Cusi: Oil imports to cut prices

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The 420-MW Pagbilao Unit 3 Power Project in Pagbilao, Quezon. (PCOO photo)

The Duterte administration’s plan to import crude from non-traditional sources will have a profound impact on the local oil industry and open a floodgate of opportunities to reduce oil prices with increased transparency and provide a benchmark for the cost of fuel in the local market, Energy Secretary Alfonso Cusi told Tribune.
He said the move will not only allow the government to sell oil at a lower rate to third-party small-time players but, more importantly, it would expose all the costs incurred from the source to distillation and distribution, making the whole process of importation of petroleum products transparent to the public.”
Our primary objective in importing from non-OPEC members, like Russia and other oil-producing countries, is to create a strategic reserve in the country’s oil stock. Currently, only private sector imports petroleum products,” Cusi added.
He hinted that this process of private sector-led oil importation makes it impossible for the government to take a thorough understanding of the actual costs involved.
It has long been speculated that the three major oil players in the country, Shell, Petron, Caltex, and to some extent the new players, have been manipulating oil prices in the country and enjoying a virtual cartel of the industry. However, Cusi said once the government stockpiles its own oil supply and starts refining to sell to small time players, it would have a better understanding of all the logistics involved in the process from buying, hauling and transporting, to distillation to refining.
“We will now have a benchmark for oil prices because we would know the costs involved,” Cusi said. “The public will now know how much they are paying for [when buying petroleum products].”
He added the government would become better informed if oil companies are overpricing their products or not.
According to Cusi, the government initially intends to import around 200,000 metric tons (MT) of crude from Russia on a staggered basis as a security stock. In addition, the government wants to expand its present 15-day oil stockpile to 30 days.
The Philippine National Oil Company Exploration Corporation (PNOC-EC) has already started the importation process and identified storage depots in Subic and Cagayan de Oro to store the stockpile.
At the same time, the energy secretary said Russia is not the only country the Philippines is exploring as alternative suppliers of oil. During his visit to the Middle East in April last year, President Rodrigo Duterte has secured commitments from several nations in the region to continue supplying Manila with oil, particularly in times of crisis.
The Philippines is tapping into that commitments from his bilateral meetings with his counterparts to ensure not only a stable supply of petroleum products but better prices terms, Cusi said adding that the government is doing all this to provide what is best for the country.
Another country the Philippines looking at is at for its petroleum product requirement is Venezuela, which is offering a 30 percent discount on its oil if buyers will use their Petro cryptocurrency for the purchase.
Last week, Presidential spokesperson Harry Roque Jr. announced the government’s plan to import oil from non-traditional sources as one of the mitigating measures from the rising petroleum products. This government-to-government transaction marks the first time the government is importing petroleum products.
But Department of Energy Undersecretary Wimpy Fuentebella explained that the effects of cheaper diesel from Russia would not be immediate, as he asked the public for patience.
On Thursday, the U.S. and Brent crude parted ways pushing U.S. crude futures to trade $11 lower than Brent to close at $67.19 per barrel, the lowest discount since early 2015. Brent crude closed at $77.77, data from Oilprice.com showed.
Energy supply to stabilize, too
Meanwhile, Cusi accompanied Mr. Duterte on Thursday for the inauguration of the newly completed 420-megawatt Pagbilao Unit 3 project coal-fired power plant in Pagbilao, Quezon that is expected to stabilize energy supply in Luzon as well as boost the economy.
In his speech, President Duterte expressed his gratitude to the Department of Energy and Aboitiz Power Corp. for working together to make the Pagbilao energy venture possible.
“This event reaffirms not only the government’s commitment to empower our citizens into proactive agents of social transformation but also the private sector’s crucial role in augmenting our local industries,” Mr. Duterte said.
“Without a doubt, this joint venture between Aboitiz and [TeaM] Energy has ensured energy sustainability that will allow us to support the electric demands of the country. Your multiple investments across the archipelago surely bolster our efforts in advancing the country’s development,” he added.
The opening of the Pagbilao Unit 3 plant is expected to provide employment and business opportunities to the residents of Quezon.
Duterte stressed that the distribution of reliable and affordable electricity would complement government programs paving the way to national development.

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