Time for Petron to revisit sea transport contracts

November 24, 2006

By VG Cabuag
Reporter, BusinessMirror
Nov. 24, 2006

PETRON Corp., the country’s largest petroleum company, may have to revisit the way it gives contracts to various shipping firms that transport fuel products after it encountered two sea mishaps in just three months.

According to Jose Luis U. Yulo Jr., a former independent director of Petron and who headed the firm’s audit committee from 2001 to 2006, the next operational audit of Petron should now focus on the safety of the vessels contracted by the company. In previous years, Yulo said the audit committee focused on the oil losses of Petron—the quantity when the fuel was loaded did not match when it was offloaded to its destination—a matter that hounded the firm for years.

“We did not focus on the safety of the vessels [that will transport petroleum products] yet because that was not the problem then,” he explained, adding that they fixed the oil loss problem by calibrating the equipment and doing some operational changes.

The government, through the Philippine National Oil Co., owns 40 percent of Petron, while Saudi Arabian Oil Co. holds another 40 percent; the rest are held by the public.

Yulo said the company is undergoing three stages of operational audit, one internally and one each both for the government and Saudi Aramco. This means all aspects of operation of Petron would have to be reviewed—even the way it enters into contracts with other parties.

“Petron is one of the best-managed companies in the world. That is why it has overtaken (Pilipinas) Shell and Caltex (Chevron Philippines) in market share in 2005. Still, accidents may happen where Petron has [no] control nor fault,” Yulo said.

At a Senate inquiry on the sinking of MT Solar 1, senators questioned the way Petron handles its contracts with the vessels that transport its products. On August 11, Solar 1, owned by Sunshine Maritime Corp., sank in rough seas off Guimaras Island, carrying 2.2 million liters of bunker fuel, in what was called the worst oil spill in the Philippines. Until today, the vessel remains submerged with more than a million liters of fuel still to be siphoned off.

On Monday evening, the oil barge Ras hauled by tugboat Vega, carrying the debris from the oil spill site, sank five kilometers off Plaridel in Misamis Occidental, also due to rough seas.

According to initial investigation, unlike the papers of the Sunshine Maritime that the maritime regulators had virtually cleared on any irregularity, Ras owner Harbor Star lacks the proper documents.

Maritime Industry Authority said Ras’s permit allowed it to ply routes only in rivers, such as the Pasig River and Manila Bay. Vega, on the other hand, was not registered with the Marina, which makes its operations to ferry the debris illegal.

Allegations of oil pilferage again cropped up during the investigation of the Board of Marine Inquiry, the special oversight body created on the Guimaras oil spill, with some quarters saying the oil theft may have caused the MT Solar 1 to sink.

During the past several months, there have also been reported cases of oil theft involving Petron’s operations in Limay and Manila.

Communities affected by the sinking of Ras may also seek compensation from the International Oil Pollution Compensation (IOPC) Fund, House Deputy Majority Leader Eduardo Gullas said.

Gullas, who represents Cebu province’s First District, said that under IOPC rules, ‘costs incurred for preventive measures and further loss or damage caused by preventive measures” following an oil spill “may be compensated.”

The IOPC Fund is financed by levies on certain types of oil carried by sea. The levies are paid by entities that receive oil after sea transport.

Petron Corp. had said the IOPC Fund would extend a total of $315 million to cover “pollution damage” as a result of the Solar I incident. This would cover cleanup costs, spoiled property and consequential losses.

Petron said it had chipped in a total of P120 million to the IOPC Fund since 1999.

Gullas, meanwhile, renewed his call for the Senate to expedite the approval of a bill enforcing in the country all international rules on the accountability of ship owners for oil spill damage, and ensuring instant and adequate compensation for parties that suffer losses as a result of the discharge.


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