Solon warns of harsh cooking gas price hikes due to shutdown of facility

HOUSE Deputy Minority Leader Arnel Ty has urged the national government, through the Department of Energy (DOE), to take over Pilipinas Shell Petroleum Corp.’s refrigerated liquefied petroleum gas (LPG) import terminal in Tabangao, Batangas, which has been permanently shut down by the oil refiner.

“The decommissioning of the import terminal, with a capacity to store 47 million kilos of LPG, is slowly but surely putting tremendous upward pressure on cooking gas prices at the expense of consumers,” warned Ty, who represents the party-list group LPG Marketers’ Association (LPG-MA) in Congress.

“Unless the DOE temporarily takes over and runs the terminal now, to allow other oil firms to bring in LPG supplies from abroad, we see prices swelling in the months ahead, as cooking gas demand grows along with national economic expansion,” Ty said.

For business reasons, Shell permanently closed down its refrigerated LPG import terminal in September 2013. The terminal began operations in 1983.

Ty urged the DOE should reactivate the terminal for 12 to 36 months — the time required for other oil firms to put up an alternative facility.

Until it was shut down, he said Shell’s LPG import terminal was the primary source of cooking gas supplies for Southern Luzon.

“Of the 25 million kilos of LPG that used to come out of the Shell terminal every month, 15 million kilos were brought in by Shell from abroad, while the balance of 10 million kilos came from the local production of Shell’s adjacent oil refinery,” Ty said.

Since the terminal’s closure, Southern Luzon has had a large LPG supply deficit of around 15 million kilos per month, since Shell has stopped importing the cooking gas, Ty pointed out.

According to him, LPG supply in Southern Luzon is now down to just 10 million kilos every month — the volume being locally produced by Shell’s refinery.

“This has put upward pressure on prices, because some of the supplies meant for Metro Manila and other parts of Luzon are now being diverted to Southern Luzon at higher prices to cover the extra transport costs from the LPG terminals in Bataan,” Ty explained.

“Actually, the problem posed by the decommissioning of Shell’s LPG import terminal could hit us earlier than expected, as Shell only recently served notice that it is temporarily shutting down its oil refinery this March for maintenance activities,” Ty said.

This means that Shell’s refinery will also temporarily stop producing Southern Luzon’s leftover supply of 10 million kilos of LPG per month — now being stored in a smaller bay tank with a capacity of just three million kilos, according to Ty.

“Thus, the only option left for government, in order to shield consumers from potentially harsh LPG price increases, is for the DOE to takeover Shell’s idle import terminal, and to run the facility, so as to enable other industry players, including the independents, to bring in extra supplies on their own,” Ty said.

Ty invoked Section 14 (e), Chapter IV (“Powers and Functions of the DOE and the DOE Secretary”) of Republic Act No. 8479, or the Downstream Oil Industry Deregulation Law of 1998, which states that: “In times of national emergency, when the public interest so requires, the DOE may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any person or entity engaged in the industry.”

Ty said this power, in turn, emanates from the 1987 Constitution (Section 17, Article 12, National Economy and Patrimony), which declares that: “In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately-owned public utility or business affected with public interest.”

He said the Constitution (Section 18, Article 12) also provides that: “The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government.”

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Solon warns of harsh cooking gas price hikes due to shutdown of facility