost and therefore better margin? Was it greed for profit?

Some distrubing information about M/T Solar I

The registered owner of this vessel is Sunshine Maritime Development Corp. located at 1973 A. Mabini St., Malate, Manila. But according to reports, the real owners are from the Hinase/Okayama Japanese group represented by Mr. Hiro Yamaguchi, who incidentally is nowhere to be found. Only Mr. Clemente Cancio (reportedly, a non-shipping man with no experience in shipping management) has been located. Talks in the shipping circle are that none among the company’s top management are experienced in ship management and operations.

There are also talks that the hull and machinery insurance coverage of the vessel (taken from Stronghold Insurance, a company reportedly in the bottom half of acceptable marine insurance companies) is not valid since the premiums have not been paid. If true, this puts to more doubt the management and financial capability of the shipping company.

According to MARINA records, the P&I (protection and indemnity) coverage submitted by the ship owner is an oil pollution cover only amounting to $3.6 million. Apart from the limited amount of oil spill clean-up cost recoverable, the insurance does not cover other claims and damages such as wreck removal, damages to marine resources, etc. Although, the owners claim they have complete P&I coverage, it seems MARINA thinks otherwise. Again, if this limited insurance coverage is true, Petron’s choice of shipping company becomes more questionable.

Petron’s culpability

Guimaras Governor Joaquin Nava is understandably frustrated by a seeming lack of commitment and full acknowledgement of liability from Petron despite the daily colorful ads being published by Petron. Media statement from company officials give the impression that Petron is invoking a "not me" stance largely and loosely based on the 1969 Convention on Civil Liability for Oil Pollution Damage that makes ship owners liable to oil spills that are not more than $80 million.

An oil company like Petron cannot totally absolve itself from culpability. In the first place, it is not only their moral obligation, but legally, too, to charter only sea-worthy vessels that can safely transport oil products throughout the archipelago. But of course, Petron may have chosen to charter vessels with cheaper rates so it can further fatten its bottom line.

Black oil or bunker oil is highly pollutant as vividly shown by the pictures of the mess it has caused at Guimaras. The handling of this sensitive product requires that the choice of vessel and ship operators must be subject to very close scrutiny of the type and condition of the vessel and very important, the qualification and expertise of the crew and all those involved in shipping operations.

Of course, the operators who strictly and religiously comply with international maritime rules may cost a bit higher, but here is where judicious management will apply. The PNOC Shipping Transport Corp. (PSTC), a wholly owned subsidiary of PNOC, a stockholder of Petron, should be able to assist Petron in determining whether the well-managed and fully-equipped shipping companies are quoting rates that are way out of line.

Profitability not at expense of others

During the first half of 2006, Petron reported a net income that was up by 16 percent to P2.68 billion while revenue jumped 25 percent to P108.45 billion. Petron president Khalid al-Faddagh was reported to have said that his company’s net profit will reach P10 billion in 2010. And Petron stockholders received this bit of news with glee.

Yes, it is all right for management and shareholders of Petron to protect their incomes. But does this come at the expense of endangering our environment by the use of old, single hulled, even precariously insured vessels?

But what about the Guimaras folks, and all other coastal folks that are and will be affected by the oil spill? Is the P200 per day being paid to those fighting their way out of all the oil slick and glob that killed their only source of livelihood enough?

If Petron is not careful, the advertising tagline, "Petron Fuel Success" may soon mean in the public’s mind as "Petron Fuel Disaster."

Oil industry culpability

A closer look at the transport capability of the oil industry, particularly the water-transport side, would show that this vital industry is sitting on an environment time bomb that could at any time cause a disaster similar or worse than the Guimaras oil spill.

For instance, according to reports, Pilipinas Shell is still using a 25-year old single-hull vessel (named Harvest Moon) to carry black oil (bunker oil) all over the islands. Is Pilipinas Shell waiting for its own Guimaras?

Apparently, the oil companies, particularly the majors, have been dragging their feet in implementing the use of "double-hull/double-bottom" vessels for domestic transport of oil products. The use of these types of vessels to ship sensitive products like oil has been adopted internationally several years ago.

While the oil majors were quick to implement the above standards in other countries, they have been holding back its implementation here in the Philippines. Is this a case of "double standards," a lower one for the Philippine market? Aramco, the major stockholder of Petron, and Royal Dutch Shell, the principal stockholder of Pilipinas Shell (my alma mater) should have some serious talks with the local management of their local affiliates.

Hold’em challenge at Angeles City

Philippine Poker Tour (PPT) announced that the next qualifying leg for the Million-Peso Hold’em Philippine Championship will be held at Casino Filipino Angeles City on Saturday, 2nd September 2006. Winners of this satellite tournament will be awarded guaranteed seats to the Grand Finals to be held on 16th and 17th December at Casino Filipino Pavilion Manila.

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Those interested to know more about the Angeles Hold’em Challenge and details on how to join satellite tournaments may visit the PPT official website www.PhilippinePokerTour.com <http://www.philippinepokertour.com/> or call the Secretariat (c/o Cindy) at 817-9092 or 812-0153.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected] or at [email protected]. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.