Almendras to look into long-delayed Shell IPO

MANILA, Philippines - Energy Secretary Jose Rene Almendras said yesterday he would look into the long-delayed initial public offering (IPO) of oil refiner Pilipinas Shell Petroleum Corp.

He pointed out, though, that to be able to convince Shell to go public, “I have to study what are the other facts about it.”

“(At the moment) I have no intelligent answer to that,” he said, adding that he has yet to familiarize himself on this issue.

Over the past years, Shell has been deferring its IPO, noting that market conditions are not conducive yet for a public offer.

Sources said the government could be weighing the impact of allowing Shell to delay its IPO as against the impact of its refinery’s possible closure on local supply, prices and employment.

Like Chevron Philippines (formerly Caltex), Shell opted not to invest on an refinery upgrade to comply with the stricter specifications of the Clean Air Act (CAA). Instead, the two oil majors decided to just import finished products from the region unlike Petron Corp., the country’s largest refiner, which invested over $100 million for refineries to produce CAA-compliant fuels.

Under the Downstream Oil Industry Deregulation Act of 1998, oil refiners should offer at least 10 percent of their shares to the public three years after the law’s passage.

Shell country chairman Edgar Chua earlier told reporters they have “the usual answer” to the IPO question.

“We continue to review that option. Remember, the law requires an IPO if you are an oil company with refinery. And so we, of course, continue to review that. We continue to review the future of our refinery. At the moment, we still have not made a firm decision either way,” he said.

Chua said the company is facing issues that need to be addressed first before they could pursue their IPO option. But he added the company continues to explore its IPO plans whenever needed.

“Though we have been studying it for a long time, things continue to be changing,” he said.

But he reiterated that the deciding factors for Shell to push through with the IPO, such as the refinery expansion, have yet to be firmed up.

“We have not made a decision to close or to further invest into it (refinery). Like any facility, you are needed to invest every so often, as the product specifications change, among others. There are different options of investment,” he said.

In August 2008, former Energy Secretary Angelo T. Reyes had ordered Shell to at least submit an IPO plan which will signify its readiness to go public anytime the market warrants.

The former energy chief said the law was passed to liberalize and deregulate the downstream oil sector in order to ensure a truly competitive market under a regime of fair prices, adequate and continuous supply of environmentally-clean and high-quality petroleum products.

Reyes said while they recognize a Department of Justice (DOJ) opinion that the three-year period under the oil deregulation law is not mandatory but prescriptive, the DOJ should determine how Shell would implement such provision in the law.

The DOE is also uncertain if the DOJ opinion has clarified the issue of whether Shell will list as a refinery or as a company.