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Malacañang yesterday said the seizure of the oil shipments of Pilipinas Shell has been put on hold while a compromise on the oil firm’s P7.3 billion tax deficiency is being pursued.

Executive Secretary Eduardo Ermita said the decision was reached after Trade Secretary Peter Favila met with Finance Secretary Margarito Teves and Bureau of Customs officials and briefed President Arroyo.

He said Arroyo instructed Favila to "come up immediately with a solution fair to every one."

Customs the other day said it would seize P40 billion worth of imports planned by Shell for February and March after the Court of Tax Appeals rejected Shell’s petition to extend a 60-day restraining order which expired on February 9.

Customs claimed Shell failed to pay excise tax on imports of blending gasoline from 2004 to 2009. Shell went to the CTA, saying the imports were materials for the production of Clean Air Act-compliant fuel and, therefore, not subject to the payment of excise tax at the piers.

Ermita said some "courses of action" have been discussed but declined to elaborate, saying he is not an expert.

Ermita nonetheless said the compromise will likely come in the form of installment payment.

He gave the assurance there would be enough supply of gasoline because oil companies could take up the slack from Shell.

Ermita said that aside from the impact of the seizure of Shell shipments on gasoline supply, the government also recognizes the wider implications of the case.

"Shell is a foreign-owned company. UK yata ito. And we have very good bilateral trade relations with UK. So we must preserve that atmosphere of very good relations with the UK. Those are the things that we should understand," he said.

"Hindi bara-bara ang ating action dahil maraming bagay ang ma-a-affect," he said.

Customs Commissioner Napoleon Morales said his office is amenable to staggered payment by Shell, but the amount must be paid before the Arroyo government steps down.

He said Shell must pay in cash, even under protest, because the law says taxes must be paid first before they can be contested.

He said if Shell wins in the CTA, it will get back the amount in the form of tax credit.

He said P7.3 billion is "peanuts" to Shell as it pays between P800 million to P1 billion in taxes for one shipment.

In talks with reporters before the Malacanang announcement was made, Morales said he and Taves agreed to give Shell a five-day grace period before initiating seizure proceedings.

A Batangas judge yesterday issued a 72-hour restraining order against Customs men from entering Shell’s refinery and port in Tabangao to "hold, seize, confiscate and forcibly take possession of Shell’s import shipments."

Executive Judge Ruben Galvez said seizure of Shell’s imports "will cause irreparable injury and grave injustice to (Shell) as a business entity engaged in the manufacture and sale of petroleum products."

Galvez said that with no more products to sell, Shell’s 959 retail dealer stations will eventually close down to the prejudice of the public in general.

Shell’s inventory is good for 10 to 15 days.

He also said closure of Shell’s refinery will result in a supply shortage since the company has a market share of 27.7 percent. It will also result in P11 billion in losses to Shell while its 823 refinery workers will lose their jobs.

Customs officers serving notice of the plan to seize Shell’s imports were met by picketing workers and other stakeholders.

Other industry players said the industry has enough capacity to make up for Shell’s absence in the market.

Ernst Wanten, president of Total Philippines, said not one oil company can make up for the supply gap, but the industry as a whole has enough spare capacity.

"(But) if the public starts panicking then, you’ll run out of product. If there is panic, even if Shell is there, you would run out of products. If you have that, there is no way you could cope, even in a normal situation," he said.

"Getting the supply of oil is one thing. You can increase that. But afterward, getting the products to your customers and to the trucks, then there is much less flexibility. There are only so many trucks out there," he said.

Wanten said Total will likely increase importation if demand picks up.

Fernando Martinez, chairman of the Independent Philippine Petroleum Companies Association and CEO of Eastern Petroleum, agreed with Wanten.

"There are 4,000 stations out there. The solution is just to go to other stations," he said.

Flying V spokesman Joey Cruz raised the possibility of a "bottleneck" in the supply chain.

Both Eastern Petroleum and Flying V said they might also increase their importation if demand picks up.

Petron, the country’s largest refiner and distributor, declined to comment on Shell’s case. With John Poquiz, Irma Isip and Genivi Factao

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