Manila's city council Thursday passed a law that officials said will allow oil companies to keep their depots in the city, defying a court order to relocate them on safety and environmental grounds.

Mayor Alfredo Lim signed the ordinance reclassifying the 36-hectare (89-acre) riverside Pandacan section as an industrial zone, amending one by the previous city council that classified the area as residential.

Petron Corp. and the local units of Royal Dutch Shell Group and US oil firm Chevron all maintain large depots on a stretch of the Pasig River that lies near Malacanang presidential palace.

In March 2007, the Supreme Court upheld the previous city council's ordinance against a challenge by the oil companies.

The court ordered the Pandacan depots shut down and the facilities relocated "to protect the residents of Manila from the catastrophic devastation that will surely occur in case of a terrorist attack on the Pandacan terminal."

However, Lim said shutting down the facilities would lead to job losses for thousands of Manila residents and cost the city government 100 million pesos (2.1 million dollars) every year in lost licensing fees and property taxes.

"There is no perfect world. Everything must be a compromise," Lim said in a speech to city employees.

He rejected suggestions that the new ordinance would compromise the safety of Manila's residents, saying relocating the depots out would have brought an extra 12,000 tanker trucks into the city every day.

The cost of relocation would also force oil companies to raise pump prices by up to three pesos a litre, he added.

There was no immediate reaction from the Supreme Court, but Maria Lourdes Garcia, a member of the city council who voted against the new ordinance, said its opponents would take legal action.

"We will go to Supreme Court to question the validity of Ordinance 7177," she told reporters.

The Pandacan oil depots supply about half the Philippines' total fuel demand and all of its lubricant requirements, according to industry officials.

The depots also supplies 70 percent of the shipping industry's fuel needs and 75 percent of aviation fuel requirements.