Philippine refiners seek deferment of Clean Air Act

MANILA�Refining companies in the Philippines have asked the government to defer the second phase of the Clean Air Act, slate to take effect in 2003. The firms, many of which have suffered deficits due to higher crude prices and lower margins in petroleum products markets, say they cannot afford to invest in new equipment to reduce the aromatics and benzene content in motor fuels, as mandated under the act.

The legislation calls for reduction of the aromatics content in unleaded gasoline to 35% from 45-50%, and reduction of gasoline benzene to 2% from 4-5%, both by 2003. It also calls for reduction of diesel sulfur to 0.3% by 2001 and to 0.05% by 2004, from the current 0.5%.

Legislators passed the act following studies showing that Manila had a total suspended particulate rate that was five times higher than the World Health Organization's tolerable standard.

Energy Sec. Mario V. Tiaoqui said he had forwarded the oil companies' paper calling for the deferment of the Clean Air Act to the interagency committee led by the Department of Environment and Natural Resources, which was drafting the implementation rules and regulations.

The oil companies said they have been saddled with huge losses due to the imbalance between petroleum prices in the domestic market and those in international markets. New investments in upgrading the refineries are not possible with a weaker balance sheet, said the local refiners, which include units of Royal Dutch/Shell Group and Caltex Petroleum Corp., as well as state-owned Petron Corp.

With the government still considering allowing the adjustment in pump prices in the Philippines, independent retailers say they cannot import the specified fuel at higher prices and supply to the locals at a discount.

The oil companies paying for crude and products imports in US dollars while supplying the local market, which deals in the local currency, the peso. The peso has been depreciating for 2 years, ever since the Asian economic crisis.

During this year alone, the oil companies raised pump prices almost every month to cover the import costs. But the government kept a direct intervention, despite deregulating the local market, to keep pump prices down to appease voters.

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