In light of rising oil prices, Senator Mar Roxas urged the government to exercise its "right of first refusal" and purchase the 40% stake in Petron Corp. that Saudi Aramco selling to Ashmore Ltd..
"Normally, this would be an intercorporate financial transaction, one buyer purchasing the ownership interest of an existing investor. But this is not an ordinary time, nor is this an ordinary transaction," Roxas, Chairman of the Senate Trade Committee, said in a privilege speech.
The "right of first refusal" means that the Philippine government has the right to purchase Saudi Aramco's stake in Petron before a third party could purchase it. Petron supplies 40 percent of the domestic oil market and produces 180,000 barrels of the daily demand of 330,000 barrels.
"At a time when oil has breached $100 a barrel, at a time when there is great uncertainty relative to the supply and price of oil, would it not be prudent for the government to have exercised its right of first refusal?" asked the senator.
By doing so, he said, the government would have the option to re-sell to "strategic hands" such as Brunei, United Arab Emirates, Indonesia, Malaysia and other oil producers.
Roxas said that when the government chose to privatize 40 percent of Petron shares in 1994, it chose Saudi Arabia through this Aramco subsidiary Aramco Overseas Co. since it was considered a strategic partner.
"The reason for selling 40 percent of Petron to Saudi Arabia via Aramco in 1994 was that it would be able to ensure a steady supply of crude. And so therefore, if they held an ownership interest in Petron, they would make sure that in fact Petron would be well-supplied with oil," said Roxas.
This is different with Ashmore Ltd., he said.
Roxas said Ashmore is a "hedge fund," and its operations is in the buying and selling of shares of stock in various businesses, not in petroleum operations.
"If we treat this sale of shares by Saudi Aramco to Ashmore as a purely financial transaction, then the rationale for having sold this to begin with in 1994 is now rendered not only obsolete but also ineffective," he said. The transaction amounts to $550 million, nearly the same paid for by Saudi Aramco.
"The government saw that they wanted in fact to have this right of first refusal to ensure that the 40 percent ownership interest would always be in 'friendly hands.' I'm not so sure that a nameless, faceless hedge fund based in London can be considered friendly, especially in these times of high oil prices and scarcity of supply," he added.