November 30, 2014

Supreme Court rules on Pandacan case

Voting 10-2, the Supreme Court (SC) declared as unconstitutional and invalid a Manila City Ordinance No. 8187 which allows the Pandacan oil terminals to stay in the city. The decision paves way for the closure of the Pandacan oil depot, a critical storage hub in the country that is operated jointly by Petron Corp (PCOR), Pilipinas Shell Petroleum Corp and Chevron Philippines Inc.

The oil firms were ordered to submit an updated comprehensive plan and relocation schedule within 45 days. The SC said the relocation shall be completed not later than six months from the date the required documents were submitted.

Our take: This is not the first time the SC has ordered the closure of the Pandacan oil depot. In March 2007, the SC ordered the immediate relocation of the oil terminals after having declared as valid Manila Ordinance No. 8027, which reclassifies portions of Pandacan and Sta. Ana from industrial to commercial.

The recent SC decision effectively upheld the ruling made in 2007. We believe contingency measures have already been put in place by the oil players. In PCOR’s case, the company already filed a manifestation last November 2010, informing the SC that is has decided to cease operations of its petroleum product storage facilities in Pandacan within five years or not later than January 2016.

For its part, Pilipinas Shell said it will comply with the SC decision but noted that the relocation will lead to higher delivery costs and more complex delivery scheduling because of the truck ban. – WealthSec