“They could ensure a steady supply of crude via Aramco, and so therefore if they held an ownership interest in Petron, they would make sure that in fact Petron would be well-supplied with oil.”
by Ducky Paredes
Senator Mar Roxas spoke on the floor of the Senate last Monday on the forthcoming sale of the forty percent of Petron that in 1994 the government sold to the Kingdom of oil-rich Saudi Arabia so that the Saudis would become our strategic partner in oil. What could be better than that? So, Mar now asks, why is this part of Petron – the Saudi holdings – being sold to a non-entity in oil and no why does no one in government seem unduly alarmed at this,
Here is a part of that Mar Roxas speech:
“One week from now, next Monday, unless Philippine National Oil Company exercises its right of first refusal, nearly 40% of Petron will be owned by Ashmore Ltd. Normally, this would be an intercorporate financial transaction, one buyer purchasing the ownership interest of an existing investor. But this is not an ordinary time, nor is this an ordinary transaction. Our daily demand for oil is roughly 330,000 barrels per day, 180,000 of which are produced from Petron’s refinery. Petron is also reputed to have a 40% share of the domestic oil or gasoline-diesel market.
“The question that I bring to the attention of the body through this availment of personal and collective privilege is: Why are we – meaning the government – not exercising our right of first refusal? In 1994, when the government chose to sell 40% of Petron shares to Saudi Arabia through this Aramco subsidiary Aramco Overseas, the rationale was, we will be selling this strategic ownership position in Petron because Saudi Arabia had much resource in terms of oil. They could ensure a steady supply of crude via Aramco, and so therefore if they held an ownership interest in Petron, they would make sure that in fact Petron would be well-supplied with oil. In fact, diplomatic pilgrimages by high officials of our country, including presidents, to Saudi Arabia , always had as a parallel objective, the ensuring of good relations with Saudi Arabia , and ensuring the regular supply of oil to Petron.
“In contrast, Ashmore is a financial company known contemporarily as a hedge fund. They have no crude oil, they have no petroleum operations, and their business is simply the buying and selling of shares of stock in various corporations engaged in various businesses engaged all over the world. They do this for a valid objective, which is the profit motive, and in so doing, they will certainly ensure that they will obtain their profit from this transaction. The transaction amounts to about $550 million, in short a price nearly the same as what Saudi Aramco paid for the same percentage ownership in 1994.
“At a time when oil has breached $100 a barrel. At a time when there is great uncertainty relative to the supply and price of oil, would it not be prudent for the government, to have exercised its right of first refusal, in order to place the strategic ownership position in Petron in ‘parallel strategic hands,’ perhaps to Brunei, the United Arab Emirates, Indonesia, Malaysia and others that have access to oil. If we treat this sale of shares by Saudi Aramco to Ashmore as purely a financial transaction, then the rationale for having sold this to begin with in the first place in 1994 is now rendered not only obsolete but rendered ineffective.
“What then can we look forward to if Ashmore owns a 40% share in Petron? Indeed, we have taken this path of least resistance long enough. One investor wants to sell his ownership position to another, that’s well and good. But this pertains to a company that is 40%-owned by the government, that has about 40% market share in the domestic oil industry, and the government, in selling their shares to begin with, saw that they wanted in fact to have this right of first refusal to ensure that the 40% ownership interest would always be in ‘friendly hands.’ I’m not so sure that a nameless, faceless hedge fund based in London can be considered friendly, especially in these times of high oil prices and scarcity of supply.
“Perhaps there is nothing more to this transaction than what is reported in the media. But certainly, I think, we are owed an explanation why the government looks upon it as benignly as it has, otherwise it ought to exercise its right of first refusal, and place this through a secondary sale to other friendly hands.”
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This is Mar Roxas, the experienced finance market trader speaking. Clearly, if the government were serious about this deal for this country, it would be doing everything to preserve the perceived gains that were there when the Saudis owned the 40%. What would Ashmore do for us? This is like the Saudis getting up from the table to be replaced by someone who brings nothing interesting to out table. Why are we letting this happen,
We would be at the utter mercy not only of the OPEC but also of the financial buccaneers – ably represented by Ashmore — that roam our world’s financial seas.
One can think of so many companies that would be a better partner for us in Petron.
Think on this: What if the grandson of a Chinaman who rode a donkey into Marikina to acquire his vast landholdings might have made a deal with someone like Ashmore to acquire the Saudi’s 40 % on the promise that eventually, he and some of his dearest associates would acquire 11 percent of the Petron shares in the local market which are owned by thousands of Pinoys (who would actually sell if given a good enough offer). Then, with 51 % of the company, they and Ashmore could do with Petron as they liked.
Thus would another grand dream — fed to us during President Ramos’ term — have again turned into stardust.
And, why is the Senate Bluie Ribbon Committee not even looking into this? Has it perhaps gotten too much on its plate for it to ingest? Without passing judgment on anyone or anything, this could well be a sweetheart deal which, again — as has so often happened to us Pinoys – will end up with most of us feeling definitely and seriously screwed. I can only hope that I am very wrong and that the only reason no one seems poised to make money on this is that nobody knew it was coming.
More than likely, though, someone very big is making money on this deal without including the rest of us.
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hvp 05.06.08)
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