Legislator warns vs. higher LPG price

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Monday, August 19, 2013


HOUSE Deputy Minority Leader Arnel Ty has warned against potentially higher cooking fuel prices in the months ahead, following the decision of the second-largest liquefied petroleum gas (LPG) supplier to leave the Philippines.

“The departure of SHV Energy of the Netherlands from the Philippines will substantially diminish free and fair LPG market competition, and likely drive retail prices up,” said Ty, who represents the LPG Marketers’ Association (LPG-MA) in the House of Representatives.

SHV Energy, which operates in 27 countries, has already set into motion the auction of the LPG operations of its wholly-owned subsidiary, Liquigaz Philippines Corp., according to Ty, who is also House energy committee member.

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Liquigaz supplies 31 percent of cooking gas demand in the Philippines and last reported P14.34 billion in gross revenues in 2011, Ty said.

“Based on information we’ve obtained, seven firms participated in the first round of the bidding (for Liquigaz’s LPG operations), where Petron Corp. supposedly made the best offer of $60 million, or about P2.6 billion,” Ty said.

By all accounts, Ty said two other bidders – Isla LPG Corp. and Petronas – then proceeded to match Petron’s best offer.

Isla is a joint-venture between the Delgado family and Itochu Corp. of Japan, while Petronas is Malaysia’s national oil company.

“Regardless of the winning bidder, the deal means that the second-largest LPG supplier will be taken out of the market. And the withdrawal of a big competitor is never good for consumers,” Ty pointed out.

On one hand, should Petron acquire Liquigaz, the oil refiner controlled by San Miguel Corp. will instantly enlarge its LPG market share to 74 percent, Ty said.

If Liquigaz goes to Isla, the latter will end up with 48-percent market share, he said.

“Either way, only two big players will be left in the LPG market, and this is detrimental to consumers,” Ty said.

Liquigaz has an import terminal in Mariveles, Bataan, where the company has one of the world’s largest mounded LPG storage facility of its kind, with a capacity to hold 12,000 metric tons – enough to fill up more than one million 11-kilogram cylinders.

Liquigaz has been a major supplier to independent refillers, including those grouped under LPG-MA, Ty said.

In a Philippine Stock Exchange disclosure, Petron general counsel Joel Angelo Cruz said: “The company confirms that it is participating in the proposed acquisition of the LPG operations of Liquigaz, a wholly-owned subsidiary of SHV Energy of the Netherlands in the Philippines.”

“The appropriate disclosure will be made by the company in the event a definitive agreement is concluded by it in respect of such proposed acquisition,” Cruz added.

After acquiring the cooking gas business of Chevron Philippines Inc. (formerly Caltex Philippines Inc.) in 2007, Petron now controls 43 percent of the nation’s LPG market, ahead of Liquigaz’s 31-percent share, according to Department of Energy records.

With 17-percent market share, Isla acquired the LPG business of Pilipinas Shell Petroleum Corp. in 2011, and renamed the Shellane brand to Solane. (PR)

Published in the Sun.Star Cebu newspaper on August 20, 2013.

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