Pakistan State Oil (PSO) - Q2 2013


SWOT Analysis

Strengths

  • Market leader in fuels distribution.

  • Leading share in distribution infrastructure.

  • Proposed strategic industry investor.

Weaknesses

  • Limited financial and operational freedom.

  • Some cost and efficiency disadvantages.

  • Lack of refining involvement.

Opportunities

  • Site upgrading/expansion opportunities.

  • Potential refining capacity expansion.

  • Rising domestic energy consumption.

Threats

  • Strong competition in fuels supply.

  • Changes in national energy policy.

Company Overview

PSO is the largest oil marketing company operating in Pakistan and is engaged in the storage, distribution and marketing of petroleum products, LPG, CNG and petrochemicals. PSO has the largest distribution network in the country comprising 3,689 outlets out of which 3,500 outlets serve the retail sector and 189 outlets serve bulk customers. In addition to retail customers more than 2,000 industrial units, business houses, power plants and airlines are being fuelled by PSO. This network is supported by around 30 storage facilities with a capacity of more than 1mn tonnes, representing 80% of the country's total. PSO dominates the fuel retailing sector with an 82.2% market share.

Strategy

PSO has been pursuing an aggressive marketing strategy - revamping its retail network and concentrating on high-margin products. PSO is also planning to establish the country's largest oil refinery at a cost of US$1.4bn, with a refining capacity of 150,000b/d of crude.

The government holds a stake of about 54% in PSO, including both direct holdings of the federal government and indirect holdings through state-owned institutions. The government is at an advanced stage of divesting 51% of PSO to a strategic investor. The Privatisation Commission has appointed JP Morgan as the financial advisor for the privatisation of PSO, which was due to take place by September 2007, but continues to be subject to delays.

The provincial government of Khyber Pakhtunkhwa in Pakistan has agreed to allocate 1.62sq km of land for a PSO-proposed refinery. A suitable location for the 40,000b/d facility will be finalised by the government, according to a senior state official. The refinery will process provincial crude oil and facilitate provision of economical petrol and diesel by reducing inland freight equalisation margins. The official added that the refinery will reduce reliance upon oil imports and local refineries.

Market Position

PSO is the largest oil marketing company operating in Pakistan and is engaged in the storage, distribution and marketing of petroleum products, LPG, CNG and petrochemicals. PSO has the largest distribution network in the country comprising 3,689 outlets out of which 3,500 outlets serve the retail sector and 189 outlets serve bulk customers. In addition to retail customers more than 2,000 industrial units, business houses, power plants and airlines are being fuelled by PSO. This network is supported by around 30 storage facilities with a capacity of more than 1mn tonnes, representing 80% of the country's total. PSO dominates the fuel retailing sector with an 82.2% market share.

In response to the government's attractive power policy, announced in early 1990s, PSO invested heavily in infrastructure facilities to import and transport fuel oil to support the additional requirements generated by the influx of thermal independent power plants. PSO signed long-term (22-30 year) supply contracts with independent power producers to supply fuel oil. PSO has an alliance with BP's lubricants subsidiary, Burmah Castrol, whose products are manufactured at PSO's own facilities.

For the year ended June 30, 2012 PSO's revenues exceeded PKR1,199bn as compared with PKR975bn in FY11, representing growth of 23%. The company also announced after tax earnings of PKR9.06bn in FY12 as compared with PKR14.78bn in 2011. The profitability was severely impacted by rapid devaluation of rupee along with a reduction in inventory gains.

PSO continued its overall domination of the market with its share in the 'Black Oil' and 'White Oil' segments standing at 78.1% and 55.1% respectively, thereby contributing to an overall market share of 65.4%.

Financial Data

Net sales

  • PKR974.9bn (2010/11)

  • PKR742.8bn (FY09-10)

  • PKR613.0bn (FY08-09)

  • PKR495.3bn (FY07-08)

  • PKR349.7bn (FY06-07)

  • PKR298.3bn (FY05-06)

Net profit/(loss)

  • PKR14.78bn (2010/11)

  • PKR9.05bn (FY09-10)

  • (PKR6.7bn) (FY08-09)

  • PKR14.05bn (FY07-08)

  • PKR4.69bn (FY06-07)

  • PKR7.52bn (FY05-06)

Company Details

  • Pakistan State Oil

  • Ground Floor

    PSO House

    Khayaban-e-Iqbal Clifton

    Karachi

    75600

    Pakistan

    Tel: +92 (21) 9920 3866-85

  • Fax: +92 (21) 9920 3835

  • www.psopk.com

This article is tagged to:
Sector: Oil & Gas
Geography: Pakistan