The Oil Industry

The oil or petroleum industry may be divided into 3 sectors: the Upstream,
Midstream and the Downstream.

 The upstream sector includes searching for potential underground or

underwater crude oil and natural gas fields, drilling exploratory wells, and
subsequently drilling and operating the wells that recover and bring the
crude oil and/or raw natural gas to the surface.

 The midstream sector is commonly associated as the downstream. (NO)

Technically, the midstream sector is the transportation and shipping of
crude oil at processing plants. Oil may be transported by pipeline, barge,
oil tanker or truck. ( This are refining companies : Shell , Caltex , Petron/
Major Players)

 The downstream sector is the one closest to the consumers. This sector
involves the actual processing, selling and distribution of the natural gas
and oil based products. This is the stage where petroleum crude oil is
refined and the raw natural gas are processed and purified.(“Minor
Players”/ Smaller gasoline companies /stations )

Products of the downstream sector reach the consumers in the form of:
 Liquefied Petroleum Gas (LPG)
 Liquefied Natural Gas (LNG)
 Gasoline
 Diesel Oil
 Jet Fuel
 Heating Oil
 Other Fuel Oils
 Propane
 Asphalt
 Synthetic Rubber
OPEC (Oil and Petroleum Exporting Countries)

 (OPEC) is a permanent, intergovernmental Organization, created at the

Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait,
Saudi Arabia and Venezuela.
OPEC Membership

 According to its statutes, OPEC membership is open to any country that is

a substantial exporter of oil and that shares the ideals of the organization.
TOP 10 OIL SUPPLIERS

1. Saudi Arabia: US$1.6 billion (31.6% of total crude oil imports)

2. Kuwait: $1.4 billion (26.6%)
3. United Arab Emirates: $1.2 billion (23%)
4. South Korea: $285.5 million (5.5%)
5. Malaysia: $259.1 million (5%)
6. Qatar: $150.9 million (2.9%)
7. Russia: $88.5 million (1.7%)
8. Oman: $69.5 million (1.3%)
9. China: $45.3 million (0.9%)
10. Nigeria: $33.7 million (0.7%)

An oil refinery or petroleum refinery is an industrial process plant where crude

oil is transformed and refined into more useful products such as petroleum
naphtha, gasoline, diesel fuel, asphalt base, heating oil, kerosene, liquefied
petroleum gas, jet fueland fuel oils.

Oil Refineries in the Philippines:

 Bataan Refinery (Petron), 180,000 bbl/d (29,000 m3/d)

 Tabangao Refinery (Royal Dutch Shell), 110,000 bbl/d (17,000 m3/d)
 Batangas Refinery (Caltex (Chevron)), 86,000 bbl/d (13,700 m3/d) - ceased
operation in 2003 to give way to a P750-million finished product import
terminal
 REPUBLIC ACT NO. 8479

“AN ACT DEREGULATING THE DOWNSTREAM OIL INDUSTRY AND FOR OTHER
PURPOSES”

Section 1. Short Title. – This Act shall be known as the "Downstream Oil Industry
Deregulation Act of 1998."

CHAPTER III
ANTI-TRUST SAFEGUARDS, OTHER PROHIBITED ACTS AND REMEDIES

Section 11. Anti-Trust Safeguards. – To ensure fair competition and prevent

cartels and monopolies in the Industry, the following acts are hereby prohibited:

(a) Cartelization which means any agreement, combination or concerted

action by refiners, importers and/or dealers, or their representatives, to fix
prices, restrict outputs or divide markets, either by products or by areas, or
allocate markets, either by products or by areas, in restraint of trade or
free competition, including any contractual stipulation which prescribes
pricing levels and profit margins; (Ex. OPEC)

(b) Predatory pricing which means selling or offering to sell any oil product
at a price below the seller's or offeror's average variable cost for the
purpose of destroying competition, eliminating a competitor or
discouraging a potential competitor from entering the market.

CHAPTER IV
POWERS AND FUNCTIONS OF THE DOE AND DOE SECRETARY

Section 14. Monitoring. – (a) The DOE shall monitor and publish daily international crude
oil prices, as well as follow the movements of domestic oil prices. It shall likewise monitor
the quality of petroleum products. Bureau of Product Standards of the DTI, together
with the Department of Environment and Natural Resources (DENR), the DOE, the
Department of Science and Technology (DOST), representatives of the fuel and
automotive industries and the consumers, shall set the specifications for all types of fuel
and fuel-related products to improve fuel composition for increased efficiency and
reduced emissions.

Section 17. Buffer Fund. – The President may, when the interest of the consumers
so requires, taking into account the rise in the domestic prices of petroleum
products, use the "Reserve Control Account" as a buffer fund in an amount not
exceeding Two billion nine hundred million pesos (P 2,900,000,000.00) to cover
increases in the prices of petroleum products, except premium gasoline, during
the Transition Phase over the prices prevailing as of the date of the effectivity of
this Act. The "Reserve Control Account" refers to a lump sum collation of reserve
impositions deducted from the appropriations approved by Congress for the
operation of the government and the implementation of projects and
programs.

Section 18. Automatic Oil Pricing Mechanism. – To enable the domestic price of
petroleum products to approximate and promptly reflect the prices of oil in the
international market, an automatic pricing mechanism shall be established. To
this end, the following laws are hereby amended.

Malampaya Project (Supported by Shell )

- Water Gas-to-Power project is one of the largest and most significant

industrial endeavors in Philippine history
- The Malampaya project has been drawing natural gas from beneath the
seafloor of the West Philippine Sea
(It fuels five power station plants with a total generating capacity of 3,200
megawatts)
- Located 50 kilometers offshore Northwest Palawan
- Began its commercial operations in 2001
- Contributed over USD$10 billion in revenues to the Philippine government
while powering up to 30% of the country’s growing electricity
requirements. It has been providing around 30 percent of the country’s
energy needs. (This even peaks to 50 percent during the summer months.)
BENEFITS

1) reduce its oil imports

2) ensure a more stable supply of energy
3) give cleaner source of power from natural gas
(The natural gases supplies five power plants in Luzon)
4) helps various communities develop sustainable social and
environmental programs
(Sustainable supply of cleaner energy are drawn from an indigenous
resource)

* SERVICE CONTRACT 38 (AKA Malampaya Gas Project) – New Discoveries

and Various Territories (Shell was looking at the existing Service Contract 38 or
the Malampaya gas project that will provide them new discoveries and “various
territories.”)
TERMS TO REMEMBER :

OPEC – Oil and Petroleum Exporting Countries

OPSF – Oil Price stabilization Fund (BUFFER FUND )

PPSF – Petroleum Price Stabilization Fund

Oil – eVAT / Tariff (imported oil from OPEC)

 20 % goes to the Gov.