One of the largest fuel producers in the Philippines is shutting down its sole refinery as the coronavirus pandemic continued to take its toll on its operations.
In a disclosure to the Philippine Stock Exchange on Thursday, Pilipinas Shell Petroleum Corporation said it was permanently shutting down its refinery in Tabangao, Batangas as a result of plunging fuel prices and lower demand for oil amid over five months of lockdown in Luzon.
Instead, the company said it will convert the refinery into a world-class importation hub which will allow for the optimization of its asset portfolio and the enhancement of its cost and supply chain competitiveness.
“We have the technical capability and financial flexibility to manage and adapt to disruptive conditions,” Pilipinas Shell President and Chief Executive Officer Cesar Romero said.
“Due to the impact of the Covid-19 (coronavirus disease-2019) pandemic on the global, regional and local economies, and the oil supply-demand imbalance in the region, it is no longer economically viable for us to run the refinery,” he added.
Pilipinas Shell initially planned to temporarily close the refinery hub.
“The shift in supply chain strategy from manufacturing to full import is a move that will further strengthen the corporation’s financial resilience amidst the significant changes and challenges in the global refining industry and the change to the new normal brought about by the Covid-19 pandemic,” the firm said.
“It also prepares the corporation for a future that will rely on more and cleaner energy solutions,” it added.
Despite the challenges, Pilipinas Shell’s net loss during the second quarter of the year narrowed by 78 percent to P1.2 billion from P5.5 billion reported in the first quarter of the year.
Sales volumes also recovered in May and June as more business activities were allowed when the Philippine government put Metro Manila under a more relaxed quarantine restriction.
However, the listed company said it will remain “cautious” as the Philippines amid the growing number of Covid-19 infections in the country.
Shares of Pilipinas Shell on Thursday dropped by 4.11 percent or 72 centavos to P16.78 from the P17.50 close the day prior.