DOF exposes 'onerous' lease deal for Chevron's oil depot in Batangas

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The Department of Finance says Chevron Philippines has been benefiting from a lopsided lease deal signed by then-President Ferdinand Marcos for its oil depot in Batangas, with the industry giant paying peanuts to the government.

Metro Manila (CNN Philippines, January 21) — The Department of Finance (DOF) exposed Chevron Philippines for its "onerous" lease deal for a 120-hectare lot in Batangas, with the global oil firm paying peanuts to the government for the past 44 years.

Finance Secretary Carlos Dominguez III said Chevron, which runs Caltex gas stations nationwide, secured the property owned by government in San Pascual town for a bargain. He said Chevron's contract with the Batangas Land Co. Inc., a subsidiary of the state-run National Development Company (NDC), allowed the unit of the multinational oil player to pay a "miniscule" rent at ₱0.74 per square meter (sqm) every month.

The DOF said the current fair market value in the industrial park where Chevron's oil import terminal sits — the main hub of its local operations — should be around ₱17.90 per sqm.

Chevron, an American chain of fuel refilling stations, secured the Batangas lot through the 1946 Bell Trade Act which granted the right for US nationals to own land here, the DOF said. When the trade deal expired, the firm was given "preferential treatment" to occupy a huge parcel of land inside the Batangas industrial park.

Then-President Ferdinand Marcos granted a 50-year lease deal with Chevron with lease rates set at a minimum of 2.5 percent of the property's value in 1974. Marcos' Letter of Instruction No. 276 said the rent should include the real estate taxes for the property, and included a provision that annual rentals must be paid based on the higher revaluation of the property.

"At ₱10.66 million per year since 2010, the rent Chevron has been shelling out is only around 4 percent of the ₱257.76 million per year that current fair market rental rates in the area would suggest," the agency said in a statement.

For its part, Chevron Philippines denied the allegations.

"The Chevron Philippines lease contract with BLCI (Batangas Land Company, Inc.) on the Batangas property was entered into in compliance with all Philippine laws and regulations. As one of the pioneer energy companies in the Philippines which has been operating here for over a hundred years, our commitment to the Philippine market remains strong. We will maintain open communication with the government, an important and valued partner, on this matter," said Raissa Bautista of Chevron Philippines corporate affairs in a statement.

All contracts between government and the private sector are now under scrutiny following President Rodrigo Duterte's order last year, which has been hastened by his anger over water concessionaires Maynilad and Manila Water as their deals allowed them to demand payment for losses incurred from the state.

READ: Chevron PH confirms oil leak in Batangas refinery

Dominguez, who sits as a member of NDC's board of directors, said Chevron paid a measly ₱146.51 million in rental fees for the past 44 years, or an average of ₱3 million annually. The DOF estimates that the property is now worth between ₱4.9 billion to ₱5.3 billion.

"Based on current standards that the State imposes on similar contracts, to have a rental yield of less than 1 percent is surely grossly disadvantageous to the government and the Filipino people," Dominguez said.

He noted that the lease rate had only been increased in 2010, which brought the annual payments to ₱10.66 million since then. This is well below DOF's estimates that the rental fee should be above ₱20 million monthly, or ₱257.76 million per year.

Chevron used to own 45 percent of the explortation and extraction operations in the Malampaya natural gas field off Palawan. Last year, it sold the stake to businessman Dennis Uy's Udenna Corporation.

READ: COA orders Malampaya consortium to pay ₱146-B in taxes

The company runs nearly 700 Caltex gas stations in the Philippines and provides jet fuels for airlines at the Ninoy Aquino International Airport and the Mactan Cebu International Airport.