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Petron may use $1-B insurance to clean up spill

August 26, 2006

By Luzi Ann Javier
Bloomberg

PETRON Corp., the larger of the country’s two oil refiners, may use $1 billion in insurance to clean up the nation’s worst oil spill and repair the damage to Guimaras Island caused by a tanker contracted by the company.

Petron chairman Nicasio Alcantara said the company will tap the insurance to augment other funding the Philippines and the operator of the sunken tanker may access. The government can draw as much as $301 million from an international pollution fund of which it is a member, while Sunshine Maritime Development Corp. is insured for $6.7 million, Alcantara said.

The tanker, which Petron contracted from Sunshine Maritime to transport fuel, was carrying at least 2 million liters of bunker oil when it sank on August 11 off the coast of Guimaras.

The vessel spilled at least a tenth of its content and may still be leaking fuel at a depth of 3,000 feet (914 meters).

The Manila-based refiner is eyeing these options: dump concrete on the sunken vessel to “entomb” it and prevent further leaks, bring up the tanker to the surface or pump out the remaining fuel, Alcantara said.

“Assuming the oil has stopped leaking, we can finish the cleanup in 45 days,” the company president said.

Shares of Petron, which is owned by the Philippine government and Saudi Aramco, fell 2.5 percent to P3.9 at the noon close of trading in Manila. That’s the stock’s lowest closing since July 17.

Petron “is not under any legal or contractual obligation” to pay for the cleanup, the company reiterated Thursday. The company “as mere cargo owner did not cause the spill and had no part” in operating the vessel.

(Originally published in the Business Mirror, Aug. 25-26, 2006.)

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