KARACHI: Pakistan State Oil (PSO) Managing Director Syed Taha said he is actively trying to refocus the company’s sales efforts on the retail segment.
In a recent interview with Dawn, Mr Taha said the company’s focus had previously moved away from retailing which he described as the “bread and butter” of the country’s largest business in terms of income.
“Our market share was at its lowest two years ago. We were 33 percent in mogas (gasoline) and 36 percent in diesel. Our focus was irrelevant, ”he said.
According to industry-wide data for the first eight months of 2021, PSO has a market share of 43% for gasoline and 47% for diesel. On an annual basis, it managed to increase its volumetric sales of gasoline and diesel over the eight-month period by 23% and 19%, respectively. The two categories have made up more than three-quarters of the company’s volumetric sales in the past eight months.
The demand for these fuels increases each year from 5 to 5.5 pc to 9 million tonnes each.
Mr. Taha said he was optimistic about the idea of bringing the market share of these two categories to more than 50pc soon. “We installed 70 service stations last year. We are installing 70 more this year. Each station gives us almost 34 to 40 tonnes, with an additional impact (on sales) of 0.3 to 0.4%, ”he said.
In heating oil, PSO held a 58% market share in January-August compared to 35% a year ago. “Now we are focused on getting more and more industrial consumers. Last year we secured new business from major clients like Frontier Works Organization and National Logistics Cell, which generated significant revenues, ”he said.
PSO reported a record quarterly profit of Rs 10.9 billion in April-June, bringing 2020-21 profits to Rs 29.2 billion from a loss of Rs 6.4 billion a year ago. According to Arif Habib Ltd, the jump in annual profitability is due to a 24% increase in sales volumes in addition to a stock gain of Rs13bn against a stock loss of Rs20.5bn the previous year.
The CEO of PSO expects annual demand for gasoline and diesel to increase by 5-5.5% to 9 million tonnes each. The main drivers for the growth of volumetric sales of liquid fuels will be the automotive sector and increased trade with Afghanistan, he said.
Mr Taha said he was setting up “preventively” storage facilities in places with “new pockets of consumption”. For example, the 45,000 tonne storage facility at Machikay “will increase our response time,” he said, adding that the company is doing particularly well in urban centers. “We are fighting in some rural pockets. We are struggling in Faisalabad because we have no storage there. Our response time is higher.
In addition to increasing the number of pumps in parts of Khyber Pakhtunkhwa and Gilgit-Baltistan to cater for the rapidly changing tourism sector, PSO is strengthening its presence in Balochistan where it already operates 201 retail locations. The company operated approximately 3,500 retail outlets across the country at the end of last fiscal year.
“In addition to the tacit obligation as a state-owned enterprise to serve the Balochistan market, we also have a strong business interest there. Iran is negotiating with the Western powers. Whenever it has access to the international market, it will stop selling (gasoline to Balochistan) at a reduced price, ”he said, adding that the demand for gasoline and diesel in Balochistan“ had almost doubled ”last year.
He said PSO’s daily retail sales of Rs 3 billion fund the circular debt that is building up in the gas industry. He criticized the media for making headlines about buying expensive LNG cargoes locally, but ignoring the cheaper ones.
Claiming that even major LNG buyers like China, Japan and South Korea are making spot purchases to meet 20-30% of their demand, the CEO of PSO insisted that the long-term agreements term and cash purchases go hand in hand to strike an “optimal balance” and mitigate market risks.
He said chronic circular debt has made a transition from oil to gas. “Our claims on Sui Northern Gas Pipelines have reached 140 billion rupees,” he said, noting that the claims of Pakistan LNG Ltd, the only other LNG importer, are also close to 100 billion rupees now. “Our circular debt in the electricity sector is expected to be around Rs 200 billion,” he said.
He said that one possible way to deal with the increasing circular debt in the gas sector is the rapid implementation of the Weighted Average Cost of Gas (WACOG).
Acknowledging that there is provincial resistance to WACOG, he said it should at least be applied to the electricity sector, which has a demand of around two billion cubic feet per day. ” It’s doable. You have federal agencies there, ”he said, noting that closing the cost price gap was fundamental to the stability of the energy sector.
Posted in Dawn, le 26 September 2021