Juwai IQI global chief economist Shan Saeed (File photo)
MANILA – Juwai IQI global chief economist Shan Saeed sees that oil refinery players in the Philippines would come back as demand will pick up once economic pressure due to coronavirus disease 2019 (Covid-19) pandemic eases.
“I think players would come back as at Juwai IQI we expect prices to consolidate in 2021 and we expect to be trading between USD50 and USD65 per barrel as demand would come back once the Covid-19 gets under the carpet,” Saeed told the Philippine News Agency in an e-mail.
He added that the situation of Philippine players in the oil and gas industry is not different from global players as the whole industry is going through challenging times due to depressed oil prices.
“This puts pressure on the oil companies’ cash flows, CAPEX (capital expenditure), and earnings outlook in the short and long run. Major oil companies are retreating from the market or getting merged with others as industry tries to fathom the impact of lower oil prices,” he said.
Just this week, Petron Corp. president Ramon Ang said the company is mulling to close permanently its oil refinery in Limay, Bataan as refinery business is “very difficult” amid the pandemic while seeing uneven playing field against importers in terms of taxes.
Petron’s oil refinery is the only oil refining facility left in the country after Shell announced in August that it is shutting down its refinery business and will convert its Tabangao facility into an import terminal.
“Alchemy of financial markets has changed dramatically in the last 12 years. The oil market is down by 53 percent since January 2020 amid bedlam in the global financial markets. With coronavirus making huge impact on the global economic outlook, oil consumption is down by 25 to 30 percent,” Saeed said.
He added that it is crucial for the government to implement reforms that will bring back confidence among investors and maintain stability in the economy.
“In the current situation, Philippine government might come up with a plan to revive the industry that would give positive signal to the market and foreign investors,” the Kuala Lumpur-based Juwai IQI economist noted.
He mentioned that mergers and acquisitions will be a key in bringing back those businesses that shut down amid the pandemic.
“I think major oil companies globally, they will be going for mergers and acquisitions that are the key. Because nowadays, companies -- the big players -- are looking for those assets with good labor force, with good human capital, good cash flows. They would acquire those companies that have not been able to survive in these times. Merger and acquisition will pick up not this year but next year,” said Saeed. (PNA)
