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From a former independent director of Petron

August 27, 2006

JOSE LUIS “NONOY” YULO writes…

HI Stella! I am in San Francisco now for a family affair and will be back in Manila on Sept 10 or 12.

From 2001 until end February 2006,I was in the board as Independent Director of Petron and Chairman of its Audit Committee and Compensation Committee… During my stay, we were able to turn Petron around from lossess and mediocre income, to its highest ever in net income in 2005 of over P5 billion. I was reasonably strict in my audit function and introduced some expense control measures and found the Petron board then to be fully professional and one of the best that I have ever served in.

By Feb this year however, pressures were adrift to offer my position to former budget secretary Emilia Boncodin, so I tendered my resignation.

During the time of my service, we made a strategic policy decision (which I pushed for) to go full blast into the refinning business in the Philippines, rather than close it down as Caltex had done. Closing down Petron’s refinery was indeed a major option being discussed at that time. Instead, Petron took the company further into creating two profit center businesses-refinery and retail. In the end, even Shell or Caltex may purchase their requirements from Petron instead of importing them.

Therefore, Petron has been investing heavily in expanding, upgrading and adding new refining capacity to produce the cleanest diesel fuel, as well as higher end products for export. I believe the good effects of this strategic decision will be felt more and more in the coming years when the whole upgrading process is complete by end 2007 thereabouts.

Now, with regards the oil spill, Petron has indeed no direct legal responsibility since transporting the oil is done by independent haulers. Direct responsibility lies therefore with the hauler and their insurance companies, and perhaps gov’t regulators,if they were remiss in their duties.

Petron however, as a company owned 40% by the government and being in a strategic business akin to a pseudo-monopoly, is indeed morally responsible in some way to help alleviate the situation. Petron and Saudi Aramco can help with its access to expertise in oil spills clean up, through its connections worlwide, plus some monetary help, but not to the extent of jeopardizing Petron’s viability.

The above are my independent thoughts which I would have put forward as Independent Director.

With best regards,

Nonoy Yulo

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