PNOC breached lease contracts, says Petron

The Philippine National Oil Co. (PNOC) breached three lease contracts with Petron Corp. by nullifying the renewal clauses ahead of the actual expiration dates, Petron claimed on Tuesday.

Petron general counsel Joel Angelo Cruz told PNOC president and CEO Reuben Lista that the lease agreements covering three properties and the renewal clauses remain are valid and binding.

A subsidiary of conglomerate San Miguel Corp., Petron has existing lease agreements with PNOC for the $3B-refinery in Bataan, 24 bulk plants, and 67 gasoline stations.

"They are not in violation of any law nor manifestly and grossly disadvantageous to the government. Accordingly, your letters—because they deny without legal causes Petron’s contractual right to renew—constitute fundamental breach of the three lease agreements," Cruz told Lista.

Petron, the country's largest petroleum company, said in a statement that the PNOC move threatens to jeopardize its operations and the interest of small shareholders and partner stakeholders.

According to Petron, Cruz was responding to Lista’s previous letter prodding the company to waive certain provisions of the lease agreements because they are "inequitable" or submit remediation plans “so that the abandonment and clean-up of the sites may already be discussed and completed” before the expiration of the lease agreements next year.

Petron claimed that Lista offered the properties covered by expiring leases to interested independent oil companies, "in total disregard of the rights of Petron."

“As you very well know, the long-term lease by Petron of the subject properties and the properties denominated as Refinery Properties which are the subject of a third lease agreement between Petron and PNOC was the primary consideration for Petron’s conveyance of said properties at book value to PNOC," Cruz supposedly told Lista.

"Hence, the consideration for Petron’s leasehold rights is not only the rental payments provided for in the lease agreements but the conveyance of the properties to PNOC,” Cruz added.

Lista declined to answer Petron's allegations. However, he said, "it might be nice to read the provisions of the contract mentioned and judge whether it is advantageous to the government or not." — VDS/BM, GMA News