PSO emerges as sole POL supplier to Pakistan armed
Mar 11 - 17, 2002
Pakistan State Oil (PSO) will be the sole supplier of
petroleum products to the Pakistan armed forces for the next financial
year that starts from July 2002. Currently, PSO and Caltex Pakistan are
jointly supplying petroleum products to the country's armed forces.
PSO, the leader in Pakistan's petroleum market, has
over 70% share, followed by Shell Pakistan with 20%, Caltex Pakistan
with 8%, and Attock Petroleum with 2%.
PSO's Managing Director, Tariq Kirmani, said: "PSO
will meet the 100% requirements for fuels and lubricants of the Ministry
of Defence. And we won through competitive bidding as our bid was the
lowest." This is the second fiscal year in which oil-marketing
companies have been invited to take part in an open bidding. Earlier,
oil companies received supply fees, while the Defence Ministry directly
purchased products from refineries.
Pakistan armed forces' petroleum demand ranges
between 250,000 metric tons and 300,000 metric tons a year.
Meanwhile, the September 11 incident in the US,
followed by the Afghan war and India-Pakistan standoff in December 2001
have caused a slump in economic activities in Pakistan, resulting in
reduced domestic consumption of petroleum, oil and lubricants (POL)
The industrial consumption of POL products fell by 5
per cent during July-February 2001-2002 as compared to the same period
The POL consumption declined by 9.1 per cent in
July-December 2001 due to the reduced consumption of fuel oil and gas
oil, which constitute almost 86 per cent of total demand.
Tariq Kirmani said the POL demand had started
improving from January and February. "Otherwise, these figures
would have been worse'" he said. Figures of February are not yet
available but, according to Mr Kirmani, the outgoing month has really
been good for the OMCs. POL consumption in January 2002 stood at 1.52
million tons as compared to 1.352 million tons in the same month of
2001. However, POL demand in July-January 2001-2002 plunged by 6.16 per
cent as compared to 9.1 per cent in July-December and 10.80 per cent in
Mr Kirmani believes that oil demand will surge in the
first half of 2002. He said the oil demand had started recovering and
would only decline between 5% and 6% in the financial year ending June
30, compared with a fall of 9.5% from July to December last year.
Petroleum product demand stood at 18 million tons in
the last fiscal year ended June 30, he said.
Kirmani said diesel demand was showing a visible
increase due to a rise in transport activity, which is linked to
The increase in fuel demand is due to cement and
food-related supplies, and military activities of the coalition forces
Increased supply of fuel oil to Wapda will further
improve its demand, as Wapda now needs more Furnace Oil for power
generation due to water shortage. The demand for petrol has also surged
due to an increase in sales of new cars from January. Jet fuel sales
have been steady due to the return of foreign airlines to Pakistan.
The MD, PSO, said it was good to see that the
large-scale manufacturing, which had been severely hit after September
11, had started picking pace.
On POL products demand in Afghanistan, Tariq Kirmani
said the company had received enquiries for jet petrol and lubricants
but so far no products had been shipped.
"A PSO team will visit Afghanistan to assess the
demand as soon as the security situation improves," he said.
Currently, the company is engaged in refueling activities for incoming
and outgoing Afghan relief flights. Pakistan's industrial POL demand,
which was 18.1 million tons in 2000-2001, may see a marginal decline of
0.5 per cent by the end of fiscal 2001-2002 as compared to estimates of
five to six per cent fall.
On deregulation, the MD PSO said he expected the
government to fully deregulate the petroleum business in July. A
decision on increasing commissions for oil marketing companies is also
The oil companies are finding it difficult to weather
the adverse market conditions due to low margins, according to Mr
"The last four months saw eight price drops. In
other words, what happened was that oil companies were exposed to
international pricing while their margins were fixed. This was expecting
too much from the marketing companies," he said.
He said that oil companies had asked the government
to consider increasing the margins and the government was reviewing a
possible increase. At present, the margins stand at an average 2% of
petroleum products' sale. "The government had agreed with oil
marketing companies five years ago to gradually increase the margins to
5%. Whether (this time) they go to 3%, 4% or 5% I don't know," he
Kirmani said he didn't know when the government will
decide on the margin increases, but said they will be in stages until
the petroleum business was full deregulated in July. Following the
deregulation, the government may still decide to keep an upper limit on
margins, he added. PSO is fully prepared for the industry's deregulation
and has a market strategy to deal with competition, Kirmani said. Mr
Kirmani cited the case of lubricants, which are fully deregulated. PSO
has become the industry leader, overtaking Shell Pakistan in January
this year. The company's share in Pakistan's lubricants market rose to
43% in January.