|21 January, 2020

Philippines says Chevron unit underpaid rent for oil terminal lot

Chevron Philippines Inc had been paying the state-run firm only a fraction of the fair market rent for an industrial lot hosting the energy company's oil import terminal

A contract worker surveys pipes under general maintenance at a Chevron geothermal steam well in Bay Laguna south of the capital Manila February 7, 2008.

A contract worker surveys pipes under general maintenance at a Chevron geothermal steam well in Bay Laguna south of the capital Manila February 7, 2008.

Reuters/Darren Whiteside

MANILA - The Philippines said on Tuesday a lease contract between a unit of Chevron Corp and a state-run firm was "grossly disadvantageous" to the government, after a review showed the energy company had been paying a "minuscule" rent.

President Rodrigo Duterte ordered a review of all government contracts last year, in a bid to ensure such deals with firms and other countries were fair and favourable to the public.

Finance Secretary Carlos Dominguez said Chevron Philippines Inc had been paying the state-run firm only a fraction of the fair market rent for an industrial lot hosting the energy company's oil import terminal.

The lease deal is "another government contract with onerous provisions," Dominguez said in a statement.

He added that the government's determination came after it compared the lease terms with fair market value of the industrial lot in Batangas, south of the capital, Manila.

Government figures showed that since 2010, Chevron Philippines has been paying only 4% of an annual rent that would amount to 257.76 million pesos ($5 million) if it were based on fair market prices.

"We have to implement a totally transparent method of getting the best deal for the rental of all government property," Dominguez added, but stopped short of saying what action the government would take to recover lost revenue.

Chevron Philippines, which has nearly 700 service stations in the country, did not immediately comment.

Among the contracts reviewed after Duterte's order were concession deals signed with the Philippines' two largest firms, which the president later called "onerous and disadvantageous" for ratepayers.

Duterte has threatened to take over the capital's water distribution services if the firms Maynilad and Manila Water refuse to accept the terms of new contracts to be offered to them. 

He also warned of scrutiny for a railway operations deal signed in 2014 under the previous president.

(Reporting by Neil Jerome Morales; Editing by Clarence Fernandez) ((neiljerome.morales@thomsonreuters.com; +632 8841 8914;))

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