PILIPINAS Shell Petroleum Corp. is expected to deliver about P1 billion in structural cost savings from its Tabangao refinery, which is now being converted into a world-class import facility.
“We should be able to realize structural opex (operational expenditure) savings from our manufacturing of about P700 million this year and additional P300 million in 2023, 2024 upon full transformation of our refinery into a world-class import facility,” said Reynaldo Abilo, the chief financial officer of the oil firm during the company’s annual stockholders’ meeting.
The oil firm permanently ceased refinery operations due to the negative outlook on regional refining margins. It also cancelled the 2020 dividend payout. Abilo said these were critical and strategic measures done to protect the long-term interests of the company.
But the company is optimistic that petroleum sales will go back to pre-pandemic levels soon. “If the government health measures will progress as promised then we can assume that the petroleum demand will go back to pre-pandemic levels by 2022.
Energy demand, vehicle sales and household spending will also grow in line with the increase in economic activities. These serve as the foundations for growth for our businesses,” said Abilo.
He also added that the company would no longer be exposed to high volatility and depressed margins now that it has a fully imported supply chain.
With these, Abilo stressed that the company expects a “higher degree of ratability in our performance and reduce volatility of our earnings.”
Company president Cesar Romero said financial resilience and prudent investments remain a priority to ensure that Pilipinas Shell is able to weather any prolonged challenges and, at the same time, be in a position to emerge stronger from the crisis.
“We see our performance to continue to be strongly correlated to the performance of the Philippine economy. Hence, if the economy recovers in conjunction with positive developments in the health crisis, then we see every reason to see improvements in our business,” said Romero.
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