Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No. ead

Introduced by
BAYAN MUNA Party-List Representatives CARLOS ISAGANI T. ZARATE,
FERDINAND R. GAITE and EUFEMIA C. CULLAMAT

AN ACT
RENATIONALIZING THE PETRON CORPORATION

EXPLANATORY NOTE

Petron Corporation (Petron), which used to be state-owned and controlled, is currently the largest and
the only publicly listed oil refining and marketing company in the Philippines. As of year-end 2011,
Petron has remained the market leader, supplying more than one-third (37.7%) of the country's
petroleum product requirements. It has 2,200 retail service stations located nationwide. Petron
accounts for the largest share, 180,000 of the 290,000-barrel per day of the refining capacity of the
country, which it produces in its petroleum refinery complex in Limay, Bataan — the largest in the
Philippines. Petron also operates a fully automated lube oil blending plant in Pandacan, likewise the
biggest and most advanced of its kind in the Philippines. Moreover, the company controls a 38 percent
market share of the highly socially sensitive liquefied petroleum gas industry (LPG) with its LPG
brand Gasul.

Clearly, Petron Corporation dominates the local downstream petroleum industry but its ownership
has been turned over to private companies, thus, instead of giving benefit to the Filipino consumers,
the oil company controls local prices in the same way as the big transnational oil corporations do, like
Exxon-Mobil, Royal Dutch Shell, Chevron-Texaco (its marketing arm is Caltex), British Petroleum
(BP), and CFP-Total that almost completely and collusively control oil prices worldwide.

Even if the largest oil producing countries (Saudi Arabia, Iran, Venezuela, Mexico, and China) control
90 percent of the world’s oil reserves, the five (5) transnational oil companies mentioned can dictate
world prices because they control 60 percent of oil production and hold all levels of the market

Philippine National OiL Company (PNOO) and Sali Aram each owned 40" of Petron’s outstanding unc, with the remsining 20% hel by thousands of
individual stockholders. In 2008 Saudi Aramco sol it erie stake tothe Ashmore & London-lsed investment group. Then Ashmore added 11
percent more when it made a rauired tender offer to other sharcholers, for a otal stake

Trolling: BV, had «50:7 percent of Petrons stock" Ashmoe's payment was made on
‘Abvpereentsake- On December 2008, San Miguel Gogporation sid i was in the Binal stages of negotiations with the Ashmore Group to buy up wo 50.1
pereent of Petron

(On Mach 30,2012, Petron acquired LixsonMobif' downs th XCEL. Petroleum In January 2013, Petron officaly opened their
Malaysian operations, rebranding all Esso and Mobil stations across Peninsular

1


through their vast global network of exploration and exploitation sites, partnerships with nationalized
oil companies, refineries, pipelines, tankers, and stations. Filipino consumers are thus severely
dependent on such corporations, which control the exploration, exploitation, refining, importation,
and retailing of crude and petroleum products from abroad; and even the re-exportation of our
country’s indigenous petroleum and petroleum-based products.

Because subsidiaries under the same corporations are both the buyers (refiners in the downstream
petroleum industry) and the sellers (producers in the upstream petroleum industry), they can fix and
pad prices through hidden transfer pricing every step of the way. Estimates show that 67% of world
trade in oil is done through term contracts, or transactions between subsidiaries of the same
companies, bypassing exchanges over world markets.

Such control over pricing has allowed big oil companies in the past to shock the globe with the highest
ever world oil prices. The relentless increases have allegedly been caused by rising demand,
particularly by Chinese and Indian markets; the lack of spare supply capacity; political tensions in the
Middle East and North Africa; the financial crisis of now government-sequestered, Russian oil giant
Yukos; stricter environmental regulations, especially in the United States; and scarcer oil. But these
factors explain only to a certain degree the latest surge in world oil prices; they do not explain why
oil prices are high to begin with. These popular claims rule out the control and influence of giant
transnational oil corporations, which are almost invulnerable to the law of supply and demand and to
the vagaries of speculation.

Locally, the Big Three -- Petron and the local subsidiaries of Shell and Caltex -- claim that they have
not overpriced based on the price increases of Dubai oil exchanged over the spot market and on Peso-
Dollar exchange rate fluctuations. Moreover, they have denied the existence of a local cartel, alleging
that they have merely and coincidentally followed the movements of world oil prices. They claim
these even as they are minimally affected by prices in world markets and even as they are able to
trade in the same currency between subsidiaries.

The privatization, liberalization, and deregulation of the oil industry have allowed oil price increases
to go unchecked. With petroleum as a sensitive commodity --which price directly affects the cost of
almost all other commodities and services, including food, housing, social services and transportation
~- deregulation has given transnational oil corporations even more leeway to influence the country’s
cost of living, livelihoods, business and commerce, employment, and the National Budget.

For example, on June 18, 2013, escalating world oil prices have prompted oil firms operating in the
Philippines to hike prices of gasoline (P1.05), diesel (P1.45) and kerosene (P1.30) per liter, inclusive
of the 12-percent value-added tax. Even when international oil prices slumped in 2015 the
corresponding downward adjustment of local oil prices was hardly commensurate to the price
‘movement in the international oil market.

Pil onal Oil Company (PNOG) and Saul Aramco cach owned 40% of Pete’
indiviualstckhollers. In 2008, Saud Aramco sl is ene stake to the Ashman: Group, a Londo
percent more when it made a required tender offer to other shareholders, fora total sake of SI percent. As of Jly 208, Ashmore, through its SEA Refinery
Floklings BV, had 2 50°57 percent of Petron’ stock Ashmore's payment was made on December 208. In December 2008, Ashmore acquired PNOC'S
‘0-pereent stake, On December 2008, San Miguel Corporation tages of negotiations with the Ash cup to Buy up #9 $0.1
pereent of Petron

nck, with the remaining 2's held by thowrands of
tcl investment group. Then Ashmore added 1

ras in the fi

‘On March 80,2012, Petron acquied Esso
Malaystan opera

Mobis downstream business in Malysa with XCEL Petroleum In January 2013, Petron oficial opened their
rebranding all Esso and Mobil stations across Pinsuli Malays



Indeed, there is a pressing need for government to regulate and intervene in the oil industry to protect
the majority of Filipinos from runaway increases in oil prices. But due to the control of monopolistic,
transnational corporations, regulation can only be effective and truly beneficial if it is part of a
program to institutionalize national oil industrialization, so that local oil prices can be brought down
from the unreasonable and unjustifiable levels set by giant transnational oil corporations and can be
prevented from falling prey to further monopoly pricing and manipulation.

This Bill requires, as an imperative for an urgent and long-term response to the looming oil crisis, the
renationalization of Petron Corporation, so that the valuable government asset can truly fulfill the
responsibility of the State to ensure public welfare through fair and regulated prices.

This Bill is part of a range of bills to institute the policy of independence from monopoly pricing by
transnational oil corporations through the regulation and the gradual industrialization of the petroleum
industry. The other bills call for: the regulation of the petroleum industry through the creation of an
oil regulatory council; the creation of a buffer fund solely to cushion drastic increases in petroleum
prices; the centralized procurement of all imported crude oil and refined petroleum products; and the
jon of investment, taxation, and other laws.

Approved,
a* \ '
REF, CARTOS ISAYANI T-ZARA
BAYAN MUNA Party-List
FERDINAND R. GAITE REP. EUFEMIA C. CULLAMAT
BAYAN MUNA Party-List BAYAN MUNA Party-List
vpn Natio! Company (PNOC) and Sas Aramco each owned 40% of Petros tsi stich, wth the remaining 2% ld by thousands of

iinvidual stockholder. In 2008, Saudi Arumco sold its etie stake to the \shimore Group, a Londomisted investment group. Then Ashmore added 11
irtcant more when i made arated lender offer to other shareholders, fora total stake of 51 percent. As of July 2008, Ashmore, through its SEA Refinery
[iota BV, had 50137 pert of Petron’ stock Ashmoe's payment was made on December 2008." In December 2008, Ashmore acquired PNOCs
‘Mipertent stake: On Decembet 208, San Migacl Compomtion sid t was in the final tages of negotiations with the Ashmore Group to buy up to 50.
percent of Petron.

(On March 30,2012, Petron acquired I'ssonMobisdanwnstcam busin in Mabysia with XCEL Petroleum. In January 2013, Petron offically opened their
alaysian operations, rebranding all Esso and Mobil stations across Bcninsular Malas 5



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No. 244

Introduced by
BAYAN MUNA Party-List Representatives CARLOS ISAGANI T. ZARATE,
FERDINAND R. GAITE and EUFEMIA C. CULLAMAT

AN ACT
RENATIONALIZING PETRON CORPORATION

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Short Title. - This Act shall be known as the “Petron Renationalization Act of
2019”.
SECTION 2. Declaration of Policy.-

I Social Justice

Article Il, Section X of the 1987 Constitution states: “The State shall promote social justice in all
phases of national development.”

Article II, Section XIX of the 1987 Constitution states: “The State shall develop a self-reliant and
independent national economy effectively controlled by Filipinos.”

I. National Economy and Patrimony

Article XI, Section I of the 1987 Constitution states: “The goals of the national economy are a
more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount
of goods and services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the under-privileged.”

Philippine Nasional OiL Company (PNOC) and Sau Aramen each owned 40
indivi stockholder. In 2008, Saudi Aramco sok its entire stake mon Group, 2 London-lsted investment group. Then Ashmore added 11
percent more whenit made a required tender offer wo other sharchollers, fora total stake of 1 percent. As of July 2008, Ashmore, through its SEA Refinery
Fooling: BV, had 25037 pereent of Petros stock Ashmoge's payment was made on December 208. Ia December 2008, Ashmore acquired PNOC'S

= On December 208, San Migusl Cogporaton sd ie was in the final stages of negotiations with the Ashmore Group to buy up 0 50.1

Petron’ cutstanding stock, wth the remaining 20% held by thowsands of

(On March 30,2012, Petzon acquie :xsonMobif's doswnstsam business in Malysa with XCEL Petroleum. In January 2013, Petron officially opened their
Malaysian operations, rebranding all Esto and Mobil stations across Peninsular Malays.
4


Article XII, Section XIV of the 1987 Constitution states: “The State shall regulate or prohibit
monopolies when the public interest so requires. No combinations in restraint of trade or unfair
competition shall be allowed.”

Article XI, Section XVIII of the 1987 Constitution states: “The State may, in the interest of
national welfare or defense, establish and operate vital industries and, upon payment of just
compensation, transfer to public ownership utilities and other private enterprises to be operated by
the Government.”

Consistent with the foregoing, petroleum and petroleum products, being vital to national security
and to industrialization and their supply at reasonable prices being essential to the general welfare,
it is hereby declared to be the policy of the State to renationalize Petron Corporation and align its
policies to fulfill the following objectives and purposes:

(a) — Toexplore, exploit, and promote the exploration and exploitation of indigenous sources of
petroleum and ensure that locally extracted crude oil, locally refined petroleum, and locally
processed petroleum products primarily and singularly serve the country’s local petroleum
requirements;

(b) To assure that the country shall have a proper, adequate, and continuous supply of crude oil
and refined petroleum products under the most economic and competitive terms possible,
considering all available sources of supply and the country’s total domestic petroleum requirements,
and for this purpose to engage in the transportation, storage, importation, exportation, refining,
supply, sale and distribution of crude oil, refined petroleum and petroleum based products, whether
imported or produced by local refineries;

(©) Toassure the public of reasonable and justified prices for petroleum products;
(@) To gradually increase the local petroleum refining capacity;

(©) To build the local upstream oil industry by upgrading research and development facilities,
updating technological expertise, and wholly or jointly finance local petroleum exploration projects;

(To integrate the local downstream petroleum industry with the developing local upstream oil
industry; and

(g) To encourage the participation of local private capital, technology, and labor.
SECTION 3. Definition of Terms.-

(a) “Petroleum” shall refer to the naturally occurring mixture of compounds of hydrogen and
carbon with a small proportion of impurities and shall include any mineral oil, petroleum gas,

Philippine National Oil Campans (PNOC) and Sau ame each owned 40" of Petron’ utstaning sock, with the remaining 2% held by thousands of
indivkualstockhollers. In 2008, Saud Arameo sok is entice stake to the Ashmore Group, a London-tsted investment group. Then Ashmore added 11
percent more whenit made a required tender oer to other shareholders, fora total stake of 1 percent. As of July 2008, Ashmore, through its SEA Refinery
longs BV, had 25037 peecent of Petros stock" Asheore's payment was made on December 2008. In December 2008, Ashmore acquired PNOC'S
4b-pereen stake. On December 2008, San Miguel Corporation sid it was ithe Gal stages of negotiations with the Ashmore Group to buy up 10 50.4
pereent of Petron?

‘On March 30,2012, Petron acquied LssonMabil
Malaysian operations, rebranding all Esso and

Jusmnstream busines in Malaysia with XCEL Petroleum I January 2013, Petron offiialy opened their
ations across Prise Malays

s


hydrogen gas, bitumen, asphalt, mineral wax, and all other similar or naturally-associated
substances, with the exception of coal, peat, bituminous shale and/or other stratified mineral fuel

deposits;
(6) “Crude oil” or “oil” shall be used interchangeably with “petroleum”.

(©) “Petroleum products” shall mean products formed in the course of refining crude petroleum
through distillation, cracking, solvent refining and chemical treatment, coming out as primary
stocks from the refinery like: liquefied petroleum gas (LPG), naphtha, gasolines, solvents,
kerosenes, aviation turbine fuels, automatic/industrial diesel oils, industrial/residual fuel oils, waxes
and petrolatums, asphalts, bitumins, coke and refinery sludges, or such refinery petroleum fractions
which have not undergone any process or treatment as to produce separate chemically defined
‘compounds in a pure or commercially pure state; and to which various substances may have been
added to render them suitable for particular uses, provided that the resultant product contains not
less than 50% by weight of such petroleum products.

(4) "Philippine national" shall mean a citizen of the Philippines, or a domestic partnership or
association wholly owned by citizens of the Philippines; or a corporation organized under the laws
of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and the
entitlement to vote is owned and held by citizens of the Philippines; or a corporation organized
abroad and registered as doing business in the Philippines under the Corporation Code of which one
hundred percent (100%) of the capital stock outstanding and the entitlement to vote is wholly
owned by Filipinos or a trustee of funds for pension or other employee retirement or separation
benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will
accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-
Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered
enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each
of both corporations must be owned and held by citizens of the Philippines and at least sixty percent
(60%) of the members of the Board of Directors of each of both corporations must be citizens of the
Philippines, in order that the corporation shall be considered a Philippine national.

SECTION 4. Specific Policy Objectives of Petron.- The specific policy objectives of Petron
Corporation to fulfill this declaration of policy shall include, but shall not be limited to, the
following:

(a) _ Especially for Petron’s socially and economically sensitive products, such as liquefied
petroleum gas (LPG), naphtha, gasolines, kerosenes, automatic/industrial diesel oils, and
industrial/residual fuel oils, to adopt a pricing policy that shall keep the prices of crude oil and
petroleum products, sold in wholesale or retail to local consumers, as socially and economically
viable as possible and as allowed by the fulfilment of the objectives of this Act;

(b) To control cartel and monopoly pricing, and thus check unreasonably high prices;

Philippine National Oi Company (PNOC) and Sai Arames each owned 4M of Petron’ oustanding stack, with the emaning 20% hel by thousands of
individual stockhokles. In 2008 Saudi Aramco told it entire stake tothe Ashmore Group, a Londoo-tsted investment group. ‘Then Ashmore added 11
Porcent more when it made a ried tender offer o other shareholders, fora total stake of $1 percent. As of July 2008, Ashmore, through its SEA Refinery
Fioklings BV, had a 507 percent of Petrons stock Ashmoe’'s payment was made on December 2008! In December 2008, Ashmore acquied PNOCs
‘Abvpercentsake- On December 2008, San Migusl Gogporation sid it was in the Binal stages of negotiations with the Ashmore Group to buy up to 51
percent of Peron

‘On March 30,2012, Petson acquired [sonMobi'downstsam business ie Nalaysia with XCEI. Petroleum. In January 2013, Peta ofall opened their
“Malaysian operations, rebranding al sso and Mobil staons across Psninsuar Malays
6


(©) To raise and promote the local capacity for exploration, refining and exploitation,
processing, and development of petroleum;

(4) Before or after the full nationalization of Petron, or once deemed feasible and cost-effective
by the Board of Directors of Petron, to invest, through partnerships, joint-ventures, mergers, or
acquisitions, in entities involved in activities directly related to the policies of Petron provided
under this Act. Such investments shall prioritize local Philippine nationals and government agencies
such as the Philippine National Oil Company (PNOC);

(e) To encourage the participation of local private capital by prioritizing such investments in
joint ventures it shall undertake consistent with the provisions of this Act; and

(To prioritize Filipino capital, technology, and labor through the investment decisions and
conduct of operations of Petron.

SECTION 5. Transitory Duty of PNOC upon the Effectivity of this Act.- The Philippine National
Oil Company (PNOC) shall, upon the first year of effectivity of this Act, reacquire equity in Petron
Corporation by at least 51% of its total subscribed stocks singularly from the 9% owned and/or
traded by individuals or from the 40% owned by the Ashmore Group, or from the 50.1% of San
Miguel Corporation or in a combination of which sum is at least 51% of the total subscribed stocks
of Petron Corporation.

PNOC shall initially buy back the shares at the Philippine Stock Exchange. If the minimum 51% is
not repurchased, the PNOC shall cause the expropriation, subject to just and fair compensation, of
Petron stocks from Ashmore, San Miguel Corporation or whoever/whichever has
possession/ownership/control/custody thereof.

For the first year upon the effectivity of this Act, four billion pesos (PhP4,000,000,000.00) shall be
appropriated by the National Government for the initial repurchase of Petron stocks.

SECTION 6. Full Nationalization of Petron Corporation.- The Philippine National Oil Company
(PNOC) shall reacquire 100% ownership of Petron Corporation within a period of four (4) years.
Reacquisition costs shall mainly be funded by the National Government, through annual budget
appropriations. The secondary source for the full repurchase shall be the expanding earnings of
PNOC from its increasing stake in Petron Corporation over the period of reacquisition.

To achieve this objective, the PNOC is hereby required to aggressively and consistently improve the
operations and income of Petron Corporation in line with the policies of this Act, The eventual
corporate merger of the PNOC and Petron Corporation shall hereby be a matter of policy.

SECTION 7. General Repealing Clause.-

Phiiopinc National Oil Campany (PNOG and Saud Aramcn each owned 40%
indivdual stockholders. In 2008, Sau Aramco sold is entre sake to the Ashmoxe- Group, a Londonisted investment group. Then Ashmore added 11
porcent more whenit made a required tender offer to other sharcholler, fora ttl stake of 1 perent. As of July 2008, Ashmore, through its SEA Refinery
loMings BV, had 2507 percent of Petros stock Ashmoge's payment was made on December 2008. In December 2008, Ashmore acquired PNOCS
‘b-pereen stake. On December 2008, San Migusl Corporation sid i was ithe final stages of negotiations with the Ashmore Group to buy upto 50.1
percent of Petron

te ing sth, with the remaining 20% held by thousands of

‘On March 30,2012, Petron acquired [sonMobis downstrsam busines in Malasa with XCEL Petroleum. In January 2013, Petron officially opened their
Malaysian operations, rebranding all Esto and Mobil stations across Peninsular Malays
7


(a) Anyand all articles, sections, and provisions under Republic Act No. 8479, otherwise
known as the “Downstream Oil Industry Deregulation Act of 1998,” contrary or inconsistent with
this act are hereby repealed.

(b) _Allother laws, decrees, executive orders, rules and regulations, or parts thereof inconsistent
with any of the provisions of this Act, are hereby repealed or amended accordingly.

SECTION 8. Separability Clause.- If, for any reason, any section or provision of this Act is
declared unconstitutional or invalid, such other sections or provisions not affected thereby shall
remain in full force and effect.

SECTION 9. Effectivity. - This Act shall take effect fifteen days after its complete publication in at
least two (2) national newspapers of general circulation.

Approved,

Philippine National Oil Company (PNOC) and Saul Aramca cach owned 4? of Petron’s outstanding toc, with the remaining 20% held by thousands of
indivival stockholders. In 2008, Saud Aramco sold is entire stake tothe Ashmore Group, a Londoo-tsted investment group. Then Ashmore added 11
percent more when it made a required tender offer to other tharchollrs, fora total stake of SI percent. As of Jaly 2008, Ashmore, through its SEA Refinery
loldings BV, had a 50.57 percent of Petron's tock" Ashmore's payment was made on December 2908. In December 2008, Ashmore acquired PNOC's
‘b-pereen stake. On December 2008, Sin Migusl Coqporation sid it was inthe inal stages of negotiations with the Ashmore Group to buy up to 50:1
percent of Petron

‘On March 30,2012, Petron acquired LsxsonMais dosenstscam businss in Malaysia with XCEL. Petroleum. In January 2013, Petron offically opened thei
“Malaysian operations, rebranding all Esto and Mobil stations across Psninsuar Malaysia