Industry Minutes

Rating Team presented a sector study (Attached as Annexure-1).

It was apprised that Pakistan consumed a total of
19.35mln MT of petroleum products registering a
substantial drop 23% from FY18. Upon discussing the
reasons for the decline, it was consumption of HSD
plummeted by 53% as slowdown in economic growth
coupled with increased illegal traffic from across the
borders impacted the sales. Discussing FO, the
government has reduced reliance on oil-based power
plants to relatively inexpensive power sources i.e. LNG &
coal. This led to a decrease in the sales of Furnace oil by
~ 18.68% to ~3.49mln MT (FY18: ~7.39mln MT).
Further deliberating, it was revealed that nearly 96% of
the products comprise of Motorgas (MOGAS), HSD and
FO. The analyst stated that product wise consumption
percentage of MOGAS and HSD have increased. While HSD witnessed a 5% growth over the 5 years,
MOGAS has seen substantial increase of 18.5% as the demand soars due to increased number of
automobiles and its use in electric generators.
Commenting on the sector wise distribution of the products, RT stated that the country’s consumption is
mainly driven by two sectors; transport and power, constituting ~91% of the demand. Moving towards the
provincial consumption pattern, RC noted that KPK’s increased consumption shows signs of revival in it’s
industry whereas it has also benefitted from a surge in tourism. Punjab and Sindh constitute ~88.4%
consumption in the country i.e. Punjab (~59.1%), and Sindh (~29.3%). Over the years Punjab's share in
total consumption slightly decreased from 60.7% to 59.1%, whereas share of Sindh has seen surge from
24.2% to 29.3%.
Discussing the market share, it was observed that PSO’s position as market leader is still intact however
it’s share has eroded in the recent years (FY19: 41%, FY15: 57%). RC commented that Gas & Oil Limited
(GO) has witnessed reasonable gains and garnered a decent 6% market share in three years’ time.
Furthermore, Shell and Attock have boosted their market share up too. Bifurcating the market share into
white vs black oil, it was discovered that PSO leads the
way with 41% followed by Total PARCO (12%). For
Black Oil, which consists of FO and lubes, PSO remained
at the top of the summit as well with a share of 52% (FY18:
67%). The company has been shedding its black oil
reserves as its demand drops due to the government’s
directive to switch to the relatively cheaper RLNG.
Observing the market share as per the OMCs, RT mentioned that PSO has witnessed a reduction however
it still retains its position of market leader. For MOGAS, Shell remains the next in line followed by Attock
and Hascol. It was deliberated that Hascol has lost its share in HSD as well however the company did
manage to sustain its position in FO sales. Commending the performance of Attock, the RC was of the view
that the company is fast catching up with HASCOL in HSD after having taken over in MOGAS in FY19.
For GO and BE Energy, RC expressed satisfaction on their improving market share.
With regards to the volume based revenues of OMC, the RT discussed that Shell derives the most revenues
from MOGAS flowed by HSD. This was in stark contrast to its
competitors such as PSO, Attock, Hascol and GO who have
approximately the same contribution of HSD and MOGAS. With
regards to the retail outlets of the OMCs, the RT stated that the
country has a total of ~8,600 retail fuel stations with PSO occupying
40% of the market followed by Total Parco and Shell Pakistan. The
RC instructed the team to work out revenues of the OMC per retail
outlets. Subsequently, a calculation was furnished adjusting the FO
sales as they are not sold in the retail outlets. The workings decoded
that PSO garnered the most revenue per outlet followed by Attock
and Shell.
Breaking down the cost structure of HSD and MOGAS, the RC was enlightened that the margins for the
OMC have been increased keeping in view the inflation. Government of Pakistan has linked OMC margins
with CPI (Consumer Price Index), which are updated annually. Margins of both HSD and Petrol have been
revised PKR 0.17/liter to PKR 2.81/liter from current PKR 2.64/liter.
Analysing the global market outlook, the RT commented that the US-China trade war and the Iranian
sanctions are raising fears regarding oil prices. Furthermore, the attacks on Saudi oil refineries resulted in
price hike which have now stabilised. RC further commented that with the discovery of shale gas in the
United States, the price is expected to remain stable as the global supply does not face any much hindrance.