SAUDI ARABIA - The Petron Venture In The Philippines.
President Gloria Macapagal Arroyo on March 22 exchanged promises with visiting Saudi Minister Naimi to make energy more affordable for the average Filipino. The more substantial promise came from Naimi, who vowed to increase Saudi crude oil output to 11m b/d to ease up on the rising demand (see Part 3). Arroyo said: "We have been sharing with the minister our deep concern about maintaining the price of affordable energy for all Filipinos. Saudi Arabia is doing everything within its power to keep the price of oil down, and I thank him for that". Naimi cited the special relations between the Philippines and Saudi Arabia, noting that both countries had gained from their close ties, in terms of investments, and employment opportunities among others. Arroyo said Philippines-Saudi relations cover "oil as well as millions of Filipinos who live and work in the Saudi kingdom". In February, a group of Saudi investors led by Abdul Rahman al-Jarieshy, chairman of the Saudi Chamber of Commerce and Industry (SCCI), was in Manila to look into possible investment partnerships with Filipino businessmen. SCCI Secretary-General Dr. Fahd al-Sultan, member of the 35-member team invited by the Philippine Chamber of Commerce and Industry (PCCI) said this would not be the last trade delegation. They hoped to even out the balance of trade between Saudi Arabia and the Philippines.
The country imports most of its oil from Saudi Arabia while the kingdom is the number one destination of Overseas Filipino Workers (OFWs). Figures from the Philippine Overseas Employment Administration (POEA) said the 2004 deployment to Saudi Arabia is over 10% of OFWs sent abroad. There are about 1m OFWs in the kingdom and there are 7.6m Filipinos abroad.
In mid-1999, Saudi Aramco and Petron made their crude oil supply contract more flexible so the latter could buy as little as 63% of its needs from the Saudi NOC, compared to 90% previously. The contract, valid for three years and renewable, was to help Petron compete in the Philippines' deregulated market. Petron has retained the right to swap some Saudi crudes for other grades to meet certain market demands.
Petron leads the Philippines 350,000-380,000 b/d oil business, with a market share of 36% involving about 1,005 retail outlets which account for half of all Philippine sites. It is strong in mid-distillates, having the biggest share of the locally important diesel market. It supplies half of the needs of the industrial sector and is the main fuel supplier to the power plants, with the latter switching to natural gas. Its foreign clients include airline firms like Saudia, Kuwait Airways and Gulf Air. Petron has consistently been ranked first in the Philippines' top 1,000 corporations list made by the Manila's Securities and Exchange Commission.
Following deregulation in mid-1998, however, Petron has been losing market share from more than 42% in 1997. Since mid-1998, many firms have entered the fuel distribution business and have gained a combined market share exceeding 10% at the expense of Petron, Shell and Caltex. These firms have taken advantage of cheaper fuel imports to undercut the refiners. Petron has had a fierce battle for consumer loyalty following the emergence in 1999 of convenience stores and tie-ups with local food outlets (see background in Vol. 61, No. 16).
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|Publication:||APS Review Oil Market Trends|
|Date:||Oct 17, 2005|
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