Strategic Management Paper

Pilipinas Shell Petroleum Corporation

Submitted by

Jeune Reginald Arvin V. Bulaon

Submitted to

DON BRODETH

School of Graduate Studies and Continuing Education

Baliuag University
Baliuag, Bulacan
 1. Introduction

Before the start of the new and regulated era of the Philippine oil industry, competitions have
been fairly matched at one point with the four refiners namely: Bataan Refining, Caltex, Filoil and Shell.
This certain era was before the 1970s and before the first world oil crisis occurred during 1973. The
government responded to the onset of the first oil crisis with the passage of RA No. 6173 or which is also
called as the “Oil Industry Commission Act” whereas the law created the Oil Industry commission which
is primarily responsible in regulated most activities of the oil industry. The said law also has a vital role in
today’s industry as the price regulation was first introduce in the act. Its role has greatly improved the
status of the industry today as entities used to have free control in setting own prices.

Pilipinas Shell Petroleum Corporation (PSPC) is an integrated fuel refining and marketing (R&M)
company in the Philippines. They represent the downstream operations of the Shell companies in the
Philippines (SciP), a network of companies involved in oil and gas exploration, refining, distribution,
marketing, and other services. SciP is part of Royal Dutch Shell plc (Shell), a global group of energy and
petrochemicals companies operating in over 70 countries.

At Pilipinas Shell, they produce, import, blend, transport, distribute, and market a wide range of
high-quality fuels, lubricants, bitumen, and other specialty oil-based products. The retail network
continues to expand, with 1,126 service stations as of December 31, 2019 catering to motorists
nationwide. They also provide non-fuel retail offerings through our service centers and convenience
stores (Shell Select, deli2go). They have also integrated supply chain composed of 24 fuel terminals and
supply points, 10 lubricant warehouses, and three import facilities

In 2018, The bitumen production facility began operating in the Refinery, serving both domestic and
international demand. And by the end of 2019, Pilipinas Shell had produced the first batch of low-sulfur
fuel oil (LSFO) to address the full requirements of International Maritime Organization (IMO) 2020
ruling, which prohibits ships from using fuels containing more than 0.5% sulfur.
 1.1 Definition of the industry

The Oil Industry, also known as the Petroleum Industry, began in 1859 when the American oil
pioneer E.L. Drake drilled a producing well on Oil Creek in Pennsylvania at a place that later became
Titusville. Many wells were drilled in the region. Kerosene was the chief finished product, and kerosene
lamps soon replaced whale oil lamps and candles in general use. The Oil Industry includes production,
exploration, Refining, transportation of Crude and Petroleum Products via rail, road, pipelines or sea (Oil
Tankers) and marketing of petroleum products.

The Oil industry is often divided into three major components.

Upstream – the business of oil and gas exploration and production

Midstream – transportation and storage

Downstream - which includes refining and marketing

The industry serves a very important role in the global economy of any nation not only because it is
almost part of the necessity but because it also promotes industrialization.

The Downstream industry portion will be the sole focus of this Strategic Management Paper as PSPC
only operates under the process of wholesale and refining oil products in the Philippines. Extraction and
exportation of oil supply are done by the Royal Dutch Shell and Shell Philippines Exploration (SPEX Shell)
which are different entities from PSPC.
 1.2 Company Background:

Pilipinas Shell Petroleum Corporation is a Philippines-based company, which is engaged in the

refining and marketing of petroleum products. The Company operates through oil and gas segment. The
products it sells include gasoline, diesel, heating oil, aviation fuel, marine fuel, lubricants and bitumen.
The company was founded on January 9, 1959 and is headquartered in Taguig, Philippines.

Pilipinas Shell traces its roots to Asiatic Petroleum Company (Philippine Islands), Ltd. which
opened for business in the Philippines and began to import and sell motor gasoline and kerosene in
1914. Asiatic Petroleum Company (Philippine Islands) Ltd. was renamed The Shell Company of the
Philippine Islands, Ltd. in the 1940s.

PSPC solely operates under the downstream oil and gas segment. The Company's integrated
downstream operations span all aspects of the downstream product supply chain, from importing crude
oil and its refining, to importing and marketing refined products to its customers across the Philippines.
The products it markets include gasoline, diesel, fuel oil, aviation fuel, marine fuel, lubricants and
bitumen. Some of the Company's products are "Shell V-Power Gasoline"; "Shell V-Power Diesel"; "Shell
FuelSave Gasoline"; "Shell FuelSave Diesel"; "Shell Helix"; "Shell Rimula" and "Shell Advance".

The Company has no majority-owned subsidiaries but has equity interest in various joint
ventures. These include Pandacan Depots Services, Inc., which manages and operates storage, handling
and distribution facilities; Bonifacio Gas Corporation, which constructs, maintains and operates a
centralized gas distribution system; and Kamayan Realty Corporation, which acquires, develops and
manages real estate properties.

PSPC distributes refined and imported petroleum products through its 25 fuel distribution
terminals and supply points, 10 lubricants warehouses, and two bitumen production and import
facilities throughout the Philippine Archipelago. As of December 31, 2019, the Company has 1,126 retail
stations nationwide.
 1.3 Product and Services

PSPC ’s commercial business prides itself as being a one stop shop for customers’ entire fuel and
lubricants needs, providing fuel differentiation, technical consulting, security of supply through Shell
network, price risk management customer offering, and a strong professional sales team. Written below
are the products and Services the entity provides:

 Wholesale Commercial Fuels - The Wholesale Commercial Fuels business has a nationwide
footprint. PSPC serve leading companies in many industries including power, mining, wholesale,
manufacturing, and marine. The entity’s product portfolio includes reliable main-grade and
premium transport fuels (unleaded gasoline and diesel) for on-road and off-road heavy-duty
vehicles as well as heavy fuel oils (cracked fuel oil and straight run fuel oil) for industrial heating
and manufacturing boilers. Supply sources are a combination of local and imports.

 Aviation - Shell Aviation is a global supplier of aviation fuels, kerosene, lubricants and technical
services, serving all aviation segments. It has been providing jet fuel and refuelling services to
local and international airlines in the Philippines since the 1950s, and is currently operating at
airports in Manila and Clark.

 Lubricants - The Lubricants business has a nationwide footprint. They offer Consumer, Transport
and Industrial Lubricants. Key customers include B2B (Power, Gen Manufacturing, Transport,
Mining) served via direct or through distributors, B2C indirect (independent workshops, retail
trade outlets) and B2C direct (franchised workshops, OEM). Shell’s product range comprises of
some of the biggest selling lubricants brands including Shell Helix, Shell Rimula, Shell Advance,
Shell Spirax and Shell Tellus. Supply source for products are currently 100% imported.

 Bitumen - The Bitumen business has a nationwide footprint enabling it to serve the different
islands from its two terminals. Key customers are road contractors being served directly and
indirectly. Pen grade bitumen, emulsions and cutbacks are the products on sale. Supply source
for bitumen is currently 100% imported.”
 1.4 Organizational Structure

The illustration below shows Shell’s latest Organizational Structure which is as of August 2021.

Illustration 1:

(Source: SHELL Website)

Structure

PSPC runs under a Functional Organizational structure which is similar to a Hierarchical structure in a
way that it starts with the highest position with the highest responsibility down to the lowest one. It
differs as the structure organizes its employees according to their specific skills and their corresponding
function in the company. Shell elect individual into different positions which is beneficial as not only it is
easy to apply to any sized company but it also allows the employee to focus on a certain role and
encourages specialization. Most commonly person elected as the authorized individual or vice president
in a certain area is based on its professional experience inside and the outside the firm as well as its
expertise and contribution to the field. An example is the Current Vice President – Lubricants, Mr.
Stephen D. Quila, who was elected primarily for the reason of its contribution to the success of Shell’s
Lubricant business in the Philippines prior to his election. He is also current general manager for
Lubricants in PSPC.
Philippine Management Team (PMT):

Cesar G. Romero (Filipino) - President and Chief Executive Officer

He is responsible for the management and capital investment associated with

the Global Retail business’ physical assets worldwide. This includes network
planning, real estate, petrol station construction, facilities maintenance, soil
and groundwater services, HSSE, and Continuous Improvement. From
September 2009 up to July 2013, he was the Vice President of Retail Sales and
Operations East which is accountable for the Operating Profit and Loss of the
Shell Retail Petrol stations in SE Asia, South Asia, and China.

Reynaldo P. Abilo (Filipino) - Vice president for Finance

He is a newly appointed Director of the Corporation since 01 January 2021. He

is likewise the Vice President-Finance, Treasurer and Chief Risk Officer of the
Corporation. He is also a director on the boards of other Shell-affiliated
companies. Prior to his current assignment, he was the Corporate Assurance
Manager that established the assurance and internal audit function of the
company.

Randolph (Randy) T. Del Valle (Filipino) – Vice President for Mobility

Randy is the Vice-President for Mobility (formerly Retail) of Pilipinas Shell

Petroleum Corporation effective 01 January 2020. He is responsible of the
Downstream Marketing Retail Business that covers >1,000 sites serving ~1
million customers/day enabled by a strong team of 15,000 employees, retailers
and service champions. Randy brings with him more than 20 years of
experience across different businesses. 

Albert A. Lim (Filipino) – Vice President for Wholesale Commercial Fuels

He is a well-rounded Shell Commercial Fuels leader with over 20 years of

experience both locally and globally. Before his appointment, Mr. Lim was
Currently the Wholesale Commercial Fuel (WCF) Business Development and
Pricing Manager. He joined Shell as a Sales Account Manager and served
marketing roles in the Philippines and the East region. He was responsible for
the development of Fuel Oil Plus for the East and played a pivotal role in WCF’s
turnaround plan in Thailand.
Sergio C. Bernal, Jr (Filipino) - Vice President for Corporate Relations

Mr. Bernal started his career in sales before taking up a few other roles including
Business Development, Training and Marketing in local, regional and global posts.
Serge was the JV General Manager for LPG from 2009-2011, when the JV achieved
remarkable volume and revenue targets and HSSE performance. He then moved
back to Shell Philippines, taking up sales and marketing leadership roles in
lubricants, where Serge led teams to achieve over 110% sales growth and at same
time built a strong high-performing team, winning global recognition.

Kit Arvin M. Bermudez (Filipino) – Vice President for Supply and Distributions

He is a multi-business Downstream leader with over 20 years of experience, most

notably known for his strong operational delivery focus. He joined as a Select
Operations Manager and has since served in different leadership capacities in
Downstream businesses in global, regional and local management roles. He has
been based in Italy, Oman, Singapore and the Philippines. He is a strong and
consistent performer with a high degree of credibility as supported by his
numerous Shell Awards.

Stephen D. Quila (Filipino) - Vice President for Lubricants

He is the General Manager – Lubricants from 2018 to present. He is responsible

for leading Shell’s Lubricants business in the Philippines. He is responsible for
leading Shell’s Lubricants business in the Philippines. Prior to that, he was
General Manager - Customer Operations of Shell Shared Services Asia, B.V.
from 2012 to 2017. He led Shell’s largest Customer Operations & services in
Manila covering the Americas, Global Marine & Aviation, Philippines & the
United Kingdom. 

Carlo D. Zandueta – Vice President for Human Resources

Mr. Zandueta has been the Vice President for Human Resources since 01
October 2018. Prior to this role, he was based in Singapore as the Global HR
Manager of Shell Aviation. He joined the Corporation in March 1999 as the
Manufacturing Learning and Development Manager and has held a number of
assignments since then.
Shell Pilipinas Business Model

The below illustration shows how PSPC runs its operation under the downstream system:

Illustration 2: PSPC Business Model

1. Crude Supply – the first step is the importation of crude oil from its distributor mainly from
Royal Dutch Shell and Shell Philippines Exploration (SPEX Shell) which all are different entities.

2. Manufacturing – Once the oil has been received, these raw materials are being transferred to
different refinery established in the Philippines. The crude is now being refined into different
products such as fuels, lubricants & bitumen.

3. Fuels Supply and Distribution – Finished products are being transported and stored into
different modes depending on the location.

4. Customers – Once received, the products will be available for sale. It will now be marketed and
distributed to different retail stations, wholesalers, etc. in order to reach its consumers.
Shell Core Values
PSPC’s core values are honesty, integrity and respect for people. These are reflected in
the Shell General Business Principles, which set out their responsibilities to shareholders,
customers, employees, business partners and society.

Ethics and Compliance

Leaders at all levels play an essential role, by being uncompromising with respect to safety,
ethics and compliance, making it clear through their actions and expectations that all business plans
and activities must be undertaken in a responsible, safe, ethical and compliant manner.

Shell have a group-wide Ethics and Compliance program which focuses on embedding Shell’s
core values and business principles into the culture at Shell. The program is directed by Shell’s Chief
Ethics and Compliance Officer who is supported by:

 The Shell Ethics and Compliance Office, which is responsible for the design, support and
monitoring of the program;
 Legal counsel who monitor external legal and regulatory developments and provides legal
advice; and
 Shell’s businesses, which implement the necessary policies, standards and procedures into
daily work, supported by Ethics and Compliance representatives who also monitor the
program.

Shell provide guidance, advice and training to help employees understand their responsibilities
and how to act ethically and in full accordance with the law. Shell do not tolerate the direct or indirect
offer, payment, solicitation or acceptance of bribes in any form. Facilitation payments are also
prohibited.

Shell aim to do business fairly, ethically and in accordance with applicable laws that promote and
safeguard fair competition among businesses. Its commitments include the prohibition of practices
such as price-fixing and market-sharing. They also publicly report where we have been found guilty
by any competition authority of violating competition law and act in each situation to ensure that
Shell’s ethical values are maintained.

In the same way, the entity’s global international trade compliance program affirms Shell’s
commitment to trade compliance, including export controls and trade sanctions. In addition to
relevant training, the program provides staff and contractors with tools and resources to comply with
applicable trade regulations.
Table 1: Shareholdings Structure as of Sept. 30, 2021:

(Source: SHELL Website)

Majority of its shareholders came from Shell Overseas Investments Besloten Vennotschap which
represents Royal Dutch Shell, PSPC’s international counterpart. This indicates that Royal Dutch Shell has
majority of the control from Shell and has great influence in terms of decision making through voting
rights.

Pilipinas Shell Petroleum Corporation’s Capital Stock Information:

Authorized Capital Stock: Php2,500,000,000.00 divided into 2,500,000,000 common shares at a par
value of Php1.00 per share
Outstanding Capital Stock: 1,613,444,202
References for Section 1:

Information about Pilipinas Shell, including its product and services. Retrieved January 15, 2022 from
[Link]

Three components of the oil industry and its definition. Retrieved January 15, 2020 from
[Link]

Organization Structure, its members and the Shareholder information. Retrieved January 16, 2022 from
[Link]

PSPC’s Capital Stock Information. Retrieved January 16, 2022 from

[Link]