Accounts June 2011

PAK-ARAB REFINERY LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011
DRAFT
AUDITORS’ REPORT TO THE MEMBERS
We have audited the annexed balance sheet of PAK-ARAB REFINERY LIMITED (the Company) as at 30
June 2011 and the related statement of comprehensive income, cash flow statement and statement of changes
in equity together with the notes forming part thereof, for the year then ended and we state that we have
obtained all the information and explanations which, to the best of our knowledge and belief, were necessary
for the purposes of our audit.
It is the responsibility of the Company’s management to establish and maintain a system of internal control,
and prepare and present the above said statements in conformity with the approved accounting standards and
the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these
statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the above said
statements are free of any material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the above said statements. An audit also includes assessing the
accounting policies and significant estimates made by management, as well as, evaluating the overall
presentation of the above said statements. We believe that our audit provides a reasonable basis for our
opinion and, after due verification, we report that:
a) in our opinion, proper books of account have been kept by the Company as required by the Companies
Ordinance, 1984;
b) in our opinion:
i) the balance sheet and statement of comprehensive income together with the notes thereon
have been drawn up in conformity with the Companies Ordinance, 1984, and are in
agreement with the books of account and are further in accordance with accounting policies
consistently applied except for the changes, as stated in note 3.3, with which we concur;
ii) the expenditure incurred during the year was for the purpose of the Company’s business;
and
iii) the business conducted, investments made and the expenditure incurred during the year
were in accordance with the objects of the Company;
c) in our opinion and to the best of our information and according to the explanations given to us, the
balance sheet, statement of comprehensive income, cash flow statement and statement of changes in
equity together with the notes forming part thereof, conform with approved accounting standards as
applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the
manner so required and respectively give a true and fair view of the state of the Company’s affairs
as at 30 June 2011 and of the profit, total comprehensive income, its cash flows and changes in
equity for the year then ended; and
d) in our opinion no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII
of 1980).
Chartered Accountants
Audit Engagement Partner’s Name: Pervez Muslim
Date:
Place: Karachi
1
BALANCE SHEET
AS AT JUNE 30, 2011
June 30, June 30,
2011 2010
ASSETS Note (Rupees in ‘000)
NON-CURRENT ASSETS
Fixed assets
Property, plant and equipment 4 34,295,473 35,735,822
Intangible assets 5 30,166 71,142
0 0
Long-term investments 6 3,973,879 3,973,879
Long-term loans 7 3,044,566 3,490,460
Long-term deposits 8 53,429 53,248
53429 43,324,551
CURRENT ASSETS
Stores, spares and chemicals 9 3,319,635 3,118,997
Stock-in-trade 10 27,172,725 19,144,249
Trade debts 11 31,203,549 38,950,862
Loans and advances 12 512,805 501,943
Trade deposit and short-term prepayments 13 96,158 77,288
Interest accrued 14 91,561 27,622
Other receivables 15 13,100,851 12,211,563
Short-term investments 16 21,676,578 20,383,674
Current portion of long-term investments - 1,486,070
Taxation – net 17 1,042,252 1,428,893
Cash and bank balances 18 1,189,657 373,823
0 0
TOTAL ASSETS 140,803,284 141,029,535
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Share Capital 19 11,605,000 11,605,000
Reserves
Capital reserve 20 19,781,902 19,781,902
Unappropriated profit 31,507,483 17,687,807
310258909 37469709
62,894,385 49,074,709
NON-CURRENT LIABILITIES
Long-term financing 21 5,904,750 7,516,000
Long-term deposits 22 889,382 624,138
Deferred taxation 23 6,703,397 5,690,349
Deferred liabilities 24 2,091,744 2,195,994
9684523 8510481
CURRENT LIABILITIES
Trade and other payables 25 44,927,951 38,591,832
Interest / mark-up accrued on loans and other payables 26 410,416 1,052,322
Short-term borrowings 27 12,452,009 34,559,535
Current portion of long-term financing 4,529,250 1,724,656
0 0
CONTINGENCIES AND COMMITMENTS 28
TOTAL EQUITY AND LIABILITIES 140,803,284 141,029,535
The annexed notes 1 to 45 form an integral part of these financial statements.
CHAIRMAN MANAGING DIRECTOR DIRECTOR DIRECTOR

2
STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED JUNE 30, 2011
June 30, June 30,

2011 2010
Note (Rupees in ‘000)
NET SALES AND SERVICES 29 238,836,585 193,315,102
Cost of sales and services 30 (211,209,544) (175,169,211)
GROSS PROFIT 27,627,041 18,145,891
Administrative and selling expenses 31 (1,355,163) (1,260,098)

Other operating income 32 1,834,351 1,564,460
Other operating expenses 33 (1,783,569) (912,943)
OPERATING PROFIT 26,322,660 17,537,310
Finance costs 34 (3,722,461) (5,198,351)
PROFIT BEFORE TAXATION 22,600,199 12,338,959
Taxation 35 (7,780,523) (4,371,315)
NET PROFIT FOR THE YEAR 0 7,967,644
OTHER COMPREHENSIVE INCOME FOR THE YEAR - NET OF TAX - -
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 0 7,967,644
BASIC AND DILUTED EARNINGS PER SHARE (Rupees) 36 12.77 6.87

3

CASH FLOW STATEMENT
June 30, June 30,
Note 2011 2010
(Rupees in ‘000)
CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations 38 33,666,086 24,089,324
Income tax paid (6,380,834) (4,049,535)
Finance costs paid (4,364,367) (5,217,641)
Long-term loans to employees paid – net 39,374 11,302
Employee benefits paid (119,706) (115,195)
Long-term security deposits received 265,063 156,617
Net cash generated from operating activities 23,105,616 14,874,872
CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditure (1,521,299) (5,969,931)
Investments encashed 1,486,070 4,987,170
Sale proceeds from disposal of fixed assets 30,973 28,796
Interest received 512,560 561,405
Net cash generated from / (utilised in) investing activities 508,304 (392,560)
CASH FLOWS FROM FINANCING ACTIVITIES

Long-term financing repaid (1,297,656) (3,544,049)
Long-term financing acquired 2,900,000 3,279,462
Short-term loans acquired (10,453,806) 4,018,502
Dividend paid (1,000,000) (3,000,000)
Net cash (utilised in) / generated from financing activities (9,851,462) 753,915
NET CASH FLOWS DURING THE YEAR 13,762,458 15,236,227
CASH AND CASH EQUIVALENTS AT THE BEGINNING

OF THE YEAR 2,352,464 (12,883,763)
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 16,114,922 2,352,464
CASH AND CASH EQUIVALENTS
Short-term investments 16 21,676,578 20,383,674

Cash and bank balances 18 1,189,657 373,823
Short-term running finances 27 (6,751,313) (18,405,033)
16,114,922 -18031210

4
STATEMENT OF CHANGES IN EQUITY

SHARE CAPITAL REVENUE

CAPITAL RESERVE RESERVE
Issued, Project
subscribed Development Unappropriated
and paid-up Reserve profit Total
------------------------------------- Rupees in ‘000
---------------------------------------
Balance as at June 30, 2009 11,605,000 16,650,259 15,851,806 44,107,065
Final dividend for the year ended June 30, 2009,

declared subsequent to the year-end @ Rs.2.58
per Ordinary share of Rs.10 each - - (3,000,000) (3,000,000)
Transfer to Project Development Reserve - 3,131,643 (3,131,643) -
Total comprehensive income for the year - - 7,967,644 7,967,644
Final dividend for the year ended June 30, 2010,

declared subsequent to the year-end @ Rs.0.86
per Ordinary share of Rs.10 each - - (1,000,000) (1,000,000)
Total comprehensive income for the year - - 14,819,676 14,819,676

5
NOTES TO THE FINANCIAL STATEMENTS

1. THE COMPANY AND ITS OPERATIONS
Pak-Arab Refinery Limited was incorporated in Pakistan on May 09, 1974 as a Public Limited
Company - Unquoted. The shares of the Company are owned by the Government of Pakistan (GoP)
and Abu Dhabi Petroleum Investment Company, LLC (ADPI), based in Emirate of Abu Dhabi (UAE), in
the ratio of 60 percent and 40 percent, respectively.
The Company is engaged in refining, sale and transportation of petroleum products. The Company also
markets petroleum products (lubricants) under the brand name of “Pearl”.
The registered office of the Company is situated at Sadiq Plaza, Shahrah-e-Quaid-e-Azam, Lahore,
whereas the corporate office is located at Korangi Creek Road, Karachi. The refinery of the Company is
situated at Mahmood Kot, District Muzaffargarh.
2. STATEMENT OF COMPLIANCE
These financial statements have been prepared in accordance with approved accounting standards as
applicable in Pakistan. Approved accounting standards comprise of such International Financial
Reporting Standards (IFRSs) issued by the International Accounting Standards Board as are notified
under the Companies Ordinance, 1984, provisions of and directives issued under the Companies
Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance,
1984 shall prevail.
These financial statements are the separate financial statements of the Holding Company (Pak-Arab
Refinery Limited). In addition to the separate financial statements, the Company prepares consolidated
financial statements.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Basis of preparation
These financial statements have been prepared under the historical cost convention.
3.2 Standards, interpretations and amendments to approved

accounting standards that are not yet effective
The following revised standards, amendments and interpretations with respect to approved
accounting standards as applicable in Pakistan would be effective from the dates mentioned
below against the respective standard or interpretation:
Effective Date
(accounting
periods
Standard or Interpretation beginning on or
after)
IFRS 7 Financial Instruments : Disclosures - Amendments enhancing July 01, 2011

disclosures about transfers of financial assets
IAS 1 Presentation of Financial Statements - Amendments to revise July 01, 2012

the way other comprehensive income is presented
IAS 12 Income Tax (Amendment) – Deferred Taxes : Recovery of January 01, 2012
underlying assets
6 PAK-ARAB REFINERY LIMITED
Effective Date
(accounting
periods
Standard or Interpretation beginning on or
after)
IAS 19 Employee Benefits - Amended Standard resulting from January 01, 2013
the post-employment benefits and termination benefits
projects
IAS 24 Related Party Disclosures (Revised) January 01, 2011
IFRIC 14 Prepayments of a Minimum Funding Requirement January 01, 2011

(Amendment)
The Company expects that the adoption of the above revisions, amendments and
interpretations of the standards will not have material affect on the Company's financial
statements in the period of initial application.
In addition to the above, amendments to various accounting standards have also been
issued by the IASB. Such improvements are generally effective for accounting periods
beginning on or after January 01, 2011. The Company expects that such improvements to
the standards will not have any material impact on the Company's financial statements in
the period of initial application.
Further, the following new standards have been issued by IASB which are yet to be notified
by the Securities and Exchange Commission of Pakistan (SECP) for the purpose of
applicability in Pakistan:
IASB Effective date

(annual periods
beginning Standard
on or after)
IFRS 9 Financial Instruments January 01, 2015

IFRS 10 Consolidated Financial Statements January 01, 2013
IFRS 11 Joint Arrangements January 01, 2013
IFRS 12 Disclosure of Interests in Other Entities January 01, 2013
IFRS 13 Fair Value Measurement January 01, 2013
3.3 Standards, amendments and interpretations adopted during the year
The accounting policies adopted in the preparation of these financial statements are
consistent with those of the previous financial year except as described below:
New and amended standards and interpretations
The Company has adopted the following new and amended IFRS and IFRIC interpretations
which became effective during the year:
IFRS - 2 Group Cash-settled Share-based Payment Arrangements

IAS - 32 Financial Instruments: Presentation - Classification of Rights Issues
(Amendment)
IFRIC - 19 Extinguishing Financial Liabilities with Equity Instruments
Improvements to various standards issued by IASB
Issued in 2009
IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations

IFRS 8 Operating Segments
IAS 1 Presentation of Financial Statements
IAS 7 Statement of Cash flows Presentation of Financial Statements
IAS 17 Leases
IAS 36 Impairment of Assets
IAS 39 Financial Instruments : Recognition and Measurement
Issued in May 2010
IFRS 3 Business Combinations

IAS 27 Consolidated and Separate Financial Statements
The adoption of the above standards, amendments / improvements and interpretations did
not have any effect on the financial statements.
The Company has not early adopted any standard, interpretation or amendment that has
been issued but is not yet effective.
3.5 Significant accounting estimates and judgments
The preparation of financial statements in conformity with approved accounting standards

requires the use of certain critical accounting estimates. It also requires management to
exercise its judgment in the process of applying the Company’s accounting policies.
Estimates and judgments are continually evaluated and are based on historic experience
and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. Revisions to accounting estimates are recognized in the period in
which the estimate is revised and in any future periods affected.
In the process of applying the accounting policies, management has made the following
estimates and judgments which are significant to the financial statements:
Property, plant and equipment
The Company reviews appropriateness of the rate of depreciation, useful life and residual
value used in the calculation of depreciation. Further, where applicable, an estimate of the
recoverable amount of assets is made for possible impairment on an annual basis. In
making these estimates, the Company uses the technical resources available with the
Company. Any change in the estimates in the future might affect the carrying amount of
respective item of property, plant and equipment, with corresponding effects on the
depreciation charge and impairment.
Stock-in-trade
The Company reviews the net realizable value of stock in trade to assess any diminution in
the respective carrying values. Net realizable value is estimated with reference to the
estimated selling price in the ordinary course of business less the estimated cost necessary
to make the sale.
Trade debts
The Company reviews its doubtful trade debts at each reporting date to assess whether
provision should be recorded in the statement of comprehensive income. In particular,
judgment by management is required in the estimation of the amount and timing of future
cash flows when determining the level of provision required. Such estimates are based on
assumptions about a number of factors and actual results may differ, resulting in future
changes to the provisions.
Staff retirement benefits
Certain actuarial assumptions have been adopted as disclosed in notes 24.1, 25.1 and 25.2
to the financial statements for valuation of present value of defined benefit obligations and
fair value of plan assets. Any changes in these assumptions in future years might affect
unrecognized gains and losses in those years.
Taxation
In making the estimate for income tax payable by the Company, the Company takes into
account the applicable tax laws and the decision by appellate authorities on certain issues in
the past.
3.6 Property, plant and equipment
3.6.1 Operating fixed assets
These are stated at cost less accumulated depreciation and impairment, if any,
except for freehold land, which is stated at cost. Such cost includes the cost of
replacing part of the plant and equipment and borrowing costs for long-term
construction projects if the recognition criteria are met (note 3.22).
Depreciation is charged to income applying the straight-line method whereby the

cost of an asset is written off over its estimated useful life. The rates used are stated
in notes 4.1, 4.2 and 4.3 to the financial statements.
In respect of additions and deletions of assets during the year, depreciation is

charged from the month of acquisition and up to the month preceding the deletion,
respectively.
The carrying amounts of the Company’s assets are reviewed at each balance sheet
date to determine whether there is any indication of impairment loss. If any such
indication exists, the asset’s recoverable amount is estimated in order to determine
the extent of the impairment loss, if any. Impairment losses are charged to
statement of comprehensive income.
An item of property and equipment is derecognized upon disposal or when no future

economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in the
statement of comprehensive income in the year the asset is recognized.
The assets’ residual values, useful lives and methods are reviewed, and adjusted if
appropriate, at each financial year end.
Maintenance and normal repairs are charged to statement of comprehensive

income as and when incurred.
3.6.2 Capital work-in-progress
Capital work-in-progress is stated at cost less impairment in value, if any. It consists

of expenditure incurred and advances made in respect of operating fixed assets and
intangible assets in the course of their erection, installation and acquisition. It also
includes capital spares held by the Company for replacement of major items of plant
and machinery, which are stated at cost less impairment, if any.
3.7 Intangible assets
These are stated at cost less accumulated amortization and impairment, if any.
Amortisation is charged to income using the straight line method at the rate disclosed in
note 5 to the financial statements.
An intangible asset is recognized if it is probable that the future economic benefits that are
attributable to the asset will flow to the enterprise and that the cost of such asset can also
be measured reliably.
Generally, costs associated with developing or maintaining computer software programmes

are recognized as an expense as incurred. However, costs that are directly associated with
identifiable software and have probable economic benefit exceeding the cost beyond one
year, are recognized as intangible asset. Direct costs include the purchase cost of software
and related overhead cost.
In respect of additions and deletions of intangible assets during the year, amortization is
charged from the month of acquisition and up to the month preceding the deletion
respectively.
Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset is accounted for by changing the recognized
period or method, as appropriate, and treated as changes in accounting estimates. The
recognized expense on intangible assets with finite lives is recognized in the statement of
comprehensive income in the expense category consistent with the function of the intangible
asset.
Expenditure which enhances or extends the performance of computer software beyond its
original specification and useful life is recognized as a capital improvement and added to the
original cost of the software.
3.8 Long-term investments
Management determines the appropriate classification of its investments at the time of

purchase and these are initially recognised at fair value which is consideration given
including the acquisition cost.
(a) Subsidiary
Investment in the subsidiary company is recognised at cost less impairment, if any.
(b) Associates
Investment in associates is recognised at cost less impairment, if any.
(c) Others
Investment in securities with fixed maturity, where management has both the intent
and the ability to hold to maturity, are classified as held to maturity and carried at
amortised cost. This cost is computed as the amount initially recognised minus
principal repayments, plus or minus the cumulative amortization, using the effective
interest method of any difference between the initially recognised amount and the
maturity amount. This calculation includes all fees and points paid or received
between parties to the contract that are an integral part of the effective interest rate,
transaction costs and all other premiums and discounts. For investments carried at
amortised cost, gains and losses are recognised in the profit and loss account when
the investments are derecognised or impaired, as well as through the amortisation
process.
3.9 Stores, spares and chemicals
These are valued on moving average basis except for the stores, spares and chemicals in
transit which are stated at invoice price plus other charges incurred thereon up to the
balance sheet date. Provision is made for slow moving and obsolete items wherever
considered necessary.
3.10 Stock-in-trade
Stock of crude oil is valued at lower of cost, determined on a weighted average basis, and
net realisable value. Crude oil in transit is valued at cost comprising invoice value plus other
charges incurred thereon accumulated to the balance sheet date. Stock of semi-finished
and finished products is valued at lower of cost, determined on a weighted average basis,
and net realisable value. Cost in relation to semi-finished and finished products represents
cost of crude oil and an appropriate allocation of manufacturing overheads. Cost in respect
of semi-finished items is adjusted to an appropriate stage of processing.
Net realisable value for crude oil signifies the estimated replacement cost whereas, net
realizable value for semi-finished and finished products represents Import Parity Price
computed using the prices published in the Platt’s Oilgram and in accordance with the
mechanism approved by Government for deregulated products and Petroleum Policy, 1994, for
regulated products.
3.11 Trade debts and other receivables
These are recognised and carried at original invoice value less an allowance for any
uncollectible amounts. An estimate for doubtful debts is made when collection of the full
amount is no longer probable. Bad debts are written-off when identified.
3.12 Loans, advances and deposits
These are recognised at cost, which is the fair value of the consideration given. However,
an assessment is made at each balance sheet date to determine whether there is an
indication that a financial asset or group of assets may be impaired. If such indication exists,
the estimated recoverable amount of that asset is determined and any impairment loss is
recognised for the difference between the recoverable amount and the carrying value.
3.13 Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash
flow statement, cash and cash equivalents comprise cash in hand, balances with banks on
current and deposit account, short-term investments and outstanding balance of running
finance facilities availed by the Company.
3.14 Employee benefits
(a) Defined contribution plan
The Company operates an approved contributory provident fund for all employees.
Equal monthly contributions are made, both by the Company and the employees, to
the fund at the rate of 8.33% of basic salary and cost of living allowance.
(b) Defined benefit plans
Funded
The Company operates the following funded schemes:
(i) pension scheme for all permanent employees of the Company. Provision is
made, annually, to cover obligations under the scheme, by way of a charge
to statement of comprehensive income, calculated in accordance with the
actuarial valuation. The most recent valuation in this regard was carried out
as at June 30, 2011, using the Projected Unit Credit Method; and
(ii) gratuity scheme for all permanent employees of the Company. Provision is
made, annually, to cover obligations under the scheme, by way of a charge
to statement of comprehensive income, calculated in accordance with the
actuarial valuation. The most recent valuation in this regard was carried out
as at June 30, 2011, using the Projected Unit Credit Method.
Unfunded
The Company operates the following unfunded schemes:
(i) medical scheme covering all retired employees and their spouses in
accordance with service regulations. Benefits are provided annually by way
of a charge to statement of comprehensive income to cover obligations
based on actuarial valuation. The most recent valuation in this regard was
carried out as on June 30, 2011, using the Projected Unit Credit Method;
and
(ii) compensated absences for all the employees in accordance with service
regulations. Benefits are provided annually by way of a charge to statement
of comprehensive income to cover obligation based on actuarial valuation.
The most recent valuation in this regard was carried out as on
June 30, 2011, using the Project Unit Credit Method.
3.15 Actuarial gains and losses
Actuarial gains and losses are recognised as income or expense when the cumulative
unrecognised actuarial gains or losses as of the beginning of the period exceed the greater
of 10% of the defined benefit obligation and 10% of fair value of plan assets; except for
compensated absences. These gains or losses are recognised over the expected average
remaining working lives of the employees participating in the plan.
3.16 Provisions
Provisions are recognised when the Company has a present legal or constructive obligation
as a result of past events and it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a reliable estimate of the
obligation can be made.
3.17 Taxation
Current
Provision for taxation is based on taxable income at the rates applicable for the current tax
year, after considering the rebates and tax credits available, if any, in accordance with the
Income Tax Ordinance, 2001. The tax charge as calculated above is compared with
turnover tax under Section 113 of the Income Tax Ordinance, 2001, and whichever is higher
is provided in the financial statements.
Deferred
Deferred tax is recognised using the liability method, on all major temporary differences at
the balance sheet date between the tax base of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred income tax assets are recognised for all deductible temporary differences and
carry-forward of unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences and / or carry-forward of
unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date
and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to
apply to the period when the asset is realised or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the balance sheet date.
3.18 Borrowings
Loans and borrowings are recorded at the proceeds received. Financial charges are
accounted for on accrual basis and charged to the statement of comprehensive income.
3.19 Trade and other payables
Liabilities for trade and other amounts payable are carried at cost which is the fair value of
the consideration to be paid in future for goods and services received, whether or not billed
to the Company.
3.20 Foreign currency translation

The financial statements are presented in Pak Rupee, which is the Company’s
functional and presentation currency. Foreign currency transactions during the year are
recorded at the exchange rates approximating those ruling on the date of the transaction.
Monetary assets and liabilities in foreign currencies are translated at the spot rates of
exchange prevailing on the balance sheet date. Gains and losses on translation are taken to
statement of comprehensive income. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates as at the dates
of the initial transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was determined.
3.21 Revenue recognition

(a) Pipeline
(i) Revenue from transportation of petroleum products is recognised on
delivering the products to the customers.
(ii) Rental income from Pak-Arab Pipeline Company Limited (PAPCO) against
sharing of facilities is recognised on a straight line basis (note 24.2).
(b) Refinery
(i) Sale of products delivered through pipeline are recorded when products pass
through pipeline flange whereas sale of products through gantry is recorded when
product is loaded in bowsers.
(ii) Gantry service charges are recorded when services in this connection have
been rendered.
(iii) Shortfall in the Guaranteed Return (SGR) is recognised on an accrual basis
if the net of tax return of refinery segment is below 25% on the Company’s
equity investment in refinery.
(c) Marketing
Sales are recorded on dispatch of goods to the customers.
3.22 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of
an asset that necessarily takes a substantial period of time to get ready for its intended use
or sale are capitalized as part of the cost of the respective assets. All other borrowing costs
are expensed out in the period they occur. Borrowing costs consist of interest and other
costs that an entity incurs in connection with the borrowing of funds.
The Company capitalizes borrowing costs for all eligible assets where construction
commenced on or after July 01, 2008.
3.23 Financial instruments

All the financial assets and financial liabilities are recognised at the time when the Company
becomes a party to the contractual provisions of the instrument. Financial assets are
derecognised at the time when the Company loses control of the contractual rights that
comprise the financial assets. All financial liabilities are derecognised at the time when they
are extinguished that is, when the obligation specified in the contract is discharged,
cancelled, or expires. Any gains or losses on derecognition of financial assets and financial
liabilities are taken to statement of comprehensive income currently.
3.24 Offsetting financial assets and financial liabilities
A financial asset and a financial liability is offset and the net amount is reported in the
balance sheet if the Company has a legally enforceable right to set-off the recognised
amounts and intends either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
3.25 Segment reporting
A segment is a distinguishable component within a Company that is engaged in providing

products (business segment), or in providing products within a particular economic
environment (geographical segment), which is subject to risks and rewards that are different
from those of other segments.
Operating segments are reported in a manner consistent with the internal reporting provided
to the chief operating decision maker. Management monitors the operating results of its
business units separately for the purpose of making decisions about resource allocation and
performance assessment. The Company's operating businesses are organised and
managed separately according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different products and serves
different markets. Company’s business segments comprise refinery, pipeline and marketing.
Refinery segment is engaged in the refining of petroleum products, pipeline segment is
engaged in the transportation of petroleum products and marketing segment offers
lubricants. The Company accounts for inter-segment sales and transfers at normal selling
price.
Segment results, assets and liabilities include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis. Unallocated items comprise
mainly investments and related revenue, loans and borrowings and related expenses,
corporate assets and income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property,
plant and equipment, and intangible assets other than goodwill.
Segment revenue, segment expenses and segment results include transfers between
business segments and are eliminated as disclosed in note 29 to the financial statements.
3.26 Derivative financial instruments
In relation to fair value hedges, which meet the conditions for special hedge accounting, any
gain or loss from remeasuring the hedging instrument at fair value is recognised
immediately in the profit and loss account. Any gain or loss on the hedged item attributable
to the hedged risk is adjusted against the carrying amount of the hedged item and
recognised in the statement of comprehensive income.
In relation to cash flow hedges, which meet the conditions for special hedge accounting, the
portion of the gain or loss on the hedging instrument that is determined to be an effective
hedge is recognised directly in equity through the statement of changes in equity and the
ineffective portion is recognised in the statement of comprehensive income.
3.27 Dividends and appropriation to general reserve
Dividends and appropriation to general reserves are recognised in the financial statements
in the period in which these are approved.
June 30, June 30,

2011 2010
4. PROPERTY, PLANT AND EQUIPMENT
Operating fixed assets

Pipeline 4.1 1,617,332 1,835,821
Refinery 4.2 31,592,415 26,287,440
Marketing 4.3 1,860 2,766
0 0
Capital work-in-progress
Pipeline 4.4 155,250 87,156
Refinery 4.4 928,616 7,522,639
0 0
34,295,473 35,735,822
15
4.1 Pipeline
WRITTEN
COST ACCUMULATED DEPRECIATION DOWN VALUE
Description As at (Disposals) / As at As at Charge for (On disposals) / As at As at

Note July 01, 2010 Additions (adjustment) * June 30, 2011 Rate July 01, 2010 the year (adjustment) * June 30, 2011 June 30, 2011
-------------------------- (Rupees in '000) -------------------------- % ------------------------------------ (Rupees in '000) ------------------------------------
June 30, 2011
Freehold land 4.1.1 319,846 - - 319,846 - - - - - 319,846
Leasehold land 18,860 - - 18,860 1.01 6,354 191 - 6,545 12,315
Building on freehold land 852,122 17,371 - 869,493 5 549,005 39,976 - 588,981 280,512
Building on leasehold land 54,184 - - 54,184 5 52,846 608 - 53,454 730
Control building and electricity 678,256 2,712 (7,940) 673,028 10 600,831 9,947 (7,940) 602,838 70,190
Station piping, pumps and

instrumentation 2,076,398 6,484 - 2,045,017 10 1,798,777 42,569 - 1,803,481 241,536
4.1.2 (37,865) * (37,865) *
Main pipeline system 3,856,784 4,154 - 3,860,938 10 3,709,246 24,802 - 3,734,048 126,890
Fire fighting system 154,775 490 - 155,265 10 139,367 2,130 - 141,497 13,768
Tankages 488,611 8,511 - 497,122 5 421,114 20,902 - 442,016 55,106
Microwave and telecom system 296,492 - - 296,492 10 97,779 29,496 - 127,275 169,217
Supervisory control system 267,008 - - 267,008 14.29 99,763 38,130 - 137,893 129,115
Cathodic protection system 59,842 1,617 (424) 61,035 10 56,657 821 (424) 57,054 3,981
Furniture and fixtures 39,096 2,992 (3,602) 38,486 10 26,788 1,998 (3,452) 25,334 13,152
Equipment 261,127 16,007 (7,329) 269,805 14.29 189,242 17,905 (6,863) 200,284 69,521
Computers and related accessories 89,944 4,063 (6,237) 87,770 33.33 75,522 8,505 (6,230) 77,797 9,973
Utilities 44,778 - - 44,778 10 44,588 62 - 44,650 128
Motor vehicles 371,436 11,816 (22,997) 360,255 20 225,859 51,829 (18,785) 258,903 101,352
9,929,559 76,217 (48,529) 9,919,382 8,093,738 289,871 (43,694) 8,302,050 1,617,332

16
(37,865) * (37,865) *
4.1.1 Freehold land includes land given on rent to Pak-Arab Pipeline Limited (PAPCO), the Subsidiary Company, for a period of 25 years, as disclosed in detail in note 24.2.
4.1.2 During the current year, gas turbines, costing Rs.37.865 million and having a written down value of Rs.nil, have been donated to four educational institutions.
4.1.3 The cost of fully depreciated assets amounted to Rs.6,583 (2010: Rs.6,596) million at the end of the year.
17
WRITTEN
Description As at (Disposals) / As at As at Charge for (On disposals) / As at As at

Note July 01, 2009 Additions (adjustment) * June 30, 2010 Rate July 01, 2009 the year (adjustment) * June 30, 2010 June 30, 2010
June 30, 2010
Freehold land 4.1.4 319,846 - - 319,846 - - - - - 319,846
Leasehold land 18,860 - - 18,860 1.01 6,163 191 - 6,354 12,506
Building on freehold land 848,666 3,456 - 852,122 5 509,438 39,567 - 549,005 303,117
Building on leasehold land 54,184 - - 54,184 5 51,770 1,076 - 52,846 1,338
Control building and electricity 668,423 9,833 - 678,256 10 591,327 9,504 - 600,831 77,425
Station piping, pumps and

instrumentation 2,061,309 22,784 (7,695) 2,076,398 10 1,758,975 47,497 (7,695) 1,798,777 277,621
Main pipeline system 3,851,065 5,719 - 3,856,784 10 3,684,881 24,365 - 3,709,246 147,538
Fire fighting system 152,773 2,697 (695) 154,775 10 137,705 2,357 (695) 139,367 15,408
Tankages 488,611 - - 488,611 5 400,389 20,725 - 421,114 67,497
Microwave and telecom system 296,492 - - 296,492 10 68,283 29,496 - 97,779 198,713
Supervisory control system 4.1.5 268,500 1,477 - 267,008 14.29 62,257 38,037 - 99,763 167,245
(2,969) * (531) *
Cathodic protection system 59,612 230 - 59,842 10 55,911 746 - 56,657 3,185
Furniture and fixtures 35,758 3,431 (93) 39,096 10 24,922 1,933 (67) 26,788 12,308
Equipment 242,179 23,844 (4,896) 261,127 14.29 175,952 17,807 (4,517) 189,242 71,885
Computers and related accessories 80,729 9,215 - 89,944 33.33 67,298 8,224 - 75,522 14,422
Utilities 44,778 - - 44,778 10 44,373 215 - 44,588 190
Motor vehicles 349,416 47,167 (25,147) 371,436 20 195,277 52,773 (22,191) 225,859 145,577
9,841,201 129,853 (38,526) 9,929,559 7,834,921 294,513 (35,165) 8,093,738 1,835,821

(2,969) * (531) *
18
4.1.4 Freehold land includes land given on rent to Pak-Arab Pipeline Limited (PAPCO), the Subsidiary Company, for a period of 25 years, as disclosed in detail in note 24.2.
4.1.5 These represent adjustment in respect of excess accrual of cost in prior years.
4.1.6 The cost of fully depreciated assets amounted to Rs.6,596 (2009: Rs.6,473) million at the end of the year.
19
4.2 Refinery
WRITTEN
DOWN
COST ACCUMULATED DEPRECIATION VALUE
As at As at As at As at As at
July 01, June 30, July 01, Charge for (On June 30, June 30,
Description 2010 Additions (Disposals) 2011 Rate 2010 the year disposals) 2011 2011
June 30, 2011
Freehold land 335,592 - - 335,592 - - - - - 335,592
Building on freehold land 2,358,274 543,056 - 2,901,330 5 1,046,193 133,024 - 1,179,217 1,722,113
Processing plant 44,914,261 7,544,434 - 52,458,695 5 22,532,763 2,466,227 - 24,998,990 27,459,705
Tankage 4,264,000 - - 4,264,000 5 2,171,437 210,405 - 2,381,842 1,882,158
Furniture and fixtures 60,465 2,058 (335) 62,188 10 46,412 3,300 (334) 49,378 12,810
Equipment 360,474 57,487 (5,121) 412,840 14.29 237,041 33,553 (5,105) 265,489 147,351
Computers and related accessories 86,895 10,848 (8,507) 89,236 33.33 82,884 4,807 (8,507) 79,184 10,052
Motor vehicles 101,985 8,230 (7,439) 102,776 20 77,776 9,242 (6,876) 80,142 22,634
52,481,946 8,166,113 (21,402) 60,626,657 26,194,506 2,860,558 (20,822) 29,034,242 31,592,415
4.2.1 The cost of fully depreciated assets amounted to Rs.372.988 (2010: Rs.393,938) million at the end of the year.
20
WRITTEN
DOWN
COST ACCUMULATED DEPRECIATION VALUE
As at As at As at As at As at
July 01, June 30, July 01, Charge for (On June 30, June 30,
Description 2009 Additions (Disposals) 2010 Rate 2009 the year disposals) 2010 2010
June 30, 2010
Freehold land 335,592 - - 335,592 - - - - - 335,592
Building on freehold land 2,274,280 83,994 - 2,358,274 5 930,452 115,741 - 1,046,193 1,312,081
Processing plant 44,878,850 35,411 - 44,914,261 5 20,287,814 2,244,949 - 22,532,763 22,381,498
Tankage 4,264,000 - - 4,264,000 5 1,961,031 210,406 - 2,171,437 2,092,563
Furniture and fixtures 58,380 2,085 - 60,465 10 42,506 3,906 - 46,412 14,053
Equipment 339,007 23,595 (2,128) 360,474 14.29 205,918 33,184 (2,061) 237,041 123,433
Computers and related accessories 86,122 773 - 86,895 33.33 75,527 7,357 - 82,884 4,011
Motor vehicles 101,954 12,913 (12,882) 101,985 20 81,212 8,621 (12,057) 77,776 24,209
52,338,185 158,771 (15,010) 52,481,946 23,584,460 2,624,164 (14,118) 26,194,506 26,287,440
4.2.1 The cost of fully depreciated assets amounted to Rs.393.938 (2009: Rs.329.048) million at the end of the year.
21
4.3 Marketing
WRITTEN
As at As at As at Charge for As at As at
Description Note July 01, 2010 Additions (Disposals) June 30, 2011 Rate July 01, 2010 the year (On disposals) June 30, 2011 June 30, 2011
June 30, 2011
Furniture and fixtures 425 - - 425 10 288 26 - 314 111
Equipment 4.3.1 7,729 18 (19) 7,728 14.29 5,795 611 (1) 6,405 1,323
Computers and related accessories 2,960 175 (431) 2,704 33.33 2,739 196 (431) 2,504 200
Utilities 51 - - 51 10 42 5 - 47 4
Motor vehicles 1,321 - - 1,321 20 856 243 - 1,099 222
12,486 193 (450) 12,229 9,720 1,081 (432) 10,369 1,860
4.3.1 Automobile lube suction machines, costing Rs.6.783 (2010: Rs. 6.783) million, having an accumulated depreciation of Rs.5.723 (2010: Rs.5.178) million, are in the possession of various Dealers.
4.3.2 The cost of fully depreciated assets amounted to Rs.6.620 (2010: Rs.5.977) million at the end of the year.
WRITTEN
Description Note July 01, 2009 Additions (Disposals) June 30, 2010 Rate July 01, 2009 the year (On disposals) June 30, 2010 June 30, 2010
June 30, 2010
Furniture and fixtures 413 12 - 425 10 246 42 - 288 137
Equipment 4.3.3 7,571 158 - 7,729 14.29 4,989 806 - 5,795 1,934
Computers and related accessories 2,853 107 - 2,960 33.33 2,549 190 - 2,739 221
Utilities 51 - - 51 10 37 5 - 42 9
Motor vehicles 2,272 - (951) 1,321 20 1,416 340 (900) 856 465
13,160 277 (951) 12,486 9,237 1,383 (900) 9,720 2,766
4.3.3 Automobile lube suction machines, costing Rs.6.783 (2009: Rs. 6.783) million, having an accumulated depreciation of Rs.5.178 (2009: Rs. 4.449) million, are in the possession of various Dealers.
4.3.4 The cost of fully depreciated assets amounted to Rs.5.977 (2009: Rs. 4.233) million at the end of the year.
22
4.4 CAPITAL WORK-IN-PROGRESS June 30 June 30

2011 Transfers Additions 2010
-------------------------Rs. in ‘000-------------------------
4.4.1 Pipeline
Building and civil works 105,164 (17,371) 71,992 50,543
Control building and electricity 6,526 (2,385) 8,479 432
Computers and related accessories 377 - 377 -
Software 15,157 (6,066) 16,752 4,471
Land 18,138 - - 18,138
Main pipeline system 5,526 (4,154) 4,154 5,526
Station piping, pumps and instrumentation 3,580 (484) 3,580 484
Tankage - (8,511) 1,667 6,844
Firefighting system 782 - 782 -
Cathodic protection system - (1,617) 899 718
155,250 (40,588) 108,682 718
4.4.2 Refinery
Building and civil works 12,325 (540,803) 36,507 516,621
Processing plant (notes 4.4.2.1 and 4.4.2.2) 461,212 (7,543,500) 1,484,585 6,520,127
Tankage 7,152 - - 7,152
Equipment 2,894 (19,498) 2,071 20,321
Computers and related accessories 247 (8,995) - 9,242
Software 71 (247) - 318
Furniture and fixtures - (1,229) - 1,229
Capital spares 444,715 - - 444,715
Motor vehicles - (2,914) - 2,914
928,616 (8,117,186) 1,523,163 485891
4.4.2.1 Transfers to operating fixed assets represent cost incurred on the Diesel Hydro-Desulphurization (DHDS) Project at the Mid-Country Refinery (MCR). After completion of the Engineering
Design Specification package from UOP (Process Licensors), the Company signed an agreement during January 2008 with a Consortium of China National Chemical Engineering Group
Corporation and Hyundai Engineering Company of South Korea for engineering, procurement and construction of the plant.
The new plant will now help the Company in producing Low-Sulphur High Speed Diesel (HSD) to meet Euro II specifications. It will also reduce Sulphur contents in HSD from the present 6,500
- 7,000 parts per million to 500 parts per million.
This project was completed during the current year in December, 2010. The project was partly financed by a Syndicate of commercial banks (refer note 21.1 for details) with funds borrowed
specifically for the purpose of the DHDS project. The amount of borrowing costs capitalised during the current year amounted to Rs.291.915 (2010: Rs.384.159) million, which represent the
actual borrowing costs incurred during the current year.
4.4.2.2 The balance at the end of the current year includes a sum of Rs.268.894 million, representing cost incurred on the Asphalt Air Blowing Unit Project at the Mid-Country Refinery. The Company
awarded the Engineering, Procurement and Construction contract for this project to Descon Engineering Limited during the current year. The unit will produce road and industrial grade Asphalt
for the domestic market with a capacity to produce 500 metric tons per day. The project is expected to be completed by April, 2012.
4.5 Depreciation charge for the year has been allocated as follows:
Pipeline Refinery Marketing Total
Note 2011 2010 2011 2010 2011 2010 2011 2010
------------------------------------------------------- (Rupees in '000) -------------------------------------------------
23
Cost of sales and services 30 266,796 272,081 2,728,242 2,493,108 - - 2,995,038 2,765,189
Administrative and selling expenses 31 23,075 22,432 132,316 131,056 1,081 1,383 156,472 154,871
34449421 5779235 1081 1383 1,081 1,383 00 0
24
4.6 The details of operating fixed assets disposed off during the year are as follows:
Accumulated Written Sale Gain Mode of Particulars

Description Cost depreciation down value proceeds on disposal disposal of buyer
---------------------------- (Rupees in '000) ----------------------------
Pipeline
Cathodic Protection
Written down value not exceeding
Rs.50,000 each 424 424 - 84 84 Auction Various
Control Building and Electrification

Rs.50,000 each 7,940 7,940 - 8,686 8,686 Auction Asian Salvaging Company, Karachi
Furniture and fixtures

Rs.50,000 each 3,602 3,452 150 312 162 Auction Various
Equipments
Rs.50,000 each 7,329 6,863 466 1,352 886 Auction Various
Computers and related accessories

Rs.50,000 each 6,237 6,230 7 113 106 Auction Various
Motor vehicles
Jeep Adam Brand Zabardast 940 846 94 85 (9) Auction Mr. Baber IIIahi, Karachi
Jeep Adam Brand Zabardast 940 846 94 55 (39) Auction Mr. Inam Khan, Karachi
Jeep Suzuki Potohar 627 543 84 401 317 Auction Mr. Mohd. Owais, Karachi
Jeep Suzuki Potohar 627 543 84 515 431 Auction Mr. Munir Ahmed, Karachi
Jeep Suzuki Potohar 627 533 94 415 321 Auction Mr. Shafiur Rehman, Karachi
Honda City 1300CC 1,341 536 805 805 - Company Mr. Riaz Khan, Karachi
Policy
Toyota Corolla 1,425 451 974 974 - Company Mr. Anwar Ahmed, Karachi
Policy
Suzuki Cultus 777 246 531 531 - Company Mr. Anwar Jamal, Karachi
Policy
Toyota Corolla 1,503 51 1,452 1,503 51 Insurance New Jubilee Insurance Co. Ltd.,
claim Karachi
Rs.50,000 each 14,190 14,190 - 9,464 9,464 Auction/ Various
Company
Policy
22,997 18,785 4,212 14,748 10,536
48,529 43,694 4,835 25,295 20,460

Refinery
Equipment
Rs.50,000 each 5,121 5,105 16 1,268 1,252 Auction/ Various
Company
Computers and related accessories Policy
Rs.50,000 each 8,507 8,507 - 74 74 Auction Mr. Shahid & Brothers, Multan
Furniture
Rs.50,000 each 335 334 1 64 63 Auction Mr. Waseem Ahmed, Multan
Motor vehicles
Suzuki Cultus 794 277 517 517 - Company Mr. Waqar Rashid, Multan
Policy
Rs.50,000 each 6,645 6,599 46 3,731 3,685 Auction/ Various
Company
Policy
7,439 6,876 563 4,248 3,685
21,402 20,822 580 5,654 5,074
Balance c/f 69,931 64,516 5,415 30,949 25,534

25
Accumulated Written Sale Gain Mode of Particulars

Description Cost depreciation down value proceeds on disposal disposal of buyer
---------------------------- (Rupees in '000) ----------------------------
Balance b/f 69,931 64,516 5,415 30,949 25,534
Marketing
Equipment
Rs.50,000 each 19 1 18 19 1 Insurance New Jubilee Insurance Co. Ltd.,
claim Karachi
Computers
Rs.50,000 each 431 431 - 5 5 Auction Mr. M. Naeem, Karachi
June 30, 2011 70,381 64,948 5,433 30,973 25,540
June 30, 2010 54,487 50,183 4,304 28,796 24,492
5. INTANGIBLE ASSETS
WRITTEN
COST ACCUMULATED AMORTISATION DOWN VALUE
Description July 01, 2010 Additions June 30, 2011 Rate July 01, 2010 the year June 30, 2011 June 30, 2011
------------------ (Rupees in '000) ----------------- % ----------------------------- (Rupees in '000) ---------------------------
June 30, 2011
Software
Pipeline 133,174 6,177 139,351 33.33 72,792 40,720 113,512 25,839
Refinery 40,093 247 40,340 33.33 29,333 6,680 36,013 4,327
173,267 6,424 179,691 102,125 47,400 149,525 30,166
WRITTEN
COST ACCUMULATED AMORTISATION DOWN VALUE
Description July 01, 2009 Additions June 30, 2010 Rate July 01, 2009 the year June 30, 2010 June 30, 2010
------------------ (Rupees in '000) ----------------- % ----------------------------- (Rupees in '000) ---------------------------
June 30, 2010
Software
Pipeline 125,420 7,754 133,174 33.33 32,710 40,082 72,792 60,382
Refinery 39,297 796 40,093 33.33 21,845 7,488 29,333 10,760
164,717 8,550 173,267 54,555 47,570 102,125 71,142
5.1 Amortisation charge for the year has been allocated as follows:
Pipeline Refinery Total

Note 2011 2010 2011 2010 2011 2010
---------------------------------------------- (Rupees in '000) --------------------------------------------------
Cost of sales and services 30 47 47 6,680 7,488 6,727 7,535

Administrative and selling expenses 31 40,673 40,035 - - 40,673 40,035
6680 7488 6,680 7,488 94970 0
26
June 30, June 30,
2011 2010
6. LONG-TERM INVESTMENTS
Investments in related parties – at cost
Subsidiary company
Pak-Arab Pipeline Company Limited (PAPCO) 3,672,000 3,672,000
36,720,000 (2010: 36,720,000) fully paid Ordinary shares of

Rs.100 each. Equity held 51% (2010: 51%). [Break-up
value of each Ordinary share of Rs.100: Rs.152.03
(2010: Rs.138.48) per Ordinary share based on the latest
audited financial statements available for the year ended
June 30, 2011].
Associated undertakings
TOTAL PARCO Pakistan Limited 299,879 299,879
29,987,980 (2010: 29,987,980) fully paid Ordinary shares of

Rs.10 each. Equity held 40% (2010: 40%). [Break-up value
of each Ordinary share of Rs.10: Rs.11.24 (2010: Rs.8.99 -
restated) per Ordinary share based on the latest audited
financial statements available for the year ended
December 31, 2010].
Corporation House (Private) Limited 2,000 2,000
200,000 (2010: 200,000) fully paid Ordinary shares of

Rs.10 each. Equity held 25% (2010: 25%). [Break-up value
of each Ordinary share of Rs.10: Rs.47.77 (2010: Rs.45.88)
per Ordinary share based on the latest un-audited financial
statements available for the year ended June 30, 2011].
3,973,879 3,973,879
Others – Held to maturity
Special US Dollar Bonds

Face value of US$ Nil (2010: US$17.224 million) 6.1 - 1,486,070
Current portion thereof - (1,486,070)
- -
3,973,879 3,973,879
6.1 These Special US Dollar Bonds were issued by the Government of Pakistan for a term of seven years
and carried interest at the rate of six months LIBOR prevailing on the day preceding the date of
payment plus a premium of 2% per annum, payable semi-annually. These have matured during the
current year.
27
June 30, June 30,
2011 2010
7. LONG-TERM LOANS
Considered good – secured
Pak-Arab Pipeline Company Limited (PAPCO) -

the Subsidiary company 7.1 & 7.2 3,434,000 3,843,000
Executives 7.3, 7.4 & 7.5 27,427 38,919

Employees 7.3 42,730 70,612
7456688 0
Current maturity of long-term loans:
Pak-Arab Pipeline Company Limited (PAPCO) – the
Subsidiary company 12 (429,250) (427,000)
Executives 12 (11,706) (11,244)
Employees 12 (18,635) (23,827)
(459,591) (462,071)
3,044,566 3,490,460
7.1 During the year ended June 30, 2005, the Company arranged a long-term loan of US$50.00 million from
European Investment Bank (EIB) and re-lent the same to PAPCO, under the terms of the Finance Contract,
dated April 13, 2004, the Company signed with PAPCO.
The loan has been given to PAPCO for the implementation of White Oil Pipeline Project (WOPP) and is
recoverable in 20 equal, six monthly installments, commencing December 15, 2009, in the same currency
or equivalent thereof.
In addition to recovering the interest charged by EIB, not exceeding LIBOR plus 40 basis points to the
Company on the said loan, the Company is also entitled to recover all other charges from PAPCO incurred
in respect thereof, along with a margin of 2.75%, receivable semi- annually.
The loan is secured by way of first pari passu charge on PAPCO's assets.
7.2 The maximum amount of loan due from PAPCO at the end of any month during the year was Rs.3,870
(2010: Rs.4,178) million.
7.3 These loans have been provided to executives and employees for the purchase of motor cars, motor cycles,
furniture and house building assistance. Motor car and motor cycle loans carry service charges at the rate
of 1% (2010: 1%) per annum and are recoverable over a period, ranging between four and five years,
whereas loans for the purchase of furniture and house building assistance are interest free and are
recoverable over a period, ranging between five and six years.
These loans are secured by way of retention of title documents of the respective assets in the name of the
Company and against the outstanding balances of staff retirement benefits of the respective employees.
7.4 Reconciliation of carrying amount of loans to executives
Opening Balance 38,919 37,682

Transferred to Executives during the year 1,776 8,469
46151 0
Disbursements during the year - 5,600
Recoveries during the year (13,268) (12,832)
27,427 38,919
7.5 The maximum aggregate amount of loans due from the Executives of the Company at the end of any month
during the year was Rs.39.506 (2010: Rs.44.224) million.
7.6 Loans to Executives and Employees have not been discounted to their present value as the financial impact
thereof is not considered material.
28
June 30, June 30,
2011 2010
8. LONG-TERM DEPOSITS
Security deposits
Utilities 48,033 47,892
Others 5,396 5,356
53429 53248
9. STORES, SPARES AND CHEMICALS
Pipeline
In hand 227,348 238,642
Provision for slow moving stores, spares and chemicals (49,663) (49,663)
177685 188979
In transit 35,430 3,750
213,115 192,729
Refinery
In hand 3,076,894 2,800,454
In transit 26,505 123,790
26505 123790
Marketing
In hand 3,121 2,024
3,319,635 3,118,997
10. STOCK-IN-TRADE
Refinery
Raw material - Crude Oil

In hand 15,822,135 8,975,585
In transit 4,960,563 6,138,777
Provision for dead stock 30 (200,000) -
15114362 0
Semi-finished products 10.1 3,057,812 1,606,342

Finished products 10.2 & 10.3 3,504,939 2,397,527
45582567 19118231
27,145,449 19,118,231
Marketing
Raw materials 10.4 4,159 5,825
Finished products 23,117 20,193
27276 26018
27,172,725 19,144,249
10.1 Semi finished products, costing Rs.355.303 (2010: Rs.170.070) million, were carried at their net
realisable value (NRV) of Rs.347.445 (2010: Rs.144.576) million at the end of the current year.
10.2 Finished products, costing Rs.608.726 (2010: Rs.1,140.958) million, were carried at their net realisable
value (NRV) of Rs.499.827 (2010: Rs. 877.193) million at the end of the current year.
10.3 This includes finished products, costing Rs.21.550 (2010: Rs.16.651) million, held with the Pakistan
State Oil Company Limited, for export purposes.
10.4 This represents raw materials held by Union Chemical Industries (Private) Limited for toll blending of the
products of the Company.
29
June 30, June 30,
Note 2011 2010
(Rupees in ‘000)
11. TRADE DEBTS
Considered good – secured
Refinery 1,579,838 726,008
Considered good – unsecured

Pipeline 290,502 189,272
Refinery 29,318,050 38,009,332
Marketing 15,159 26,250
15159 26250
Considered doubtful – unsecured
Refinery 361,336 361,336
31,564,885 39,312,198
Provision against debts considered doubtful (361,336) (361,336)
31,203,549 38,950,862
11.1 Included in trade debts are the following amounts

due from the related parties:
TOTAL PARCO Pakistan Limited 2,368,006 1,744,201
Pak-Arab Pipeline Company Limited 876 2,180
2180 0
11.2 The ageing analysis of unimpaired trade receivables is as follows:
Neither
past Past due but not impaired
due nor 1-90 91-180 > 180
Total impaired days Days Days
------------------------------(Rupees in ‘000) ------------------------------
2011 31,203,549 11,587,137 18,433,510 1,099,046 83,856
2010 38,950,862 7,840,705 15,028,582 14,477,496 1,604,079

`
11.3 “Past due but not impaired” include a sum of Rs.19,844.437 (2010: Rs. 31,025.375) million due from an
Oil Marketing Company (OMC). The said sum is a part of Inter Circular Debt which the GoP is currently
trying to amicably settle with all the stakeholders, and, hence, pending the said settlement, the above
referred sum although past due is not considered impaired.
12. LOANS AND ADVANCES

Considered good
Loans – secured
Current maturity of long-term loans
Pak-Arab Pipeline Company Limited (PAPCO) – the
Subsidiary company 7 429,250 427,000
Executives 7 11,706 11,244
Employees 7 18,635 23,827
462071 0
Advances
Executives 1,860 445
Suppliers 51,354 39,427
39872 0
512,805 501,943
30
June 30, June 30,
2011 2010
13. TRADE DEPOSIT AND SHORT-TERM PREPAYMENTS
Trade deposit
Margin against letters of credit 11,662 3,580
Short-term prepayments
Insurance 65,189 62,830
Others 19,307 10,878
84496 73708
96,158 77,288
14. INTEREST ACCRUED
On:
Foreign currency term deposit receipts 53,995 27,410
Local currency term deposit receipts 37,566 -
Others - 212
91561 212
15. OTHER RECEIVABLES
Amount due from Refineries in respect of crude sharing 5,586,502 2,428,746
Due from the Government of Pakistan (GoP) 15.1 633,422 7,231,144
Income tax paid under protest to FBR in respect

of payments made to:
Japan Gasoline Corporation 28.2 344,861 344,861
Universal Oil Products 32,815 32,815

Provision there-against (32,815) (32,815)
- -
344,861 344,861
Due from Pak-Arab Pipeline Company Limited – the
Subsidiary company 15.2 49,298 10,490
Inland Freight Equalisation due from Oil and Marketing

Companies (OMCs) 15.3 6,326,078 2,013,779
Octroi receivable 13,510 13,510

Provision there-against (13,510) (13,510)
- -
Customs duty on imports 388 388

Workers’ Profit Participation Fund 15.4 10,429 38,449
Amount due from Contractors 309 309
Miscellaneous 15.5 149,564 143,397
13,100,851 12,211,563
15.1 Due from the Government of Pakistan (GoP)
This represents amount due from the GoP in respect of:

Shortfall in Guaranteed Return (SGR) 15.1.1 - 6,631,747
Price Differential Claims (PDCs) 15.1.2 531,952 497,927
Sales tax on JP-1 15.1.3 101,470 101,470
633422 599397
31
15.1.1 The Clarificatory Agreement signed between the Government of Islamic Republic of Pakistan
(GoP) and the Emirate of Abu Dhabi, dated October 03, 1997, provides that “In the event that the
PARCO Mid Country refinery yields an after tax net income which is less than 25% of the paid up
capital in any of the first eight (8) years of operation measured from the commencement of
commercial refinery operations (December 16, 2000), Pakistan guarantees to make payments
[“Shortfall Payment(s)”] to PARCO in the said year or years which shall ensure that PARCO shall
have an after tax net income of not less than 25% of the paid-up capital in any and all of the first
eight (8) years if its operations”. The Company, as a result of the said provision, accrued a sum
of Rs.6,632 million during the year ended June 30, 2009 as due from the GoP, which was also in
accordance with the provisions of the Petroleum Policy of 1994 and the Implementation
Agreement, dated June 14, 1995. The said amount has been fully recovered during the current
year.
15.1.2 This includes a sum of Rs.524.144 (2010: Rs.490.119) million due from the GoP in respect of
price differential claims, which is the difference between the actual ex-refinery prices, as
determined by the Oil and Gas Regulatory Authority (OGRA), and the restricted ex-refinery
prices, as per PDC notified by the GoP to control the inflationary trend in the prices of petroleum
products in the local markets in response to the increase in the prices of oil in international
markets.
15.1.3 This represents input sales tax relating to the sale of JP-1 to the Oil Marketing Companies in
prior years which was subsequently exempted from the levy of sales tax. The Company has
claimed this sales tax from the GoP as the said input sales tax was paid prior to the exemption
of JP-1 and, as such, was claimable. Necessary efforts are currently underway to recover the
same from the GoP. The management is, therefore, confident that the said tax would be
recovered in the near future.
15.2 This represents amount due from PAPCO on account of payments made by the Company on its behalf
under the Operation and Maintenance Agreement signed therewith.
15.3 This represents the difference between international market price (i.e. Import Parity Price) and ex-
refinery price of petroleum products, due from the OMCs.
June 30, June 30,

Note 2011 2010
(Rupees in ‘000)
15.4 Workers’ Profits Participation Fund (WPPF)
Balance at July 1 38,449 7,116

Allocation for the year 33 (1,216,572) (661,553)
(1,178,123) (654,437)
Amount paid to the Trustees of the Fund 1,188,552 692,886

-1167694 38,449
The Company has established a Workers’ Profit Participation Fund under the Companies Profits
(Workers’ Participation) Act of 1968 and has made contribution towards the fund @ 5% of net profit as
required under the aforesaid Act.
15.5 This includes a sum of Rs.141.872 (2010: Rs.131.139) million, representing expenditure incurred by the
Company in respect of Khalifa Coastal Refinery Project. The said sum will be reimbursed or adjusted
upon the formation of a separate company in the near future.
16. SHORT-TERM INVESTMENTS
Local currency
Term deposit receipts - 640,000
Foreign currency
Term deposit receipts 16.1 21,676,578 19,743,674
21,676,578 20,383,674
32
16.1 These represent US$ term deposits, equivalent to US$ 252.494 (2010:US$ 231.190) million, placed with
banks, maturing latest by September 23, 2011. These carry return at rates, ranging between 2.00% and
3.25% (2010: 0.68% and 2.50%) per annum.
June 30, June 30,

Note 2011 2010
(Rupees in ‘000)
17. TAXATION – net
Advance tax 35.1 23,833,834 17,453,000

Provision for taxation (22,791,582) (16,024,107)
1,042,252 0
18. CASH AND BANK BALANCES
Cash at bank
Deposit accounts
Local currency 18.1 1,087,364 344,633
Foreign currency 18.2 4,667 16,624
361257 0
Current accounts
Local currency 97,303 12,081
Balances with the National Savings Center 17 15

1,189,351 373,353
Cash in hand 306 470
1,189,657 373,823
18.1 These carry return at rates, ranging between 5.00% and 12.60% (2010: 1% and 11.75%) per annum.
18.2 These carry return at the rate of 1% (2010: 1%) per annum.
19. SHARE CAPITAL
No. of Shares
June 30, June 30,
2011 2010
Authorised Share Capital
1,500,000,000 1,500,000,000 Ordinary shares of Rs.10 each 15,000,000 15,000,000
Issued, Subscribed and

Paid-up Capital
54,000,000 54,000,000 Ordinary shares of Rs.10
each fully paid in cash 540,000 540,000
1,106,500,000 1,106,500,000 Ordinary shares of Rs.10

each issued as fully paid
bonus shares 11,065,000 11,065,000
1,160,500,000 1,160,500,000 11,605,000 11,605,000
The Government of Pakistan and Abu Dhabi Petroleum Investment Company held 696,300,000
(2009: 696,300,000) and 464,200,000 (2009: 464,200,000) Ordinary shares of Rs.10 each, respectively, at the
end of the current year.
June 30, June 30,
2011 2010
20. CAPITAL RESERVE
Project Development Reserve 20.1 19,781,902 19,781,902
20.1 Project development reserve is utilised from time to time towards the development of major projects
initiated by the Company.
33
June 30, June 30,
2011 2010
21. LONG-TERM FINANCING
Refinery 21.1 7,000,000 5,397,656

Pipeline 21.2 3,434,000 3,843,000
10434000 9240656
Current portion of long-term financing

Refinery 21.1 (4,100,000) (1,297,656)
Pipeline 21.2 (429,250) (427,000)
(4,529,250) (1,724,656)
5,904,750 7,516,000
21.1 Long-term financing – Refinery

June 30, June 30,
Secured – Local Currency Interest Repayment 2011 2010
rate Period Security (Rupees in ‘000)
Lender
Syndicated loan II – 0.175% 12 equal semi Guarantee from - 1,297,656
From Commercial banks (2010: 0.175%) annual installments, the Government
above 6 months commencing of Pakistan
KIBOR June 5, 2005 to
December 5, 2010
Syndicated loan (DHDS) – 0.25% 6 equal monthly First pari passu 4,100,000 4,100,000
From Commercial banks (2010: 0.25%) installments, hypothecation charge
above 6 months commencing over fixed assets of
KIBOR October 2011 to DHDS Project
March 2012
Syndicated loan (DHDS) – 1.45% above 6 6 equal semi-annual First Charge on all 2,900,000 -
From Commercial banks months KIBOR installments, present and future
commencing movable fixed assets of
June 30, 2013 to DHDS plant
December 31, 2015
7,000,000 5,397,656
Current maturity (4,100,000) (1,297,656)
2,900,000 4,100,000
21.2 Long-term financing – Pipeline
June 30, June 30,

Secured – Foreign Currency Interest Repayment 2011 2010
Note rate Period Security (Rupees in ‘000)
Lender
European Investment Bank 21.2.1 LIBOR with a 20 equal semi Guarantee from 3,434,000 3,843,000
US$40.00 (2010: US$45.00) million spread of annual installments, the Government
0.4% commencing of Pakistan
(2009: LIBOR with December 15, 2009
a spread of 0.4%) to June 15, 2019
Current maturity (429,250) (427,000)
3,004,750 -427000
21.2.1 This represents a long-term loan obtained by the Company from the European Investment Bank
(EIB) and relent to Pak Arab Pipeline Company Limited (PAPCO) under the terms of the Finance
Contract signed between the Company and PAPCO (note 7.1).
June 30, June 30,

2011 2010
22. LONG-TERM DEPOSITS
Security deposits from customers 22.1 889,382 624,138
22.1 These represent security deposits received from customers in respect of sale of Liquefied Petroleum Gas
(LPG). These are repayable on termination of agreements signed with the customers.
34
June 30, June 30,
2011 2010
23. DEFERRED TAXATION
Credit / (debit) balances arising in respect of:

Short-term provisions (711,754) (518,667)
Unrealised exchange gain on foreign currency
term deposit receipts 1,283,586 1,244,500
Accelerated tax depreciation 6,131,565 4,964,516
6,703,397 5,690,349
24. DEFERRED LIABILITIES
Employee benefits 24.1 363,744 359,994

Deferred income 24.2 1,728,000 1,836,000
13576692 4287738
24.1 Employee benefits
Provision for compensation of death and disability 500 500

Post retirement medical benefits 24.1.1 216,033 188,288
Compensated absences 24.1.3 147,211 171,206
359994 0
24.1.1 The status of the post retirement medical benefits and principal assumptions used in the actuarial
valuation as of June 30, 2011 were as follows:
Company's (liability) / asset

Opening balance (188,288) (171,139)
Charge for the year 24.1.2 (37,286) (24,562)
Contributions paid during the year 9,541 7,413
Closing balance (216,033) (188,288)
Reconciliation of payable to post retirement

medical benefits
Defined benefit obligation (294,953) (224,030)
Unrecognised plan unfunded liability (294,953) (224,030)
Unrecognised net gain 78,920 35,742
Recognised liability (216,033) (188,288)
The actuarial valuation as of June 30, 2011 uses a discount rate of 14% (2010: 13%) per annum. It
assumes that salaries will increase by 10.85% (2010:10.85%) per annum and medical cost will increase at
the rate of 9% (2010: 7.62%) per annum.
24.1.2 Charge for post retirement medical benefit scheme
Current service cost 9,641 8,236

Interest cost 26,311 17,865
Recognition of actuarial loss 1,334 (1,539)
37286 24,562
24.1.3 The Company’s liability for earned leave was determined as Rs.147.211 (2010: Rs.171.206) million
at the latest actuarial valuation at June 30, 2011. The valuation uses a discount rate of 13% and
assumes that salary increase will average 10.85% in the long-term.
35
June 30, June 30,
2011 2010
24.2 Deferred income
Advance rent in respect of the sharing of the

Company's facilities 24.2.1 2,700,000 2,700,000
Recognised as income to-date (972,000) (864,000)
1836000 0
24.2.1 This represents advance rent received from PAPCO, the Subsidiary company, for sharing the
Company's facilities (comprising rental of freehold land and a host of other facilities) for a period
of 25 years, commencing July 01, 2002, as discussed in note 4.1.1. The same is being
recognised as income on a straight line basis over the above referred period.
25. TRADE AND OTHER PAYABLES
Trade
Creditors - related parties
Abu Dhabi National Oil Company - 5,749,150

TOTAL PARCO Pakistan Limited 158 3,507
158 5752815
Other creditors 36,988,359 18,024,397

36,988,517 23,777,054
Other payables
Accrued liabilities 344,568 198,640

Advances from customers 355,225 451,435
Due to:
Employees’ Gratuity Fund 25.1 38,457 34,754
Employees’ Pension Fund 25.2 157,566 144,756
196023 179510
Other liabilities
Security deposits 17,785 16,156
Retention money 39,582 18,102
Government Guarantee Commission 25.3 391,174 391,174
Sales Tax 4,804,793 2,727,180
Payable to statutory authorities in respect of Petroleum
Levy and Federal Excise Duty 25.4 338,768 9,843,813
Workers’ Welfare Fund 25.5 1,354,408 892,111
Miscellaneous 97,108 96,657
97108 988768
44,927,951 38,591,832
36
25.1 The status of the gratuity fund and principal assumptions used in the actuarial valuation as of
June 30, 2011 were as follows:
Supervisory June 30, June 30,

Company's asset / (liability) Note Staff Workmen 2011 2010
------------------------ (Rupees in ‘000) ------------------------
Opening balance (56,303) 21,549 (34,754) (37,154)

Charge for the year 25.1.1 (34,163) (2,737) (36,900) (32,455)
Contributions paid during the year 31,421 1,776 33,197 34,855
Closing balance (59,045) 20,588 (38,457) (34,754)
Reconciliation of payable to gratuity fund
Fair value of plan assets 25.1.2 272,641 52,322 324,963 322,961

Present value of defined benefit obligation (312,553) (42,109) (354,662) (378,395)
Unrecognised plan funded (liability) / asset (39,912) 10,213 (29,699) (55,434)
Unrecognised net (loss) / gain (19,132) 10,374 (8,758) 20,680
Recognised asset / (liability) (59,044) 20,587 (38,457) (34,754)
The actuarial valuation as of June 30, 2011 uses a discount rate of 14% (2010: 13%) per annum. It
assumes that salaries will increase by 10.85% (2010: 10.85%) per annum and the return on plan assets
will equal the discount rate.
25.1.1 Charge for defined benefit gratuity fund
Current service cost 28,304 2,113 30,417 25,411

Interest cost 39,619 5,330 44,949 40,824
Expected return on plan assets (33,760) (6,141) (39,901) (36,852)
Recognition of actuarial loss - 1,435 1,435 3,072
34,163 2,737 36,900 32,455
25.1.2 Fund Investment - gratuity
National Saving Bonds - - - 39,737

Special Savings Certificates 204,801 49,845 254,646 225,607
Term Finance Certificates 42,254 - 42,254 3,492
Other bank balances 25,586 2,477 28,063 55,656
Benefits due - - - (2,718)
(Payables) / receivables - - - 1,187
272,641 52,322 324,963 322,961
25.2 The status of the pension fund and principal assumptions used in the actuarial valuation as of
June 30, 2011 were as follows:

Company's liability Note Staff Workmen 2011 2010
------------------------ (Rupees in ‘000) ------------------------
Opening balance (52,854) (91,902) (144,756) (124,932)

Charge for the year 25.2.1 (83,053) (16,267) (99,320) (100,164)
Contributions paid during the year 81,560 4,950 86,510 80,340
Closing balance (54,347) (103,219) (157,566) (144,756)
37
Note Staff Workmen 2011 2010
------------------------ (Rupees in ‘000) ------------------------
Reconciliation of payable to
pension fund
Fair value of plan assets 25.2.2 1,320,083 69,587 1,389,670 1,273,498

Defined benefit obligation (1,374,584) (174,947) (1,549,531) (1,457,525)
Unrecognised plan funded (liability) /
asset -54501 -105360 -159861 -184027
Unrecognised net (loss) / gain 154 2,141 2,295 39,271
Recognised asset / (liability) (54,347) (103,219) (157,566) (144,756)
The actuarial valuation as on June 30, 2011 uses a discount rate of 14% (2010: 13%) per annum. It
assumes that salaries will increase by 10.85% (2010: 10.85%) per annum and the return on plan assets will
equal the discount rate. The pension increase is 10% (2010: 7.62%) per annum.
25.2.1 Charge for defined benefit pension

Scheme
Current service cost 91,253 5,771 97,024 67,329

Interest cost 148,467 19,004 167,471 146,140
Expected return on plan assets (156,667) (8,508) (165,175) (147,348)
Past service cost - - - 36,034
Recognition of actuarial loss - - - (1,991)
83,053 16,267 99,320 100,164
25.2.2 Fund Investment – Pension

National Saving Bonds - - - 324,786
Special Savings Certificates 928,838 24,346 953,184 843,853
Term Finance Certificates 317,520 36,278 353,798 20,800
Term Deposits 37,581 - 37,581 -
Other bank balances 36,144 8,963 45,107 83,966
(Payables) / receivables - - - 93
1320083 69,587 1389670 1,273,498
June 30, June 30,

2011 2010
25.2.3 Charge for employee benefits
Defined benefit plans

Gratuity 25.1.1 36,900 32,455
Pension 25.2.1 99,320 100,164
Post retirement medical benefits 24.1.2 37,286 24,562
Staff compensated absences 868 8,111
174374 165292
Defined contribution plan 36,467 33,574
210,841 198,866
25.2.4 Historical information in respect of gratuity, pension and post retirement medical benefits:
As at June 30 2011 2010 2009 2008 2007

---------------------------------- (Rupees in ‘000) ----------------------------------
Present value of
defined benefit obligation 2,199,152 2,059,950 1,679,807 1,552,618 1,437,708
Fair value of plan assets (1,714,633) (1,596,459) (1,358,398) (1,197,794) (686,956)
Deficit 484519 463491 321409 354,824 750752

38
25.2.5 Allocation of cost of staff retirement benefits to:
June 30, June 30,
Note Pipeline Refinery Marketing 2011 2010
---------------------------------- (Rupees in ‘000) ---------------------------
Cost of sales and services 30 61,790 51,203 - 112,993 112,248

Administrative and selling
Expenses 31 76,283 16,568 4,997 97,848 86,618
61 0 4,997 0 0
25.3 This represents commission payable @ 0.5% per annum to the Government of Pakistan (GoP) on account
of guarantees provided by the GoP to the lenders in respect of long-term loans obtained by the Company.
Although the loans in question have been fully repaid, the Company has recorded the government
guarantee commission as a matter of prudence.
25.4 This includes a sum of Rs.337.553 (2010: Rs.9,842.867) million, due to the GoP on account of Petroleum
levy, which has not been paid pending settlement of the inter circular debt issue, as fully disclosed in
note 11.3.
25.5 The Workers Welfare Fund (WWF) in terms of the Ordinance of 1971 is applicable to industrial
undertakings excluding those, which in the Company’s opinion and that of its tax advisor, have majority
shareholding of the Government of Pakistan. With this view, the tax return of the Company was filed for the
tax year 2005 commensurate to the year ended June 30, 2005. This contention was also upheld by the Tax
Authorities in finalizing the assessment for the said year, which was later contested by the income tax
department. The final decision in this regard is currently awaited.
Further, in finalizing the assessments for the tax years 2006 and 2007, the Tax Authorities raised a demand
for WWF for the said years. The Company contested this deviation from an accepted position and filed
appeals before the Commissioner of Income Tax (Appeals). The CIT(A) upheld the assessing officer’s
decision. The Company filed appeals during the year ended June 30, 2008 before the ITAT for tax years
2006 and 2007. Whilst the decision of the appeals is currently awaited, provision for WWF has been made
in these financial statements as a matter of prudence, without admitting it as a liability for the years 2005
onwards, aggregating to Rs.2,016.582 million including Rs.462.297 million for tax year 2011 commensurate
to the year ended June 30, 2011. The estimated liability for WWF for the tax year 2008, aggregating to
Rs.469.162 million was paid under protest during the year ended June 30, 2009 after adjusting a tax refund
of Rs.42.190 million relating to tax year 2008. The Company has also paid a sum of Rs.235.202 million
under protest, relating to the WWF levied by the Department for tax years 2006 and 2007. The year wise
break-up of the provision for Workers’ Welfare Fund is given below:
Tax year (Rupees in ‘000)
2005 231,928
2006 245,582
2007 228,879
2008 478,749
2009 117,757
2010 251,390
2011 462,297
2016582
Less: Payments made (662,174)
1,354,408
June 30, June 30,

2011 2010
(Rupees in ‘000)
26. INTEREST / MARK-UP ACCRUED ON LOANS AND
OTHER PAYABLES
Interest, including penal interest, accrued on:

Long-term financing
Pipeline 1,641 2,301
Refinery 167,835 162,915
169476 165216
Mark-up on short-term running finances 230,358 698,022

Mark-up on short-term loans 97 189,084
Mark-up on trade finance facility 10,485 -
39
410,416 1,052,322
40
June 30, June 30,

2011 2010
27. SHORT-TERM BORROWINGS
Short-term running finances 27.1 6,751,313 18,405,033
Short-term loans 27.2 250,000 16,154,502
Trade Finance facility 27.3 5,450,696 -
0 0
27.1 The Company has arranged facilities for short-term running finances from various commercial banks,
aggregating to Rs.34,632 (2010: Rs.29,794) million. The unavailed credit facility in respect of short-term
running finances amounted to Rs.27,881 (2010: Rs.11,389) million at the end of year.
The rate of markup on these facilities ranges between 12.51% and 16.64% (2010: 11.50% and 15.42%) per
annum, payable monthly or quarterly.
These running finance facilities are secured by inferior ranking charge over the current assets of the Mid
Country Refinery of the Company and right of set-off against US$ term deposit receipt. The purchase prices
are repayable on various dates, latest by June 30, 2012.
27.2 During the current year, the Company arranged short-term loans from various commercial banks. The rate
of markup on these loans is 14% (2010: 13.03% and 13.75%) per annum, payable quarterly or upon
maturity.
These short-term loans are secured by pari-passu charge over the current assets of the Mid Country
Refinery of the Company.
The purchase prices are repayable on various dates latest by June 10, 2012.
27.3 During the current year, the Company arranged a short-term Trade Finance facility amounting to US$ 125
million (equivalent to Rs.10,756.250 million) from a commercial bank for import of crude oil. The unavailed
facility in respect of same amounted to US$ 61.657 million (equivalent to Rs.5,305.554 million) at the end of
current year. The rate of markup on this facility is 2.47% per annum, payable upon maturity.
The facility is secured by way of a deed of floating charge over present and future stores, stock, finished
goods, chemicals, catalysts and trade receivables of the Mid Country Refinery of the Company.
The purchase price is repayable on October 11, 2011.
28. CONTINGENCIES AND COMMITMENTS
Contingencies
28.1 The Company has given Indemnity Bonds to the Custom Authorities to the extent of Rs.6.920
(2010: Rs.6.920) million, under SRO 367 (I) / 94, dated May 9, 1994 for clearance of refined power
chemical. The indemnities shall be cancelled upon the submission of consumption certificates.
Further, the Company has given indemnity bonds to the Custom Authorities to the extent of
Rs.18.369 million, under SRO 759 (I) / 2008, dated July 18, 2008, for export cum import purposes.
28.2 The Company has paid an aggregate sum to Rs.344.861 (2010: Rs.34.861) million under protest on
account of income tax liability assessed in respect of assessment years 1998-99 to 2001-02 by the Deputy
Commissioner of Income Tax (DCIT), treating the company as an agent of Japan Gasoline Corporation
(JGC) and levying tax on JGC’s income allegedly attributable to operations carried out in Pakistan under the
contract for supply of machinery, plant, materials and equipment.
The Company’s Appeals filed before Appellate Tribunal Inland Revenue (ATIR), formerly the Income Tax
Appellate Tribunal (ITAT), have been disposed of vide its combined order, dated March 4, 2008, whereby it
has been confirmed that the JGC’s income was taxable in the respective years, owing to the existence of its
branch treated as a Permanent Establishment (PE) in the first year when the contract was signed for the
mid-country refinery project. With regard to working out the taxable profit, applying an arbitrary rate of 6.5 %
and then considering 50% of the same as taxable in Pakistan, the said action has been held by the ATIR to
be improper.
The matter has been remanded to the Assessing Officer for a de novo assessment in a manner that should
not be framed arbitrarily simply by way of an exorbitant estimation. After detailed reassessment
proceedings, the Assessing Officer vide its combined order dated June 29, 2009 upheld the previous
treatment and ordered that 6.5% net profit rate and 50% attribution of income towards Pakistan operations
41
is fair treatment to the taxpayer.
42
The Company’s tax advisors are of the view that tax authorities have not followed the directives of the ATIR,
which had pointed out that the net profit and distribution rates were excessive and exorbitant. Therefore,
appeals were filed by the Company with the Commissioner Inland Revenue – Appeals. The CIRA vide a
combined order dated January 10, 2011, disposed of these appeals without considering the factual grounds,
confirming the same treatment given by the Taxation Officer. The Company’s management is of the view
that the JGC’s income with regard to offshore supplies was not taxable in Pakistan under the domestic law
and also under the Pakistan-Japan tax treaty. Accordingly, appeals have been filed before the Appellate
Tribunal Inland Revenue. The ATIR decision on this matter is awaited, pending which the above referred
sum has not been adjusted in these financial statements.
28.3 The Collector of Sales Tax (Adjudication) has issued an order for the recovery of Rs.254 million from the
Company against which the Company has filed an appeal, which is currently pending with the Appellate
Tribunal Inland Revenue. Pending a final decision in this matter, no provision has been made for the above
referred sum in these financial statements.
Further, in respect of tax year 2004-05, a show cause notice was issued by the Additional Collector
(Adjudication) for Rs.951 million. During the year ended June 30, 2009, a relief of Rs.849 million was
granted by the Collector. The hearings for balance of Rs.102 million along with default surcharge of Rs.71
million are currently in progress and, as such, pending a final decision in this matter, no provision for the
same has been made in these financial statements.
Moreover, in respect of tax year 2007-08 and 2008-09, show cause notices have been issued by Additional
Collector (Adjudication) for Rs.104.76 million. Few of these have been adjudicated imposing the entire
amount of tax. The Company has filed appeals against these orders, which are currently pending with the
CIRA. Pending a final decision in these matters, no provision for the same has been made in these financial
statements.
The total contingencies, as discussed above, aggregated to Rs.901.91 (2010: Rs.807.133) million at the end of the
current year.
June 30, June 30,
2011 2010
(Rupees in ‘000)
28.4 Claims not acknowledged as debts:
Pipeline 56,614 74,644

Refinery 1,103,482 921,524
996168 0
28.5 Counter guarantees issued by the Company to banks:
Pipeline 602 602

Refinery 147,856 131,072
131674 0
Commitments
28.6 Outstanding letters of credit for:
Revenue expenditure
Pipeline 72,570 4,608
Refinery 61,602 3,276,863
134172 3281471
Capital expenditure
Pipeline 7,999 6,125
Refinery 661,562 -
6125 0
28.7 Commitments for capital expenditure in respect of:
Pipeline 154,777 32,456

Refinery - Diesel Hydro Desulphurization Project - 865,166
Refinery - Asphalt Air Blowing Unit Project 1,876,778 -
Refinery - Others 180,755 140,927
140927 0
43
29. (i) NET SALES AND SERVICES

Pipeline Refinery Marketing Eliminations Total
Note 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
--------------------------------------------------------------------------------------- (Rupees in '000) ---------------------------------------------------------------------------------------
Sales and services
Inter-segment sales and services 2,717,658 2,630,872 - - - - (2,717,658) (2,630,872) - -
Local sales 1,303,903 1,045,749 267,389,735 231,957,930 140,697 172,252 - - 268,834,335 233,175,931
Gantry service, margins, flushing and
blending charges 9,919 9,289 29,459 33,247 660,879 374,780 - - 700,257 417,316
Inland freight equalisation margin /
price differential claim - - 21,566,504 16,023,755 - - - - 21,566,504 16,023,755
4,031,480 3,685,910 288,985,698 248,014,932 801,576 547,032 (2,717,658) (2,630,872) 291,101,096 249,617,002
Sales tax - - (41,473,246) (34,210,483) (20,439) (23,791) - - (41,493,685) (34,234,274)

Federal excise duty - - (16,085) (11,555) - - - - (16,085) (11,555)
Petroleum Levy - - (10,754,741) (22,056,071) - - - - (10,754,741) (22,056,071)
- - (52,244,072) (56,278,109) (20,439) (23,791) - - (52,264,511) (56,301,900)
Net sales and services 4,031,480 3,685,910 236,741,626 191,736,823 781,137 523,241 (2,717,658) (2,630,872) 238,836,585 193,315,102
(ii) OPERATING RESULTS
Net sales and services 4,031,480 3,685,910 236,741,626 191,736,823 781,137 523,241 (2,717,658) (2,630,872) 238,836,585 193,315,102
Cost of sales and services 30 (1,925,793) (1,832,668) (211,849,908) (175,856,938) (99,133) (131,320) 2,665,290 2,651,715 (211,209,544) (175,169,211)
Gross profit 2,105,687 1,853,242 24,891,718 15,879,885 682,004 391,921 (52,368) 20,843 27,627,041 18,145,891
Administrative and selling expenses 31 (535,280) (11087593) (757,528) (375012309) (62,355) (48,433) - - (1,355,163) (36291782)
Other operating income 32 1,590,750 2,280,101 242,693 (716,259) 908 618 - - 1,834,351 1,564,460
Other operating expenses 33 (110,799) (252,126) (1,629,951) (637,074) (42,819) (618) - - (1,783,569) (912,943)
Operating profit / (loss) 3,050,358 3,452,632 22,746,932 13,743,472 577,738 320,363 (52,368) 20,843 26,322,660 17,537,310
Finance costs 34 (1,514) (50,758) (3,720,947) (5,147,593) - - - - (3,722,461) (5,198,351)
Profit / (loss) before taxation 3,048,844 3,401,874 19,025,985 8,595,879 577,738 320,363 (52,368) 20,843 22,600,199 12,338,959
Taxation - current (1,152,717) (577,389) (5,988,041) (3,419,781) (221,082) (121,605) - - (7,361,840) (4,118,775)
- prior 110,123 (217,440) 481,682 49,009 2,560 (12,066) - - 594,365 (180,497)
- deferred 58,069 (292,476) (1,074,571) 218,077 3,454 2,356 - - (1,013,048) (72,043)
35 (984,525) (1,087,305) (6,580,930) (3,152,695) (215,068) (131,315) - - (7,780,523) (4,371,315)
Net profit for the year 2,064,319 2,314,569 12,445,055 5,443,184 362,670 189,048 (52,368) 20,843 14,819,676 7,967,644
29.1 The Company has not identified geographical segment as a secondary segment as the entire operations of the Company are located within Pakistan and are not subjected to different economic and
regulatory environment.
44

Note 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
------------------------------------------------------------------------------------------------ (Rupees in '000) --------------------------------------------------------------------------------
29.2 Segment assets 10,170,141 10,369,754 104,475,951 105,956,957 142,869 57,058 (148,747) (96,379) 115,042,677 116,287,390
Unallocated assets 25,760,607 24,742,145
Total assets 140803284 1410295355
29.3 Segment liabilities 27,010,971 27,672,471 80,163,606 91,336,961 362,670 189,048 (52,368) 20,843 107,484,879 119,219,323
Unallocated liabilities 33,318,405 21,810,212
Total liabilities 422409852 423088605
29.4 Capital expenditure incurred

during the period 150,490 184,418 1,177,062 5,785,236 193 277 - - 1,327,745 5,969,931
29.5 Depreciation 289,872 294,513 2,860,558 2,624,164 1,080 1,383 - - 3,151,510 2,920,060
29.6 Amortisation 40,720 40,082 6,680 7,488 - - - - 47,400 47,570
29.7 Inter-segment sales / services and purchases
These have been eliminated from the total.
29.8 Inter - segment pricing basis
Sales between business segments are recorded at their fair market value.
45
30. COST OF SALES AND SERVICES
Note 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
----------------------------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------------------------------------
Crude oil processed/lubricants purchased 30.1 - - 208,481,575 170,562,925 102,057 127,571 (2,692,377) (2,644,878) 205,891,255 168,045,618
Salaries, allowances and other benefits 530,780 502,917 478,122 452,045 - - - - 1,008,902 954,962
Employee benefits 25.2.5 61,790 53,949 51,203 58,299 - - - - 112,993 112,248
Contract services 196,716 154,721 94,583 84,940 - - - - 291,299 239,661
Stores, spares, chemicals and consumable stores 90,867 134,555 346,530 284,363 - - - - 437,397 418,918
Stores and spares written off - 52,987 - 7,009 - - - - - 59,996
Fuel, power and water 546,443 460,353 1,762,114 1,675,686 - - - - 2,308,557 2,136,039
Repairs and maintenance 62,047 46,801 14,795 18,196 - - - - 76,842 64,997
Rent, rates and taxes 8 67 - - - - - - 8 67
Insurance 75,281 70,035 249,607 201,844 - - - - 324,888 271,879
Depreciation 4.5 266,796 272,081 2,728,242 2,493,108 - - - - 2,995,038 2,765,189
Amortisation 5.1 47 47 6,680 7,488 - - - - 6,727 7,535
Travelling 5,116 6,326 4,185 4,719 - - - - 9,301 11,045
Postage, telegram and telephone 1,696 1,658 657 1,276 - - - - 2,353 2,934
Printing, stationery and office supplies 2,356 2,751 3,897 381 - - - - 6,253 3,132
Vehicle running 63,655 69,202 7,970 1,764 - - - - 71,625 70,966
Royalties- Telecom 1,191 1,131 - - - - - - 1,191 1,131
Consultancy 14,012 841 - - - - - - 14,012 841
Provision for dead stock - crude oil 10 - - 200,000 - - - - - 200,000 -
Other expenses 6,992 2,246 5,717 2,943 - - - - 12,709 5,189
6992 2246 205717 2943 102,057 127,571 (2,692,377) (2,644,878) 324171 5189
Opening stock of semi finished goods - - 1,628,555 1,805,474 - - (22,213) (25,454) 1,606,342 1,780,020
Opening stock of finished goods - - 2,420,065 2,243,098 20,193 23,942 (22,538) (26,134) 2,417,720 2,240,906
- - 4460054 4054458 20,193 23,942 (44,751) (51,588) 4672404 4031304
Closing stock of semi finished goods - - (3,092,251) (1,628,555) - - 34,439 22,213 (3,057,812) (1,606,342)
Closing stock of finished goods - - (3,542,338) (2,420,065) (23,117) (20,193) 37,399 22,538 (3,528,056) (2,417,720)
- - (6,634,589) (4,048,620) (23,117) (20,193) 71838 44751 (6,585,868) (4,024,062)
13984 1,832,668 211,849,908 175,856,938 99,133 131,320 (2,665,290) (2,651,715) 211,209,544 175,169,211
30.1 Crude oil processed / lubricants purchased
Opening stock - - 9,027,213 12,709,905 5,825 5,630 (51,628) (65,634) 8,981,410 12,649,901
Purchases - - 212,635,748 164,249,361 100,391 127,766 - - 212,736,139 164,377,127

Transportation charges – Inter-segment - - 2,717,658 2,630,872 - - (2,717,658) (2,630,872) - -
- - 224380619 179590138 100,391 127,766 (2,717,658) (2,630,872) 212,736,139 177027028
Closing stock - - (15,899,044) (9,027,213) (4,159) (5,825) 76,909 51,628 (15,826,294) (8,981,410)
46
Crude oil processed/lubricants consumed - - 208,481,575 170,562,925 102,057 127,571 (2,692,377) (2,644,878) 205,891,255 168,045,618
47
31. ADMINISTRATIVE AND SELLING EXPENSES

Note 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
------------------------------------------------------------------------------------------------ (Rupees in '000) --------------------------------------------------------------------------------
Salaries, allowances and other benefits 178,060 164,410 331,680 330,492 29,080 29,188 - - 538,820 524,090
Employee benefits 25.2.5 76,283 53,274 16,568 29,767 4,997 3,577 - - 97,848 86,618
Transportation, handling and other charges - - - - 746 179 - - 746 179
Contract services 23,219 17,739 61,035 70,992 1,054 1,056 - - 85,308 89,787
Fuel, power and water 2,154 2,543 46,226 42,927 217 83 - - 48,597 45,553
Consumable stores 5,194 8,955 12,085 11,877 1,037 662 - - 18,316 21,494
Repairs and maintenance 11,207 11,145 26,752 30,977 34 288 - - 37,993 42,410
Rent, rates and taxes 8,591 6,359 4,536 4,838 686 618 - - 13,813 11,815
Vehicle running 10,146 10,726 21,771 26,178 5,457 2,764 - - 37,374 39,668
Travelling 17,116 18,625 8,649 18,638 1,497 1,797 - - 27,262 39,060
Postage, telegram and telephone 6,245 3,393 3,830 3,482 760 701 - - 10,835 7,576
Depreciation 4.5 23,075 22,432 132,316 131,056 1,081 1,383 - - 156,472 154,871
Amortisation 5.1 40,673 40,035 - - - - - - 40,673 40,035
Insurance 17,950 15,425 38,641 36,362 12,053 62 - - 68,644 51,849
Printing, stationery and office supplies 6,367 5,553 9,550 13,330 291 319 - - 16,208 19,202
Advertising and publicity 3,395 7,131 1,132 2,537 2,329 848 - - 6,856 10,516
Legal and professional charges 13,523 9,179 7,059 8,268 160 4,730 - - 20,742 22,177
Donations 31.1 53,706 25 - - - - - - 56,706 25
Trade subscription 1,911 1,235 - 118 150 - - - 2,061 1,353
Auditors' remuneration 31.2 1,452 665 1,321 680 - - - 2,773 1,345
Directors’ fee 42 48 - - - - - - 42 48
Consultancy 6,056 2,397 1,942 1,749 - - - - 7,998 4,146
Other expenses 25,915 27,291 32,435 18,812 726 178 - - 59,076 46,281
277937 210901 34377 20561 726 178 - - 1355163 1260098
31.1 Included herein is a sum or Rs.38.5 million, representing donations made by the Company to the Prime Minister’s Flood Relief Fund, in accordance with the approval of the Board of Directors in its meeting
held in October 2010. Further, none of these donations were given to organisations in which any director or his spouse had any interest.
31.2 Auditors’ remuneration
Audit fee 600 500 600 500 - - - - 1,200 1,000

Special assignment 350 - 350 - - - - - 700 -
Audit of retirement benefits funds 90 15 90 15 - - - - 180 30
Certification of dividend remittance 15 15 15 15 - - - - 30 30
Out of pocket expenses 397 135 266 150 - - - - 663 285
667 665 551 680 - - - - 1218 1,345
48
32. OTHER OPERATING INCOME
2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
------------------------------------------------------------------------------------------- (Rupees in '000) -----------------------------------------------------------------
Return on long- term investments and bank deposits 4,103 139,227 - - - - - - 4,103 139,227
Return on short-term deposits 408,263 384,639 164,133 16,669 - - - - 572,396 401,308
Gain on sale of fixed assets 20,460 15,339 5,074 8,524 6 629 - - 25,540 24,492
Liabilities / provisions written back - 50,004 24,651 11,173 - - - - 24,651 61,177
Fixed Manpower Cost from PAPCO - 49,060 - - - - - - - 49,060
O & M Fee from PAPCO 53,612 51,224 - - - - - - 53,612 51,224
Interest (including margin) on EIB loan relent to PAPCO 153,652 170,141 - - - - - - 153,652 170,141
Interest incurred on EIB loan (49,437) (54,995) - - - - - - (49,437) (54,995)
104215 115,146 - - - - - - 104215 115,146
Rental income against sharing of facilities 108,000 108,000 - - - - - - 108,000 108,000

Vehicle running cost from PAPCO 5,602 3,573 - - - - - - 5,602 3,573
Dividend from PAPCO 708,038 254,957 - - - - - - 708,038 254,957
Service fee from PAPCO 3,156 3,485 - - - - - - 3,156 3,485
Insurance claims 851 - 9,698 102,692 - - - - 10,549 102,692
Exchange gain / (loss) – net - 1,018,483 - (880,712) - (11) - - - 137,760
Miscellaneous income 174,450 86,964 39,137 25,395 902 - - - 214,489 112,359
1,590,750 2,280,101 242,693 (716,259) 908 618 - - 1,834,351 1,564,460
33. OTHER OPERATING EXPENSES

Note 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
------------------------------------------------------------------------------------------- (Rupees in '000) ------------------------------------------------------------------
Exchange loss / (gain) – net (115,168) - 219,868 - - - - - 104,700 -

Workers’ Welfare Fund 25.6 62,223 69,426 388,283 175,426 11,791 6,538 - - 462,297 251,390
Workers’ Profits Participation Fund 15.4 163,744 182,700 1,021,800 461,648 31,028 17,205 - - 1,216,572 661,553
110,799 252,126 1629951 637,074 42819 23743 - - 1783569 912,943
34. FINANCE COSTS

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010
------------------------------------------------------------------------------------------- (Rupees in '000) ------------------------------------------------------------------
Interest on long-term financing - 49,900 634,289 457,760 - - - - 634,289 507,660

Mark-up on short-term running finances - - 1,678,831 3,105,390 - - - - 1,678,831 3,105,390
Mark-up on short-term loans - - 1,334,755 1,577,702 - - - - 1,334,755 1,577,702
Mark-up on withheld amount (GoP) - - 63,151 - - - - - 63,151 -
Interest to IPIC - - - - - - - - - -
Bank charges 1,514 858 9,921 6,741 - - - - 11,435 7,599
1,514 50,758 3,720,947 5,147,593 - - - - 3,722,461 5,198,351
49
June 30, June 30,

2011 2010
(Rupees in ‘000)
35. TAXATION
Current 7,361,840 4,118,775

Prior (594,365) 180,497
Deferred 1,013,048 72,043
252540 0
35.1 Income tax assessments of the company have been finalized up to and including tax year 2010. Income tax
return for tax year 2010 has been filed under the Self Assessment Scheme.
During the year ended June 30, 2009, tax return for the tax year 2008 was selected for audit under Section
177 of the Income Tax Ordinance, 2001 by the Commissioner of Income Tax (Audit) Large Taxpayer Unit,
Lahore. The Company filed a writ petition before the Lahore High Court against its selection for audit and
the Court declared these audit proceedings as unlawful. The tax department filed an appeal against the
High Court's decision before the Supreme Court of Pakistan. The Supreme Court, vide its judgement dated
March 5, 2011 set aside the Lahore High Court’s judgement and ordered the tax department to treat the
case as per the policy. Further, the department has been advised that if it intends to proceed with audit then
sufficient opportunity should be given to the taxpayer. Currently, the department is finalizing the audit
proceeding in light of the Supreme Court of Pakistan’s judgement, and the final order is awaited.
Further, during the year ended June 30, 2010, the Additional Commissioner Inland Revenue served notices
to the Company under Section 122(5A) of the Income Tax Ordinance, 2001 for amendment of assessments
for the tax years 2008 and 2009. The Company filed writ petitions before the Lahore High Court on legal
grounds and the Court has suspended the operation of the subject notices.
Currently, no appeal is pending before the Commissioner of Income Tax (Appeals). The Company’s
appeals are pending with the ITAT for tax years 2006 and 2007. The main issue involved is levy of Workers’
Welfare Fund (WWF). The Tax Department has also filed appeals before the ITAT pertaining to tax years
2005, 2006 and 2007 in respect of deletion of levy of WWF, additional tax, excess claim of depreciation and
disallowances on account of financial charges. The ITAT’s decision on the above appeals is awaited.
Furthermore, two Reference Applications have been filed by the Company before the Lahore High Court
against disallowance of initial depreciation of Rs.8.5 billion in respect of assessment year 2001-02 and
taxability of Shortfall in Guaranteed Return (SGR) of Rs.7.96 billion for assessment year 2002-03. Final
decision of the Lahore High Court is awaited on these two issues. However, tax demand amounting to
Rs.3.047 billion in respect of these issues was paid during the year ended June 30, 2008.
35.2 Reconciliation of tax expense and accounting profit

Accounting profit 22,600,199 12,338,959
Tax at the applicable rate of 35% (2010: 35%) 7,910,070 4,318,636
Flood Relief Surcharge 466,139 -
Tax effect of accounting and tax written down values (1,219,182) 190,132
Exchange (loss) / exempt income (2,530) (48,729)
Exchange gain on foreign currency deposits (39,086) (361,988)
Tax effect of provisions / previous assessments finalized
during the year 247,288 195,436
Impact of items subject to lower tax rate / others 417,824 77,828
7,780,523 4,371,315
BASIC AND DILUTED EARNINGS PER SHARE
There is no dilutive effect on the basic earnings per share of the Company, which is based on:
Profit after taxation for the year 14,819,676 7,967,644
(Number of shares in ‘000)
Weighted average number of Ordinary shares 1,160,500 1,160,500
(Rupees)
50
Earnings per share 12.77 6.87

51
37. REMUNERATION TO CHAIRMAN, CHIEF EXECUTIVE AND EXECUTIVES
37.1 The aggregate amounts charged in the financial statements for the remuneration, including all benefits, to the
Chairman, Chief Executive and Executives of the Company were as follows:
Chairman Chief Executive Executives Total

2011 2010 2011 2010 2011 2010 2011 2010
---------------------------------------------------------(Rupees in '000) ---------------------------------------------------------
Managerial remuneration - 2 19,331 14,690 534,851 368,565 561,168 383,257
Retirement benefits - - - - 71,153 58,147 71,153 58,147
Rent and house maintenance - - 6,986 6,227 - 124,997 - 131,224
Utilities 319 - - - 20,367 18,188 20,686 18,188
Leave passage - - - - 13,954 14,717 13,954 14,717
319 2 26,317 20,917 34321 584614 34640 605533
Number of persons 1 1 1 1 201 215 203 217
37.2 A fee of Rs.0.042 (2010: Rs.0.048) million has been paid to 10 (2010: 10) directors during the year.
37.3 Chief Executive and certain Executives are provided with free use of Company cars and certain residential
equipment in accordance with their entitlement.
37.4 The Company, based on actuarial valuations, has also charged amounts in respect of retirement benefits for the
above mentioned employees.
June 30, June 30,

2011 2010
38. CASH GENERATED FROM / (USED IN) OPERATIONS
Profit before taxation 22,600,199 12,338,959
Adjustment for non-cash charges and other items:

Depreciation / amortization 3,198,910 2,967,630
Amortisation of deferred income (108,000) (108,000)
Provision for staff retirement benefits 139,970 157,879
Finance cost 3,722,461 5,198,351
Return on investments (576,499) (540,535)
Exchange loss / (gain) - net (104,700) (137,760)
Gain on sale of fixed assets (25,539) (24,492)
Changes in operating assets and liabilities 38.1 4,819,284 4,237,292
33,666,086 24,089,324
38.1 Changes in operating assets and liabilities
(Increase) / decrease in operating assets

Stores, spares and chemicals (200,638) (307,173)
Stock-in-trade (8,028,476) 41,301
Trade debts 7,747,313 (4,703,982)
Loans and advances and trade deposit and
Short-term prepayments (233,933) 53,808
Other receivables (889,288) (435,097)
(1,605,022) (5,351,143)
Increase / (decrease) in operating liabilities
Trade and other payables 6,424,306 9,588,435
4,819,284 4,237,292
52
39. FINANCIAL INSTRUMENTS
The main risks arising from the Company’s financial instruments are credit risk, liquidity risk foreign currency risk
and interest rate risk.
The Company's senior management oversees the management of these risks. The Company's senior management
is supported by the Finance Committee that advises on financial risks and appropriate financial risk governance
network. Besides, the Audit Committee oversees the financial risk taking activities. All activities for risk management
are carried out by specialist teams that have the appropriate skills, experience and supervision.
The Board of Directors reviews and agrees policies for managing each of the risks faced by the Company.
39.1 Credit and Concentration of Credit Risk

Credit risk is the risk which arises with the possibility that one party to a financial instrument will fail to
discharge its obligation and cause the other party to incur a financial loss. Concentration of credit risk arises
when a number of counter parties are engaged in similar business activity or have similar economic features
that would cause their ability to meet contractual obligations to be similarly affected by changes in economic,
political or other conditions. Concentration of credit risk indicates the relative sensitivity of the Company's
performance to developments affecting a particular industry.
Pakistan State Oil Company Limited (PSO), Shell Pakistan Limited, Cheveron Pakistan Limited and TOTAL
PARCO Pakistan Limited are the main customers for the refinery products and transportation of petroleum
products through the Company’s Pipeline system. Trade debts include Rs.23.288 (2010: Rs.33.142) billion
receivable from a single customer. The customer contributes approximately 26% (2010: 37%) of the total
revenue of the Company.
The Company attempts to control credit risk by (a) assigning credit limits to its customers and the monitoring
credit exposures on an ongoing basis, (b) limiting transactions with specific counterparties, (c) continually
assessing the creditworthiness of counterparties and (d) ensuring that sales of products and services are
made to customers with appropriate credit history and credit worthiness, except in cases where the
counterparty is a Government owned entity. Accordingly, the Company believes that credit risk is minimal and
it is not exposed to major concentration of credit risk.
The Company is exposed to credit risk on investments, loans and advances, deposits, trade debts, other
receivables and bank balances. The maximum exposure to credit risk at the reporting date is:
Carrying Values
June 30, June 30,
2011 2010
(Rupees in ‘000)
Long-term investments and current portion 3,973,879 3,973,879

Long-term loans and advances 3,044,566 3,490,460
Long-term deposits 53,429 53,248
Trade debts 31,203,549 38,950,862
Loans and advances 512,805 501,943
Trade deposit 11,662 3,580
Interest accrued 91,561 27,622
Other receivables 12,111,751 4,596,721
Short-term investments 21,676,578 20,383,674
Bank balances 1,189,351 373,353
0 0
Quality of financial assets
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to
external credit ratings or the historical information about counter party default rates as shown below:
39.1.1 Trade Debts

Customer with no defaults during past one year 7,725,733 2,491,099
Customer with some defaults during past one year
which have been fully recovered 23,477,816 36,459,763
0 0
53
June 30, June 30,
2011 2010
(Rupees in ‘000)
39.1.2 Investments
PARCO has made the following investments in its subsidiary and associated companies for which
credit ratings are not available.
Pak-Arab Pipeline Limited Subsidiary Company 3,672,000 3,672,000

Total Parco Pakistan Limited Associated Company 299,879 299,879
Corporation House (Private) Limited Associated Company 2,000 2,000
0 0
In US $ Bonds issued by Government of Pakistan - 1,486,070

These are risk free investments
US$ Deposits - A1+ 21,676,578 19,743,674
Cash and Bank Balance
A1+ 1,189,145 373,263

A1 150 29
A2 33 36
A3 - 1
P1 23 24
1,189,351 0
39.2 Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Company applies the prudent risk management policies by maintaining sufficient cash and bank balances and
by keeping committed credit lines. The table below summarises the maturity profile of the Company's financial
liabilities at the following reporting dates:
Less
On than 3 3 to 12 1 to 5 More than
June 30, 2011 Demand months months years 5 years Total
------------------------------------Rupees in '000------------------------------------
Long-term financing - - 4,529,250 4,617,000 1,287,750 10,434,000

Interest accrued on long
term financing - 166,624 2,852 - - 169,476
Trade and other payables 17,785 41,793,310 3,116,856 - - 44,927,951
17,785 0 7,648,958 4,617,000 1,287,750 56819177
Less
On than 3 3 to 12 1 to 5 More than
June 30, 2010 Demand months months years 5 years Total
------------------------------------Rupees in '000------------------------------------
Long-term financing - - 1,724,656 6,235,000 1,281,000 9,240,656

Interest accrued on long
term financing - 150,955 14,261 - - 165,216
Trade and other payables 16,156 26,504,234 12,071,442 - - 38,591,832
16,156 0 40465548 6,235,000 1,281,000 49278704

54
39.3 Foreign currency risk
Foreign currency risk is the risk that the value of financial assets or a financial liability will fluctuate due to a
change in a foreign exchange rates. It arises mainly where receivables and payables exist due to transactions
in foreign currency. The Company is exposed to foreign currency risk on purchases, investments and
borrowings that are entered in a currency other than Pak Rupees. As the Company substantially imports crude
oil, any appreciation in foreign currency (mainly US Dollars) has an adverse impact on the Company’s
operations and cash flows. The Company offsets the exchange loss by maintaining foreign currency deposits in
US Dollars. The Company manages its currency risk by close monitoring of currency markets. However, as per
State Bank’s regulations, the Company cannot hedge its foreign currency risk exposure in respect of
procurement of crude oil. As at June 30, 2010, the total foreign currency risk exposure was Rs.26.643 (2010:
Rs.15.206) billion in respect of creditors and Rs.21.621 (2010: Rs.21.262) billion in respect of foreign currency
investments. The Company's exposure to foreign currency risk is as follows:
June 30, June 30,

2011 2010
(US$ in ‘000)
US $ Bonds - 17,224
US $ Deposits 252,454 231,191
Interest accrued on US $ Bonds - 178
Interest accrued on US $ Deposits 629 321
Accrued Margin income EIB 46 52
253,129 0
Local crude suppliers 21,117 32,915

Imported crude suppliers 288,505 144,724
0 0
Sensitivity analysis:
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar exchange
rate, with all other variables held constant, of the Company’s profit before tax and the Company’s equity.
Change in Effect on
US$ rate Profit and Effect on
% Loss Equity
(Rupees in ‘000)
June 30, 2011 10 1,035,924 673,351
(10) (1,035,924) (673,351)
June 30, 2010 10 605,562 445,627
(10) (605,562) (445,627)
39.4 Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. The Company's exposure to the risk of changes in market
interest rates relates primarily to the Company's long-term debt obligations with floating interest rates and
US$ investments with floating interest rates. The Company minimizes the interest rate risk by investing in
fixed rate investments like Term Deposit Receipts.
Sensitivity Analysis:
The following figures demonstrate the sensitivity to a reasonably possible change in interest rate, with all
other variables held constant, of the Company’s profit before tax and equity:
Increase / Effect on
decrease in Profit and Effect on
basis points Loss Equity
June 30, 2011 (Rupees in ‘000)
LIBOR 20 (848) (551)

(20) 848 551
KIBOR 20 (3,106) (2,019)

(20) 3,106 2,019
55
56
Change in Effect on
US$ rate Profit and Effect on
% Loss Equity
June 30, 2010 (Rupees in ‘000)
LIBOR 20 1,052 1,052

(20) (1,052) (1,052)
KIBOR 20 (2,573) (1,673)

(20) 2,573 1,673
39.5 Capital management

The primary objective of the Company’s capital management is to ensure that it maintains healthy capital
ratios in order to support its business and to sustain future development of the business. The Company
closely monitors the return on capital along with the level of distributions to ordinary shareholders. No
changes were made in the objectives, policies or processes during the years ended June 30, 2011 and
June 30, 2010.
The Company monitors capital using a debt equity ratio, which is long-term debt divided by total capital plus
long-term loan. The debt comprises of long-terms loans including current maturity. Equity comprises of share
capital, capital and revenue reserves. The gearing ratio is 14.23% (2009: 15:85%).
June 30, June 30,

2011 2010
(Rupees in ‘000)
Long-term loans 5,904,750 7,516,000

Current maturity 4,529,250 1,724,656
10434000 19674656
Shareholders’ equity 62,894,385 49,074,709
Shareholders equity plus long-term debt 73,328,385 58,315,365
Gearing ratio 14.23% 15.85%

39.6 Fair value of financial instruments
Fair value is the amount for which an asset could be exchanged, or a liability can be settled, between
knowledgeable willing parties in an arm's length transaction.
The carrying amounts of all the financial instruments reflected in the financial statements approximate their
fair value.
40. TRANSACTIONS WITH RELATED PARTIES

Related parties of the Company comprise a Subsidiary, associated undertakings, directors, key management
personnel and retirement benefit plans. Amounts due from and to related parties, amounts due from executives
and remuneration of the Chairman, Chief Executive and Executives are disclosed in the relevant notes. Further,
the term "associated undertakings" has been deemed not to include those companies in which the Federal
Government holds directly or indirectly over 20 percent of shares or common directorship of the directors
appointed by the Federal Government.
Details of transactions with related parties except those under the terms of employment are as follows:
June 30, June 30,
2011 2010
(Rupees in ‘000)
40.1 TOTAL PARCO Pakistan Limited (TPPL) –
an Associated Company
Transportation income 106,779 103,511

Sale of petroleum products 35,259,000 29,303,353
Purchase of petroleum products 37,366 42,001
Gantry service charges 6,536 6,681
Dividend income 22,491 29,988
57
June 30, June 30,
2011 2010
(Rupees in ‘000)
40.2 Pak-Arab Pipeline Company Limited (PAPCO) –
the Subsidiary Company
Rental income against sharing of facilities 108,000 108,000

Fixed Manpower - 49,060
O & M Fee 53,612 51,224
Margin on EIB loan 104,214 115,146
Service Fee 3,156 3,485
Vehicle Rent 5,602 3,573
Dividend income 708,038 254,957
Transportation income 7,533 10,637
40.3 Abu Dhabi Petroleum Investment Company (ADPI) –

40% shareholder
Dividends paid 400,000 1,200,000
40.4 OMV Austria - an Associated Company by virtue

of common directorship
Purchase of lubricants 2,682 2,425
40.5 Payments to retirement benefit schemes
Refer notes 24.1.1, 25.1 and 25.2 for details of contributions / charge in respect of retirement benefit
schemes.
41. CAPACITY AND ACTUAL PERFORMANCE

Actual designed
throughput June 30, June 30,
Note capacity 2011 2010
------------------- (in Metric Tons) -------------------
Refinery 41.1 4,500,000 3,358,194 3,555,763

Pipeline
- Karachi - Mahmoodkot (KMK) 4,500,000 3,389,941 3,539,013
- Mahmoodkot - Faisalabad / Machike (MFM) 41.2 3,000,000 2,707,721 2,446,462
41.1 Actual production is less than capacity due to the product mix and industry demand.
41.2 The total quantity transported is less than capacity due to industry demand.
42. CORRESPONDING FIGURES
Following corresponding figures have been reclassified for the purposes of better presentation:
Rupees
From To in ‘000
Trade Debtors Trade Debtors

Considered good – unsecured Considered good – unsecured (Refinery) 47,208
Trade and other payables Trade and other payables

Creditors - Related party Other creditors 5,749,150
Stores, spares, chemicals and loose tools Capital-work-in-progress

Stores, spares chemicals and loose tool Capital spares 444,715
Property, plant and equipment Stores, spares, chemicals and loose tools
Capital-work-in-progress Stores, spares, chemicals and loose tools 395,275
58
43. DATE OF AUTHORISATION FOR ISSUE
These financial statements have been authorised for issue by the Board of Directors of the Company in its
meeting held on __________________, 2011.
44. MOVEMENT BETWEEN RESERVES AND PROPOSED DIVIDEND
The Board of Directors in its meeting held on __________________________ (i) approved the transfer of
Rs.___________ thousand from Unappropriated profit to General reserve / Project Development Reserve; and
(ii) proposed a final dividend of Rs.______ per share for the year ended June 30, 2011, amounting to
Rs.____________ thousand for approval of the members at the Annual General Meeting to be held on
_________________________. These financial statements do not reflect these appropriations and the dividend
payable.
45. GENERAL
Figures presented in these financial statements have been rounded off to nearest thousand rupees, unless
otherwise stated.
`

Accounts June 2011

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Accounts June 2011

Uploaded by

Copyright:

Available Formats

PAK-ARAB REFINERY LIMITED

AUDITORS’ REPORT TO THE MEMBERS

Audit Engagement Partner’s Name: Pervez Muslim

CHAIRMAN MANAGING DIRECTOR DIRECTOR DIRECTOR

PAK-ARAB REFINERY LIMITED

STATEMENT OF COMPREHENSIVE INCOME

June 30, June 30,

NET SALES AND SERVICES 29 238,836,585 193,315,102

Cost of sales and services 30 (211,209,544) (175,169,211)

GROSS PROFIT 27,627,041 18,145,891

Administrative and selling expenses 31 (1,355,163) (1,260,098)

OPERATING PROFIT 26,322,660 17,537,310

Finance costs 34 (3,722,461) (5,198,351)

PROFIT BEFORE TAXATION 22,600,199 12,338,959

Taxation 35 (7,780,523) (4,371,315)

NET PROFIT FOR THE YEAR 0 7,967,644

OTHER COMPREHENSIVE INCOME FOR THE YEAR - NET OF TAX - -

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 0 7,967,644

BASIC AND DILUTED EARNINGS PER SHARE (Rupees) 36 12.77 6.87

The annexed notes 1 to 45 form an integral part of these financial statements.

CHAIRMAN MANAGING DIRECTOR DIRECTOR DIRECTOR

PAK-ARAB REFINERY LIMITED

CASH FLOWS FROM OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

NET CASH FLOWS DURING THE YEAR 13,762,458 15,236,227

CASH AND CASH EQUIVALENTS AT THE BEGINNING

CASH AND CASH EQUIVALENTS

Short-term investments 16 21,676,578 20,383,674

CHAIRMAN MANAGING DIRECTOR DIRECTOR DIRECTOR

PAK-ARAB REFINERY LIMITED

STATEMENT OF CHANGES IN EQUITY

SHARE CAPITAL REVENUE

Balance as at June 30, 2009 11,605,000 16,650,259 15,851,806 44,107,065

Final dividend for the year ended June 30, 2009,

Transfer to Project Development Reserve - 3,131,643 (3,131,643) -

Total comprehensive income for the year - - 7,967,644 7,967,644

Balance as at June 30, 2010 11,605,000 19,781,902 17,687,807 49,074,709

Final dividend for the year ended June 30, 2010,

Total comprehensive income for the year - - 14,819,676 14,819,676

Balance as at June 30, 2011 11,605,000 19,781,902 31,507,483 62,894,385

The annexed notes 1 to 45 form an integral part of these financial statements.

CHAIRMAN MANAGING DIRECTOR DIRECTOR DIRECTOR

PAK-ARAB REFINERY LIMITED

NOTES TO THE FINANCIAL STATEMENTS

1. THE COMPANY AND ITS OPERATIONS

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation

3.2 Standards, interpretations and amendments to approved

IFRS 7 Financial Instruments : Disclosures - Amendments enhancing July 01, 2011

IAS 1 Presentation of Financial Statements - Amendments to revise July 01, 2012

IAS 24 Related Party Disclosures (Revised) January 01, 2011

IFRIC 14 Prepayments of a Minimum Funding Requirement January 01, 2011

IASB Effective date

IFRS 9 Financial Instruments January 01, 2015

3.3 Standards, amendments and interpretations adopted during the year

New and amended standards and interpretations

IFRS - 2 Group Cash-settled Share-based Payment Arrangements

Improvements to various standards issued by IASB

IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations

Issued in May 2010

IFRS 3 Business Combinations

3.5 Significant accounting estimates and judgments