Pilipinas Shell, a subsidiary of Royal Dutch Shell, said that it will permanently shut down its Tabangao Refinery in Batangas City, Philippines, and convert it to a full import terminal.
The company said that the decision will help it streamline its asset portfolio and boost its cost and supply chain competitiveness. Furthermore, the move is expected to bolster the financial resilience of Pilipinas Shell amid the significant changes and difficulties in the global refining sector caused by the Covid-19 crisis.
Tabangao Refinery began operations in 1962
The Tabangao Refinery, which started operations in 1962, had ceased operations since late May 2020 to help protect Pilipinas Shell from further deterioration of refining margins, and enable its cash saving efforts.
Pilipinas Shell president and CEO Cesar Romero said: “We have the technical capability and financial flexibility to manage and adapt to disruptive conditions. The regional refining margins which have been weak for some time due to the oil supply/demand imbalance in the region, have worsened due to demand destruction from the covid crisis.
“As such, it is no longer economically viable for us to run the refinery. It is with a heavy heart that we announce the cessation of oil refining activities in Tabangao.”
According to Pilipinas Shell, the demand for fuel products has not returned to normalcy, with several businesses still suspended or operating below capacity, while travel remains restricted because of the varying levels of quarantine curbs across the world.
The Shell subsidiary said that a drop in demand can be expected once again as Metro Manila and other major cities and provinces revert to modified enhanced community quarantine (MECQ). Additionally, refining margins, which had a sharp drop earlier in the year, have further gone down and could stay depressed in the medium term, said Pilipinas Shell.
As an import terminal, the Tabangao facility is expected to continue to serve the fuel requirements of Luzon and Northern Visayas.
Pilipinas Shell said that the North Mindanao Import Facility (NMIF) in Cagayan de Oro, will cater to the increasing energy demand in the rest of the Visayas and Mindanao region.
