A PILIPINAS Shell executive took the witness stand at the Makati Regional Trial Court Wednesday for the first hearing of the oil firm's petition for the issuance of a Temporary Restraining Order (TRO) against Executive Order 839.

Willy Sarmiento, Shell Vice President for Finance, told the court that the Malacañang order has been "unjust, oppressive and unconstitutional."

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"The price ceiling definitely had a negative impact on Shell's working capital, which is used to fund its importation of oil service its substantial debts, pay for its maintenance and overhead expenses, labor costs, among others, which directly gravely damage Shell's credit standing, business reputation, operational integrity and credibility as a local and international oil industry player," he stated in his testimony.

The order, according to Sarmiento, has had a grave impact on their business and distributing and refining fuel products as he said they were selling products at a loss.

Earlier, other oil players have said the EO has been distorting the supply and demand dynamics of the market, and has created losses that prevent them from importing crude oil and finished oil products.

Sarmiento said the company's sole refinery is in danger of being closed down. "Because of the substantial financial losses arising from the price ceiling under EO 839, Shell's sole refinery is in danger of closing down. With the depletion of our working capital and the impending closure of its sole refinery, Shell's ability o supply the Philippine market is in peril. Shell is also in danger of not being able to fulfill contractual obligations to its suppliers and dealers."

He also told the court that the price cap further aggravated the company's refining capability as it was already operating at a technical minimum level even prior to the Palace imposed price freeze.

Once the refinery closes, he said 200 employees will be laid-off and several thousand contractors who work for the company and its service providers.

Aside from this, Sarmiento said the country will be left with only a single refinery, thus he argued further increasing the country's dependence on imported finished products to 70 percent of the current requirement.

As to financial losses, he told the court that from October 26 to 31 alone, Shell incurred losses estimated at P80,973,884.

"The massive losses continue every day since we are compelled to sell at prices lower than that dictated under the Mean of Platts Singapore and the Forex," he added.

Likewise, Sarmiento warned that a price cap without limitations or restrictions would change the rules of doing business in the country in a deregulated industry.

"This will make the Philippine market undesirable since the risks and expenses for operating in the country will no longer be competitive and thus, companies and foreign investors would opt to leave the country because of the unattractiveness of doing business here."

He also junked claims of various sectors on the supposed insensitivity of the oil firms on the plight of the people following the devastation brought by typhoons Ondoy and Pepeng, which hit the country in succession recently.

He said Shell has initiated and coordinated rehabilitation projects to aid the typhoon victims through donation of millions of pesos worth of relief goods.

Shell spearheaded the donation of P5 million to the Gawas Kalinga and another P5 million for the restoration of areas along Estero de Paco that have been vacated by informal settlers.

A price freeze on lubricants and cooking gas was instituted in areas affected by the calamities aside from offering for free such services as change of engine oil, brake, clutch and radiator fluid in Manila and other areas in Luzon flooded by the typhoons.

Sarmiento said these projects, along with their plan to implement a price discount has been out in peril by the price cap.

"Shell had planned and lined-up other projects to assists typhoon victims, which were stopped because of the issuance of EO 839," he added.

The official's testimony is part of the oil company's effort to persuade the court to grant a TRO on EO 839, which effectively pegged oil prices in typhoon-battered Luzon at October 15, 2009 levels.

President Gloria Macapagal-Arroyo signed EO 839 as a form of relief for those who are still struggling to recover from the cyclones that successively whipped major cities and provinces of Luzon.

But Assistant Solicitor General Marissa Macaraig-Guillen, who represented Executive Secretary Ermita and Energy Secretary Angelo Reyes and the Department of Justice-Department of Energy Joint Task Force, said Sarmiento is a "biased witness."

The court allowed Guillen to present a witness to the next hearing scheduled on Friday to rebut Sarmiento's testimony.

Earlier, the Office of the Solicitor General tried to block the testimony of the Shell official saying they were not aware of the judicial affidavit detailing his testimony, which needs to be submitted to all parties.

Guillen tried but failed to convince the petitioner to maintain a "status quo" on the issue, saying they should just wait for the lifting of the price cap, which is implemented only on a temporary basis while the state of calamity is in effect.

But the petitioner's counsel, Charisse Jen Choa, said: "Client is suffering grave and irreparable injury day and day and urged for a hearing." (AH/Sunnex)