OBG talks to Ramon Ang, Chairman and CEO, Petron Corporation

Interview: Ramon Ang

Given its reliance on imports, how can the Philippines best shield itself from fluctuations in the price of oil and its derivatives?

RAMON ANG: As a country wholly dependent on crude oil and finished product imports, the Philippines is affected by movements in international oil prices. The industry remains risky given its exposure to external factors including volatility in international oil markets. With this reality, the local oil industry has adopted a weekly price adjustment mechanism to ensure that pump prices are adjusted, either upward or downward, in a timely and transparent manner.

To further lessen the country’s dependence on imported fuels, the government continues its efforts to develop alternative fuels. Petron has been very supportive of government initiatives to use biofuels, namely ethanol and coco methyl ester (CME). Currently, most of our gasolines are blended with 10% ethanol, while our diesel products contain 2% CME. The government should also work to encourage more domestic production by continuing programmes to entice companies to participate in oil exploration efforts in the country.

How can the country best progress towards its stated goals of energy self-sufficiency and security?

ANG: The country should invite or attract substantial investments in strategic industries such as oil exploration, refining and power generation. These sectors are the bedrock of any industrialised nation. On top of these, the government is taking a close look at other sustainable sources of energy such as wind and solar.

How can the Philippines work to stamp out smuggling, which remains a significant challenge to formal downstream and retail players?

ANG: Oil smuggling is a major industry concern that victimises the customers with cheap, poor-quality fuels that can destroy car engines. It also deprives the government of revenue that could have been used for socio-civic projects. Legitimate industry players are working closely with concerned government agencies on this. Several initiatives in place include fuel marking and closer monitoring of depots.

Do you see opportunity in the market for additional downstream and value-added refineries to set up shop in the country?

ANG: Yes, especially since local fuel demand is projected to grow over the long term. At the same time, the country imports nearly 50% of its finished product requirements so there is definitely more opportunities to establish refineries in the country. With demand for petrochemicals, as well as for products derived from petrochemicals, continuing to grow in the Philippines and around the world, it makes sense to have additional local production in the near future.

The local production of petrochemicals is essential to the country’s growth since these are the raw materials used in a variety of everyday applications. Food packaging, common home plastic wares, computers and automobile parts are just a few of the products derived from petrochemicals.

What challenges and opportunities does the country’s geography present to players involved in the retail and downstream segments?

ANG: There are many underserved areas across the archipelago where retailers have been pursuing rather aggressive expansion strategies. At the same time, at any given moment, market forces could demand drastic changes across the industry’s supply chain. It is important for retailers to continue to integrate and to improve logistics infrastructure to eliminate unnecessary costs and to ensure sustainability and continuous flexibility. As service stations have spread out beyond Metro Manila, they have also become catalysts for economic growth in the countryside. These service stations create business opportunities for small entrepreneurs, and they have generated much-needed employment in some of the more far-flung areas of the country.