Coastal Corp aims big in RP oil market
Coastal Corp aims big in RP oil market
SINGAPORE (Reuters): U.S.-based Coastal Corp plans to use its
large 2.4 million-barrel Subic Bay oil storage center as the hub
to become a major player in the Philippines' market, a senior
company official said yesterday.
"In five years, I will be equal to everybody. All of us will
have 25-percent of market share," Jess Medina, Coastal Corp's
Philippines country manager and chief executive officer of Subic
Bay Distribution Co., said.
The storage complex is equally owned by Petroleum Authority of
Thailand (PTT).
The Philippines' oil market has been a three-refinery
oligopoly since the 1970s, made up by Petron Corp and Caltex.
But the market was eventually deregulated earlier this year,
so now there was room for at least four main players in the
390,000 barrels-per-day (bpd) oil products market, Medina said.
In just a few months of full market liberalization, Coastal
has grabbed around five-percent of the Philippines' market,
Medina said.
"When they woke up, I was already in the market and they
didn't even know it," Medina told Reuters in a telephone
interview from Manila.
The deregulation set uniform tariffs for importing products
and crude. Previously, tariffs were higher for products imports,
which helped support refinery businesses.
In response to the new tariff structure, Philippines'
petroleum product imports surged 124-percent to 8.376 million
barrels for the first quarter of 1998 compared with a year-
earlier 3.732 million, the Department of Energy (DOE) said.
Another sign of the deregulation came from Philippines
National Power Corp (Napocor), the country's largest fuel oil
buyer, which called in April on the refineries to re-negotiate
exclusive contracts because of falling prices.
With margins coming under pressure, partly because of a weak
global market, the country's largest refiner, Petron lowered
output in July at its 180,000-barrel-per-day (bpd) Bataan
refinery to 140,000-150,000-bpd.
Medina said Coastal intended to make use of the US$70 million
storage facility to import cheap international oil and fill the
supply gaps left by such cutbacks as Petron's.
"The guys here who are big, are the ones with existing
facilities, and Coastal has the biggest storage in this entire
country...on products," he said.
Coastal will tackle commerce and industrial buyers and look to
back PTT in entering the retail sector, Medina said.
PTT plans a 9.6-billion-peso ($230 million) investment to set
up 140 retail outlets in the next five years and another 110 by
2007, the DOE said.
Due to it's early entry into the market, the Coastal/PTT
venture will have an edge over other new international oil
companies like French major Total SA and Malaysia's Petronas,
which were also keen on the Philippines market, Medina said.
"We invested when this country was very, very down. Nobody
wanted to touch this country," he said.
Petronas, a previous 50/50 joint-venture partner with Coastal,
in Subic Bay terminals, pulled out in 1995.
"You need huge storage to bring in economical-sized cargoes,
period. You cannot just make press releases and say you are
entering the market," Medina said.
Coastal also plans to make use of Subic Bay as a swing
supplier to the Asia but this strategy was hostage to the Asian
economic downturn which has seen oil demand fall, Medina said.
"We are just starting from a low volume (of sales)," Medina
said. "In the meantime, we have a lot of storage capacity and we
are leasing it out. Every square inch of that storage is
generating revenue."
Around 1.4 million barrels of diesel, fuel oil and jet fuel
storage in Subic Bay was currently leased out, he said, partly
because of cargoes getting rejected at Chinese customs.