Bu-lat-lat (boo-lat-lat) verb: to search, probe, investigate, inquire; to unearth facts
Volume 3, Number 24 July 20 - 26, 2003 Quezon City, Philippines
Full Privatization: An Act of Desperation, a Fulfillment of Oil Deregulation
years ago, Petron was partly privatized when the Arabian American Oil Company (ARAMCO)
bought 40% of its equity. The private sector got another 20% through an initial
public offering (IPO). Now, the government wants to sell its 40% stake in a
desperate bid to raise money, as well as strengthen the deregulation of the oil
DANILO ARAÑA ARAO
Arroyo administration plans to sell 3.75 million government shares in Petron
Corporation worth P6 billion ($112.5 million, based on an exchange rate of
P53.34 per US dollar). This means that government will give up its 40% stake in
Petron, giving the private sector total control of the oil company.
a time when the budget deficit is projected to reach P202 billion ($3.8 billion)
this year, the government appears to be getting desperate.
less than Socioeconomic Planning Secretary Romulo Neri admits that while he does
not have the details, Petron’s sale is “part of the government's
privatization plan.” He adds, “In line with our privatization policies, (Petron
is) better left to the private sector.”
recently, there were reports that the Presidential Commission on Good Government
(PCGG) will also sell “sequestered shares” in 26 companies (i.e., 8 listed,
18 privately held).
the PCGG has not yet disclosed the actual worth of all the sequestered shares
that will be sold in line with its privatization program, the 8.4 million
government shares in Chemfields, Inc. and the 12,445 government shares in
Oceanic Wireless Network, Inc. are worth P205 million ($3.8 million) and P80.27
million ($1.5 million), respectively.
planned total sale of Petron to the private sector is not just an issue of
money, though this is the Arroyo administration’s primary concern. In the
context of the government’s development policy, Petron’s full privatization
is a natural consequence of the deregulation of the downstream oil industry.
Petron went through
Corporation was established in 1973 as a marketing arm of the Philippine
National Oil Company (PNOC).
a government-owned corporation, it aimed to compete with foreign oil firms like
Pilipinas Shell and Caltex which started operations in the country in 1914 and
1921, respectively. Other oil companies pulled out of the country in 1973 (Esso
and Filoil), 1980 (Getty) and 1983 (Mobil).
1993, Petron’s partial privatization started when 40% of its total equity was
sold to the Arabian American Oil Company (ARAMCO).
Standard Oil of California (SOCAL) and Texas Corporation (TEXACO) established
ARAMCO in the early 1930s. Other transnational oil firms Exxon at Mobil also
invested in ARAMCO. The latter currently operates Ghamar Field in Saudi Arabia,
the world’s largest single oil field.
from the deal with ARAMCO, 20% of Petron’s equity was sold to the private
sector through an initial public offering (IPO).
private sector took interest in the company since it continued to reap profits
through the years. From 1992 to 2002, Petron’s net income reached P27.3
billion ($511.8 million). Except for the years 1997 and 2000 when the company
reported losses, its yearly profits ranged from P1.2 billion ($22.5 million) to
P7.5 billion ($140.6 million). (See Table)
downstream oil deregulation
history of Petron is closely related to the oil industry’s restructuring.
deregulation of the downstream oil industry started in April 1996 through the
enactment of Republic Act (RA) No. 8180. However, the Supreme Court (SC)
declared this law unconstitutional in November 1997. The SC justices said there
were provisions that failed to promote free competition, like the minimum
inventory requirement for oil companies and the higher tariff on imported
refined petroleum products (7% ad valorem tax) compared to imported crude
February 1998, the Ramos administration approved RA 8479, the second law on
downstream oil deregulation.
to the government, deregulation is necessary to depoliticize the pricing of
petroleum products. Officials argue that the public must be acclimatized to
frequent oil price changes based on the foreign exchange rate and world crude
them, competition among the oil companies will result in lower prices and better
services. In the final analysis, the consumer will reportedly benefit due to
relation to the Arroyo administration’s globalization thrust, the continued
40% government ownership in Petron becomes an impediment to free competition in
the downstream oil industry.
the government wants minimal intervention in the economy, privatization becomes
an instrument to allow the private sector, which includes the foreign investors,
to have control of different areas of the economy.
Indeed, there is more to the reported sale of Petron’s government shares than just simply raising funds to offset the ballooning deficit. The government’s deregulation policy plays an important role in allowing the private sector to wield more power over the downstream oil industry, no matter how important it is to the people and the country’s energy needs. Bulatlat.com