DOE to review oil firms' books

MANILA, Philippines - The Department of Energy (DOE) will meet next week the sector nominees of the independent review committee (IRC) to iron out the details of a review of oil firms’ books. The actual review is suppose to be undertaken starting February.

Energy Secretary Jose Rene D. Almendras will meet with the IRC to finalize the details of the terms of reference (TOR) for the review.

The TOR, drafted by the DOE in consultation with the sector, is being sent out to nominees for their comments/inputs so they may decide on whether to accept the nomination or not.

The IRC will be composed of an economist, accountant, and representatives from each of the following sectors: academe, business community, consumer group, and public transport.

The names that have been floated as members of the review committee are: Government Watch chairman Raul Concepcion, former National Economic and Development Authority (NEDA) director general Solita Monsod, former Budget Secretary Benjamin Diokno, University of the Philippines professor Rene Azurin, economist Victor Abola, accountant Tammy Lipana, and party-list representative Vigor Mendoza.

Almendras said that the sector nominees, who were chosen by their colleagues from the sectors that they represent, were selected based on their credibility, competence, integrity, commitment, and leadership.

By virtue of its powers under Republic Act (RA) 8479 or the Downstream Oil Industry Deregulation Act of 1998, the energy department organized an ad hoc IRC in line with its transparency efforts to provide the public information on the real scenario on local pump pricing and to determine if any of the oil companies have been accumulating excessive profits.

According to the energy department, the country’s three biggest oil firms, based on their audited financial reports, are: Petron Corp. with earnings of P7.92 billion; Pilipinas Shell Petroleum Corp., P6.02 billion; and, Chevron (formerly Caltex) Philippines Inc., P1.43 billion.

An independent study was earlier undertaken in 2008. It was co-authored by the Sycip, Gorres, & Velayo, and the University of Asia and the Pacific (UAP).

In its summary, the report said that the adjusted return on equity figures for Petron and Shell do not appear extraordinary when compared with benchmark market interest rates.

From the perspective of the stock market, the report said that if an oil company like Petron had been performing very well, one would expect its stock price to have appreciated significantly too. If Petron had been significantly more profitable than other companies listed on the stock exchange, its stock should have outperformed the stock market index.

“However, the performance of Petron’s stock price has not been outstanding. If an investor had been able to acquire a share of Petron at the IPO price of P9.00 in 1994 and held it until the close of 2007, he would have only earned an IRR of four percent for the period. This already accounts for the dividends earned in between,” it said, adding that the stock market investors perception (at that time) was that Petron did not seem to be “extraordinarily profitable.”