Oil production, refining, and export is a key part of the Philippines economy. While the economy of the country is doing well overall, global fluctuations in oil prices have led to concerns. But, despite the global recession and negative forecasts in many industries, the country can still expect to see growth in the coming years. This is due in part to the significance of oil, and in particular, paraffin oil, to the country’s wealth.
An emerging market and one of the sixth richest in Southeast Asia, the Philippines’ economy is based on services and manufacturing. A part of this is the export of petroleum products and oil.
Oil is perhaps one of the Philippines’ most dynamic exports. A highly valued and traded product, it is traded widely on the commodity market all over the world. How oil performs on the world’s markets, is of great importance to a producer market such as the Philippines. As a result, the country is expected to have a GDP of 360 billion USD by the end of 2020, reaching 373 billion USD by the end of 2021. Some of the ‘Big Four’ have predicted it could be the 12th richest economy in the world by 2060 and could surpass the economy of Indonesia due to its GDP growth rate of around 6.5%.
History of the Filippino oil industry
Oil in the Philippines is a long-standing industry and started back in 1896. Widespread exploration was conducted during the mid-1900s leading to the discovery of the Nido, Palawan, West Linapacan, and various other, smaller oil fields. The government then moved to create a series of fiscal incentives for Filipino companies working in the oil sector.
Experts believe that much of the area remains underexplored and say there could be significant amounts of hydrocarbon accumulations, petroleum, and oil. It’s reported that only 10% of oil and energy resources have been explored to date, meaning there is much, much more to be uncovered.
This paints a picture of a very promising future for the Filipino economy and society. If even a fraction more of the Philippines’ oil potential is explored, it could up the GDP of the country substantially.
The state of the oil industry
In 2019, mineral fuel including the oil industry is believed to have exported some $1.04 billion worth of product, equivalent to 1.5% of the economy. As of the start of this year, there were two active oil fields in the country: Galoc and Cebu. While the industry did note a decline in previous years, it seems like the industry could be looking up.
Paraffin oil and medical-grade paraffin oil, in particular, is seeing a global surge in demand. Medical grade paraffin is refined to an exceptionally high standard and is used in medicines, cosmetic preparations, in the textile industry, as a preservative, and as a lubricant in certain manufacturing processes.
Even when taking into account the situation during the last six months, the need for both light liquid paraffin and heavy liquid paraffin is expected to increase, presenting a great opportunity for Filipino refiners. With the increased interest in the product globally, it’s a great opportunity for leading market players and new entrants to move into this niche.
At a time when the global oil industry has hit a few bumps in the road, diversification into liquid paraffin oil, or bumping up production, is a smart move for Filipino companies. As growth in this sector is predicted to go from strength to strength.
Other key oil-based exports include condensate, propylene, and naphtha, alongside crude oil, fuel oil, and gasoline. Again, these along with various plastics made from oil, provide the Filipino economy with a great way to continue growth through diversification.
The future is promising for the Philippines oil industry, in particular, those refining and exporting varieties of paraffin. If forecasts are to be believed, then this growth rate could have a significant and positive impact on the economy. By taking into consideration the amount of the country that remains unexplored, the potential for the Philippines to become a key player in the market becomes even more of a reality.