Message from the President & CEO
“The opportunity for us is to ensure that we are always best positioned to meet the needs of our customers, both in product and in services.”
We celebrate 105 years of Pilipinas Shell in the Philippines, not only as a milestone year, but equally as proof of the Company’s capabilities, and commitment to the country.
It is seeing our purpose “to power progress together with the Filipino by providing more and cleaner energy solutions” in action.
It is not by chance that Pilipinas Shell is the oldest energy company in the Philippines. This report, “105 Years of Energy, A Legacy of Sustainable Partnership,” illustrates our consistent and strategic approach to sustainability from day one. Sustainability in Pilipinas Shell is deeply rooted in three factors: to become – and remain – a world- class investment, to thrive through
the transition to lower-carbon energy, and to be a responsible partner of the Philippines in nation building.
Getting the basics right
Being a world-class investment means maximizing cash generation at competitive returns for our shareholders, built upon a strong financial framework, capital discipline, and strong corporate governance. This requires getting the basics right as we push for integration and optimization at the same time.
We commit to respond to the evolving energy needs of our customers, both in product and in services. It is not just about what we deliver; but how we deliver. We strive to produce and deliver energy responsibly – in a way that respects people’s dignity, safeguards their well-being, and protects their environment. We employ global standards in managing health, safety, and the environment. We also engage the communities, and stakeholders we work with, to continuously improve our performance.
Our strategy is designed to reinforce our position as a leading energy company that adapts and evolves as the Philippines’ energy system transforms. This strategy sustained us for the last 105 years. In 2019, this responsiveness to the operating environment enabled Pilipinas Shell’s to post double-digit earnings growth despite low regional refining margins and higher excise taxes for our products.
Our marketing business is very strong. In 2019, we grew our retail network to 1,126 stations nationwide. We also maintained a world class premium fuel penetration of 27%, one of the highest in the Shell Group. We opened 13 Select, 7 deli2go, and 39 Shell Helix Oil Change+ (SHOC+) and Helix Service Centers (HSC) during the year as our non-fuels retail segment grew by 15% versus the prior year.
Meanwhile, the Company’s commercial segment, which covers lubricants, bitumen, aviation and commercial fuels, posted an overall volume growth of 9%. Our Lubricants business delivered volume growth – with Shell Advance, Shell Helix and Shell Rimula emerging as the most preferred brands in the market. Bitumen and aviation grew their margins significantly compared to 2018. We reaped the benefits of our investment in the bitumen production facility in Tabangao – the only one of its kind in the country – in its first year of operation. Pilipinas Shell also exported bitumen to five countries in 2019.
Amidst the challenges from the low regional refining environment, our Tabangao Refinery undertook self- help measures and delivered close to Php700 million in structural cost savings, surpassing initial targets.
Shaping a more sustainable energy future
Our country’s energy system is gradually evolving. And throughout our 105 years of existence in the Philippines, we are proud to have been part of life’s journeys – delivering energy products that Filipinos need and want – and doing this responsibly and safely to help shape a more sustainable energy future.
Leading in the energy transition means having the flexibility to deploy cleaner, convenient, and competitive energy, depending on what a country needs. You will recall that Pilipinas Shell was an early adopter of Euro IV-PH fuels. We were also among the first to make biofuels from sustainable sources. We already have a reliable partner in and strong ties to local coconut farmers, through our Project Coconut initiative. We also recently broke ground in the construction of the first industrial-scale solar farm located at our oil refinery, considered as one of the largest in Southeast Asia.
In 2019, Pilipinas Shell became the first company to introduce eco-friendly bitumen, Bitumen FreshAir, in the country. Bitumen FreshAir is a market-tested product that inhibits the chemical compounds that are the sources of gases, particulates, and odor-releasing molecules. This inhibiting effect, which can last up to two weeks after paving, benefits both the asphalting crew and the community.
Our product portfolio continues to evolve with the times. We develop product innovations that are future- fluent and have long-term benefits for society at large. We revolutionize the energy industry landscape by developing and introducing differentiated products – from high performance, energy-efficient fuels to high-efficiency lubricants to eco-friendly bitumen.
We are helping our community with their energy transition by consistently giving them high-quality, on-grade, and on-spec products.
Creating and sharing value
We continue to be a good neighbor by improving the living conditions of the communities where we operate, by providing access to energy, opportunities for livelihood, and extending various forms of assistance to the government and to the people during times of crisis like the coronavirus pandemic. Our assistance and donations have gone a long way in protecting thousands of lives, especially the medical frontliners. We energize the communities where we conduct business by creating employment opportunities, paying the correct taxes, and by developing local supply chains.
Our Pilipinas Shell Foundation Inc. (PSFI) has empowered the lives of more than 14 million Filipinos, through several social investment programs that focus on STEM education, community skills, and enterprise development.
The Company has also been leading positive and progressive industry changes. Pilipinas Shell has been working with policy makers that would contribute to a fair and sustainable industry. The Company expresses its full support for the Government’s fuel marking program to minimize oil smuggling. Shell’s North Mindanao Import Facility and the Tabangao refinery are the first terminal and refinery to undergo fuel marking in Mindanao and in the country, respectively.
Making our way to the next 105 years
Throughout its 105-year presence in the Philippines, Pilipinas Shell has experienced its share of regional economic crises, socio-political disruptions, and industrial shifts. Change is constant; but our core values in doing business has remained consistent through the years. Our responsibility to our various stakeholders, including our commitment to sustainability will always remain.
In this report you will find details of the actions we are taking to operate safely, to respect the environment, and to work closely with communities. We will also share our drive to further strengthen our solid financial foundations to help us navigate through the next 105 years.
We are diversifying the way we produce and consume energy. We have incorporated cleaner energy solutions in our facilities, including solar panels in our retail stations, and natural gas at the refinery.
Our latest project is the construction of an Integrated Energy System in Tabangao that will enable us to harness both solar and natural gas, and to store energy through a battery system. This project, upon completion, is expected to reduce our carbon footprint equivalent to planting half a million trees.
Since 2017, we have also expanded our carbon sink management program in Tabangao, which allows us to offset some of our emissions, by sequestering carbon from the atmosphere. Additionally, we are part of a product chain that transforms byproducts such as sulfur and carbon dioxide, into input products used by other industries.
The future of energy is still very much evolving, and it is therefore imperative that we lay down today the foundations for a resilient, adaptive, and future-ready business and organization.
Let’s continue powering progress together for the next 105 years to come.
Cesar G. Romero
President and CEO