Pipeline shutdown may cause fuel shortage, price hike

Metro Manila may suffer a fuel shortage if a major oil pipeline, shut down on Thursday after it sprung a potentially deadly leak, isn’t repaired and reopened within four days, oil companies and the pipeline operator said. The 40-year-old pipeline of the Lopez-owned First Philippine Industrial Corporation (FPIC) shut off its valves after it was pinpointed by geologists as the source of a months-long leak at the basement of a nearby high-rise condominium in Makati City. (See: Firm in Makati gas leak warns of fuel shortage) FPIC owns and operates the country’s sole commercial oil pipeline, which transports 60 percent of Metro Manila’s crude and refined petroleum needs from refineries in Batangas, located some 100 kilometers south of the capital Royal Dutch Shell Plc, Chevron Corp.’s Caltex unit and other oil companies, which are using the pipeline to transport their oil products to their depots in Pandacan, Manila, have pledged to step up deliveries by truck, Energy Secretary Rene Almendras told Bloomberg in a late Friday night interview. Almendras said the capital has “good" inventories in Manila depots and that the three-day All Saints’ Day weekend will reduce demand. The exodus to the provinces for All Saints’ and All Souls’ Days, also known locally as Undas, has already begun, spurring the national police to go on full alert to protect thousands of Filipinos who are expected to travel to their hometowns and visit family graves over the weekend. In a separate interview earlier Friday, the DOE told GMANews.TV that contingency plans have already been drawn up to address the possibility that repair of the major pipeline would be prolonged. (See: DOE, oil firms draw up plans in case of prolonged pipeline shutdown) DOE director Zenaida Monsada said oil companies have submitted their contingency plans and that the department was coordinating with the Department of Transportation and Communications (DOTC) and the Metropolitan Manila Development Authority (MMDA) to lift the truck ban for petroleum products. Oil firms have also proposed the use of barges and tankers to deliver the petroleum products from Batangas to Manila, the Energy Department said. The DOE is also in talks with other oil companies that will not be affected by pipeline shutdown to provide the market with adequate supply, Monsada said. “We do not see an immediate [petroleum] shortage for now," she claimed. Price hikes Oil companies, themselves, however, were less optimistic. Pilipinas Shell Vice President for Communications Roberto S. Kanapi said his company has a stable supply of petroleum products enough for the next two days. Beyond that, however, he said “we have to evaluate it on a daily basis." Kanapi said that his company will resort to transporting oil to Metro Manila supply points using trucks and barges, but that this will raise logistical costs — which will result in more expensive gas prices. Even the pipeline operator had earlier warned that “there will be a shortage of fuel in Manila for our motorists, commercial users and even our airplanes." FPIC president Leonides Garde, in an interview over dzBB radio on Thursday said that his company will comply with the Makati city order to keep the pipe shut, and was working with authorities to trace the source of the leak, which might take at least a week. Geologists located the source of a gas leak in the FPIC pipeline before dawn on Friday.
However, geologists said while the defective portion of the pipe can be repaired within the day, they still have to look for other possible defective portions. “The defective part was found 100 meters southeast of West Tower, along South Superhighway. We had been working on this since Thursday night but it is only now that we saw the actual defective portion," Carlo Dayanghirang, one of the geologists working on the pipe since Thursday night, said in an interview on dzBB radio. Dayanghirang said the valve had been closed before they found the defective portion. However, he said they are still not discounting the possibility that there may be other defective portions. FPIC was “not sure when pipeline will be reopened," DOE’s Almendras also said. "Hopefully we will be able to finish that before we reach critical level of fuel," he said. While he was quick to assure the public there would be no price hike in fuel products, “at least for now," he also admitted concerned that the prolonged shutdown of the pipeline may result in a shortage of fuel supply. "As of now wala tayong ganyan (we don’t see something) to that effect," Almendras said in an interview on dzBB radio when asked about a possible oil price hike. (See: DOE: No oil price hike despite shutdown of Makati pipeline) He admitted that the shutdown will definitely affect fuel supplies because a big volume of gas and diesel pass through the pipelines, and that even if all trucks were used to transport oil, Metro Manila consumes so much fuel that the amount transported via tankers may not be enough. "Maapektuhan po dahil yan ang pinakamabilis at malaking volume ng gasolina at diesel fuel dumadaan sa pipeline na yan," he said. (It will affect supplies because that’s the fastest way, and a huge volume of gasoline and diesel fuel pass through that pipeline.) "Yan ang contingency pero problema natin sa Metro Manila napakalakas (magkonsumo). Kukulangin ang volume kahit paandarin natin lahat na trak," he added. (Trucking is the contingency but our problem is that Metro Manila has a massive consumption. The volume won’t be enough even if we load all the trucks.) Why so long? Authorities discovered a leak at the basement of the West Tower condominium in late July, but it was only on Thursday that excavation work around the area started. The pipeline was shut down for the third time upon the orders of the Makati City government to determine the source of petroleum leak discovered at the basement of the West Tower Condominium along Osmeña Highway, Barangay Bangkal, Makati City. FPIC shut down the pipeline on July 12 and resumed its operations on July 15. It again shut down the pipeline on July 21 and resumed operations on July 24. The excavation was only conducted after the geologists from the University of the Philippines National Institute of Geological Studies (UP-NIGS) discovered a new gas leak in the area, this time along the south-bound service road of Osmeña Highway, just a few meters from West Tower. The building has since been evacuated, and police, firefighters and medical teams around the area remain on heightened alert. The FPIC is now drilling to find other possible leaks along its 117-kilometer pipeline.
DOE cleared the FPIC On July 29, the Energy Department and the Makati government both cleared the FPIC. The DOE then said that the pipeline operator had nothing to do with the gas leak at West Tower Condominium in Makati City. (See: Energy Dept clears FPIC in Makati condo gas leak) Almendras said the department agreed with the result of investigation by the Makati government, which cleared the name of FPIC. Instead, Nelson Morales, city engineer of Makati, ruled that the management of the West Tower Condominium was negligent in allowing water to accumulate in the basement. FPIC's 117-kilometer pipeline carries gasoline, diesel, kerosene, and aviation fuel from refineries in Batangas to the oil terminal in Pandacan. FPIC operates the largest commercial oil pipeline in the country. FPIC’s pipeline system consists of two main pipelines, one for the refined petroleum products (the “white" line) and the other for heavier petroleum products (the “black" line). First Gen Corporation exercises organizational supervision over FPIC, while the company is 60% owned by First Philippine Holdings Corp, in partnership with Shell Petroleum Co., Ltd. (UK) which owns 40%. It has a 25-year concession until 2017.—DM/JV, GMANews.TV