Russian crude oil has come to the rescue of the Philippines as oil supply from the Middle East becomes harder to secure with the near total closure of the Strait of Hormuz. 

Petron Corporation disclosed on Monday, March 30, details of the crude oil shipment which arrived last week via an oil tanker, Sara Sky, as captured by French news agency Agence France-Press (AFP) lensman Ted Aljibe on March 26. 

AFP reported the ship was carrying 700,000 barrels of crude from Russia’s Eastern Siberia-Pacific Ocean oil or ESPO pipeline and consigned to Petron. According to the ESPO website, the pipeline “is a pioneering feat in the oil industry, designed to transport crude oil from Eastern Siberia to the Pacific Ocean, ensuring a stable and efficient supply of energy to the Asia-Pacific markets.”

Petron, in its disclosure, gave more details about how it was able to secure the shipment. 

The shipment is part of 2.48 million barrels of crude oil from Russia that the Marcos administration is procuring following the declaration of a state of national emergency on March 24. Energy Secretary Sharon Garin said the government had successfully negotiated to bring 1 million barrels of oil good for a week, part of the 2 million being sought under the emergency. The Philippines’ had a daily demand of around 200,000 barrels of diesel in 2024, based on Deparment of Energy (DOE) data.

Petron said its decision to buy Russian crude oil came after it received information that two of its shipments of crude oil could not pass through the Strait of Hormuz after the US-Israel attacked Iran on February 28, prompting the Islamic Revolutionary Guard Corps Navy of Iran to close the Strait of Hormuz. 

Petron was informed about the first scuttled shipment of 2 million barrels on February 28, while the second shipment of 2 million barrels of crude oil was canceled on March 7, a week after the war began. 

In a Senate PROTECT committee hearing last Thursday, Petron general manager Lubin Nepomuceno, without specifying at that time that it was from Russia, said “Petron managed, “albeit very challenging, to procure additonal crude and finished products.”

“Suppliers are bidding out available volume resulting in higher replacement costs. In addition, other costs including freight, import premiums, and insurance have substantially increased,” Nepomuceno said. 

Petron, in its disclosure, defended its move to buy Russian crude oil amid a US embargo on sales of Russian crude oil that has since been eased.

“Acting out of extreme necessity and considering the abrupt cut in supply, the Corporation was thus constrained to procure Russian crude oil, which at that time was available and the only viable crude, to protect not only its interests as a company but, more importantly, the security and interests of the nation,” it said.

How critical is Petron in terms of the Philippines fuel supply requirements? 

• It has a 30% market share of the Philippines’ fuel supply
• It operates the only oil refinery located in Bataan

Petron said “a refinery shutdown would have led to “serious nationwide fuel shortages, sharp price spikes, panic buying, disruption to transportation and logistics, and broader economic dislocation-outcomes that would have had serious consequences for households, businesses, and critical public services” given that the Philippines imports 98% of its crude oil requirements from the Middle East. 

Petron said it worked closely with the DOE and the Department of Finance (DOF) on buying the Russian crude oil. 

It also said that the Bangko Sentral ng Pilipinas issued a letter saying there is no law against using foreign currency for the transaction.  

“Based on these engagements, the Corporation’s understanding was that there were likewise no domestic legal prohibitions on the importation of Russian crude oil,” Petron said. 

It added that if the current tight supply crisis continues “and alternative crude sources remain unavailable or insufficient, the Corporation may again be compelled to consider purchases of Russian crude oil to augment the national fuel supply and directly mitigate the inimical consequences resulting from the absence of a stable and reliable source of crude.”

Other petroleum companies operating in the Philippines testified in the Senate last week that their inventories were only good until April, and nothing is assured beyond that as other oil exporting countries look to protect their own requirements.

As of March 20, the Philippines’ fuel inventory was down to 45 days from nearly two months supply before the war began.

– Rappler.com