PETRON Corp. said the state-run Philippine National Oil Company (PNOC) violated three lease contracts when it sought to nullify the renewal clauses in its concession agreement.

In a statement issued on Tuesday, the country’s largest oil refinery company stressed its agreements with PNOC covering the operations of its $3-billion refinery in Bataan, 24 bulk plants, and 67 gasoline stations in the country are valid and binding.

“It is Petron’s position that the lease agreements for the three properties and the renewal clauses therein are valid and binding. They are not in violation of any law nor manifestly and grossly disadvantageous to the government. Accordingly, your letters — because they deny without legal causes Petron’s contractual right to renew — constitute fundamental breach of the three lease agreement,” Petron general counsel Joel Angelo C. Cruz said in a letter sent to PNOC President and Chief Executive Officer Reuben S. Lista.

The contracts started about 24 years ago when Petron was still owned by PNOC.

The provisions in question are Sections 2 and 3 of the lease agreement, which pertain to the rental rates for the 32.2-hectare land being leased by Petron from PNOC.

The statement follows Mr. Lista’s letter asking Petron to waive provisions in the lease agreements — set to expire in 2018 — because they are inequitable.

“So that the abandonment and clean-up of the sites may already be discussed and completed before the expiration of the lease agreements next year,” Petron quoted Mr. Lista as writing.

Petron further said that PNOC has been disregarding Petron’s rights when Mr. Lista supposedly offered the properties covered by the agreement to interested independent oil companies.

“As you very well know, the long-term lease by Petron of the subject properties and the properties denominated as Refinery Properties which are the subject of a third lease agreement between Petron and PNOC was the primary consideration for Petron’s conveyance of said properties at book value to PNOC. Hence, the consideration for Petron’s leasehold rights is not only the rental payments provided for in the Lease Agreements but the conveyance of the properties to PNOC,” Mr. Cruz said.

Petron President and Chief Executive Officer Ramon S. Ang earlier said the company is even planning to increase the size of the property it is leasing from the PNOC to give way for the expansion of its refinery in Limay.

Mr. Ang had said the refinery expansion would require an additional 100 hectares, some of which could come from PNOC’s property.

Petron generated P8.2 billion in consolidated earnings in the first half of 2017, 56% higher year on year as it sustained sales volume growth from both Philippine and Malaysian operations.

Shares in Petron added two centavos or 0.20% to close at P10.14 each at the Philippine Stock Exchange on Tuesday.


Francia, A. B. (October 11, 2017). Petron says PNOC violated 3 lease contracts. Business World. Retrieved from http://bworldonline.com/petron-says-pnoc-violated-3-lease-contracts/

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