Daily Times

KARACHI: The government-run Pakistan State Oil (PSO) has planned to incur over Rs 40 billion in capital expenditure (capex) over the next three years as the company (PSO) is facing stiff competition from smaller players.

The PSO plans to make heavy capex of Rs 44 billion in next 3 years to expand storage facilities, pipeline projects, automation of depot, retail outlets, non-retail business and safety equipment. The PSO has been lost its overall market share by about 8 percent to private oil marketing companies (OMCs) during the period of 2013 to 2015.

According to industry sources, overall market share of the PSO also declined in Fiscal Year 2016-17 (FY17) as compared to FY16 owing to stiff competition from smaller OMCs. “The management of PSO reiterated its resolve to protect and enhance its market share, which it has lost off late owing to intensifying competition in the industry”.

Moreover, the PSO’s management said that the company has won the legal battle for stake acquisition of Pakistan Refinery Limited (PRL), which has effectively ensured its supply lines. In future, company is targeting heavy capex of Rs 44 billion in various projects which is on top of PRL investment. The projects will be financed in combination of debt/equity components. PSO is intended to focus on LPG and lubricant businesses going forward with target to become first and second largest by 2020 respectively, said sources.

PRL is planning to expand its capacity from 2.23 million tons which would require PSO (50% ownership) to inject Rs 30 billion over the period of 3 years starting from FY19. Subsequently, company’s refinery uplift is expected to increase to 60 percent from 38 percent currently.

Hence, company has ambitious target of heavy capex to Rs 74 billion in combination of debt and equity components which would leverage the balance sheet, added the sources.

In lubricant segment, company has reported 28 percent year-on-year (YoY) increase in volumes in FY17 to 35,000 MT.

PSO management claimed to be in talks with ministry of petroleum through Oil Companies Advisory Council (OCAC) for upward revision of white oil segment margins (CPI linked). However, sources believe that matter may face some delays given ongoing political turmoil in the country. In LNG business, PSO is currently receiving 6 ships per month.

However, PSO has not disclosed any timeline for the transfer of LNG business to government entity. a
It is important to mention here that the Oil and Gas Regulatory Authority (Ogra) has granted 21 fresh licenses between July-December 2016 while the new 21 companies are expected to invest about Rs10.5 billion over the next few years to set up storages and filling stations in various parts of the country.

Published in Daily Times, August 10^th 2017.