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|MANILA, Philippines — Petron Corp., the country’s largest oil refiner, is embarking on an ambitious P74.78 billion modernization and expansion program that would transform its Bataan facility into a full-conversion plant that would produce white products that are compliant with the Euro international standards for clean fuels, improve efficiency, increase its presence in the export market, and supports business integration and expansion of its retail business.
The Board of Investments has approved Petron’s project called “Refinery Expansion Project (RMP-2) with five year income tax holiday as it qualifies for incentives under the Downstream Oil Industry Deregulation.
BoI executive director Lucita P. Reyes cited the project for making the country compliant one year ahead of the implementation of the Euro 4 international standards, which comes into full effect in 2016.
The ambitious project of Petron, which is owned by diversifying San Miguel Corp., will be financed via a combination of internally-generated funds and loans. The bulk of the project would be used for the acquisition of new equipment particularly on converter units.
The full conversion means a 90 percent improvement in the sulfur content of Petron’s oil products, making its products whiter.
Implementation of the new processes will start in July 2015 and the plant will employ 165 jobs regular employees to support the additional processes.
“This will make the country Euro 4 compliant of 50 ppm (parts per million) of sulfur content by 2016. At present, the Euro 2 standards requires 500 ppm so we will be ahead in compliance for diesel and gasoline grade,” Reyes said.
Reyes explained that since Petron’s project is classified as modernization program, its five-year ITH is applicable only to the new investments.
Even with the five-year ITH, Reyes said the BoI is still going to generate P1.289 billion in revenues from taxes on salaries paid, real property tax and for exchange savings from years 6 to 10 of the project’s operation.
Based on its website, Petron said that RMP-2 will further enhance the country’s supply security, increase Petron’s capability to supply the increasing demand for white products (LPG, gasoline, and diesel) and petrochemicals.
The project will also produce other by-products such as petrochemical feedstock to be sold to plastic producers. These are propylene, the raw materials for polymer plastics.
Once completed, RMP-2 will enable Petron’s Bataan Refinery to "digest" a wider range of crude oils including from African sources, giving it greater flexibility to source cost-efficient crude types from any part of the world.
Petron’s operational efficiency will also significantly improve since the project allows the full "conversion" of all remaining black streams into high-margin white products and petrochemicals.
This means that the company can run its refinery 100% without incurring penalties from producing low-value fuel oil. For instance, the project will increase current propylene production by nearly 200%. The project doubles Petron’s refining complexity, enabling it to compete more effectively with refineries in the Asia-Pacific region.
The project also supports Petron’s strategic initiatives to expand its retail network, integration of its petrochemicals business, and increased presence in the export market.
May 2, 2011