PHILIPPINE DEMAND for oil would in all probability develop at a median 3.4% between 2022 and 2031, based on Fitch Options Nation Threat and Trade Analysis, citing the nation’s overcrowded market.
“Internet imports are anticipated to develop at round 3.5%, kind of carefully according to demand development,” it mentioned in a report dated Jan. 25.
Oil product imports are anticipated to hit 78% of complete gasoline consumption this 12 months amid a comparatively sturdy restoration in oil demand since 2021, it added.
The nation’s “comparatively small oil market” has dampened trade profitability, demand and development, Fitch Options mentioned.
“The Philippines’ demand for oil merchandise has not been rising quick despite a rising economic system and inhabitants,” it mentioned. “Oil product demand stayed comparatively at round 450,000 barrels per day (bpd) for the previous years, rising by an annual common price of three.3% between 2010 and 2021.”
Potential demand development for transport gasoline comparable to gasoline and diesel has been hampered by the upper ratio of motorbikes in contrast with vehicles. Oil demand development has additionally been hindered by the growing use of biofuels, it added.
The Philippine oil market is overcrowded, with many gamers concerned in oil distribution and commerce, based on the report.
There have been 167 gasoline importers and 157 bulk distributors within the Philippines on the finish of 2021, based on the Division of Vitality (DoE), Fitch Options mentioned, citing Vitality division knowledge. “Refiners confronted elevated competitors from trade gamers in wholesale and retail markets the place they’re free to set oil product costs and gross sales of smuggled fuels is rampant.”
It additionally cited the nation’s fragmented oil market, with extra importers, wholesale and retail gamers.
“Corporations like Phoenix, Unioil, Insular and Seaoil are gaining market shares, far outpacing legacy gamers like Chevron,” based on the report.
In 2021, about 61% of the oil market was managed by a fragmented group of importers and end-users, with the remaining market share held by Petron Corp., Pilipinas Shell Petroleum Corp. and Chevron Philippines, Inc. it added.
“In gentle of refining capability losses, the long-term safety of provide has turn into a rising concern for the federal government because it seeks to construct strategic petroleum reserves for oil emergency use,” Fitch Options mentioned.
“We anticipate a pointy rise in oil product imports if the state-owned Philippine Nationwide Oil Co. goes forward with funding within the strategic petroleum reserve undertaking, along with imports by present trade gamers,” it added.
Fitch Options mentioned the Philippines was anticipated to draw downstream refining gamers resulting from worth decontrols after the passage of the Downstream Oil Trade Deregulation Act, however this didn’t materialize.
“Deregulated oil markets are supposed to draw downstream gamers, however refiners within the Philippines had as an alternative chosen to divest from refining property and completely closed their refineries.”
In the meantime, Fitch Options warned that the Philippines may very well be the one market in Southeast Asia with out an working refinery if Petron Corp. decides to shut its refinery in Bataan.
“It stays unsure whether or not Petron will maintain working its lone refinery for an extended time frame if refining income are unfavorable amid rising competitors from trade gamers,” it mentioned. “The Philippines may very well be left as the one market in Southeast Asia with out an working refinery if Petron decides to name it quits someday sooner or later.”
Fitch Options mentioned the nation had a decrease refining capability as refined gasoline manufacturing dropped to 79,000 bpd in 2021 from 236,000 bpd in 2018, with the low refining capability gaps worsened by decrease refinery use charges.
“Petron has sturdy incentives to hike refinery utilization charges in gentle of rising shortages in home provide, however it’s not probably to take action given the challenges of distribution throughout the archipelago, which is vital to securing market shares within the Philippines’ oil market,” it added. — Revin Mikhael D. Ochave