KARACHI: Sale of petroleum products in the month of June went 13% up yearly to 2.2 million tonnes leading the total POL volume for the fiscal year 2015-16 (FY16) up by 5% to 23.3 million tonnes.
Overall volumes declined 7% sequentially on account of seasonal decline in agriculture activity coupled with festive season of Ramazan resulting in 24% decline in High Speed Diesel (HSD) volumes during the month, which primarily contributed to month on month (MoM) decline in volumes.
On a product wise basis, Mogas/HSD/FO registered a growth of 24%/5%/-4% YoY respectively in FY16. Volumes for Attock Petroleum Limited (APL) stood out during the month, up 30% belying the sectors trend during the month.
However during FY16, Hascol was the only top oil marketing company (OMC) which was able to increase its market share by 1.3% to 6.6% in FY16 with volumes increasing by 31% Year on Year (YoY), while market share for APL/Pakistan State Oil (PSO) /Shell declined by 2%/0.5%/0.1% during the year, underscoring surge of smaller OMCs.
Contribution of retail fuels (HSD and Mogas) increased to 58% (?5%) in FY16 from 53% in the preceding year, with volumes for FO declining by 5% on account of 10% decline in FO based generation (11MFY16) as increased gas in the energy system with the advent of liquefied natural gas (LNG) improved relatively cheaper gas-based generation by 34% (26,247 gWh in 11MFY16).
With the quantum of RLNG slated to be increased further to 500mmcfd in the near term and further imports of gas (1300mmcfd in the medium term along with 7000MW of coal based generation coming online in the next 4-5 years), volumes for FO are expected to recede further, while retail fuel volumes, the quantum of which have increased by 13% over the last two years are likely to remain buoyant.
Stimulus to retail fuels would be afforded by economic growth north of 5%, and increased freight related transport, especially for coal in the medium term for which dedicated diesel based locomotives are required, with communication network of the country expected to further improve in the backdrop of gradual development of China-Pakistan Economic Corridor (CPEC), said Mubashir Anis Silat, a research analyst at Elixir Securities.
On the margins front, increased quantum of fixed margin cash based products, the margins for which have been recently linked to CPI bodes well for the core profitability growth of the sector and marks a systematic shift in exposure away from cash strapped power sector, added Silat.
“In the backdrop of possibility of positive earnings surprise emanating from inventory gains from $12/bbl surge in oil prices over the preceding quarter are likely to garner traction for the OMC space. We retain our preference for PSO as our top pick in the sector,” said Silat.