DOMINATING ENERGY SECTOR
The energy sector was already leading the trade in terms of volume at all the three stock exchanges
By AMANULLAH BASHAR
Dec 20 - 26, 2004
While the energy sector which is leading the corporate sector at bourses, the forthcoming public offering of some of the leading energy sector units such as Kot Addu Power Company, a large chunk of 10 million shares of Attock Refinery and the strategic divestment of one of the largest oil refinery i.e. National Refinery and Karachi Electric Supply Corporation (KESC) are going to make 2005 an eventful year especially for the energy sector.
The energy sector was already leading the trade in terms of volume at all the three stock exchanges of the country. It is expected that addition of the forthcoming shares of APL, Kot Addu and the second offer of the OGDC and PPL shares on trade are bound to assign a much greater role to the energy sector in the capital market.
It is generally criticized that the some vested interest in the government quarters were opposing the privatization of some big government-owned organization in the energy sector such as Pakistan State Oil (PSO) which is awaiting for privatization for the last several years. However, the delay is unlikely to shake the firm commitment of the decision makers which are determined to privatize state-owned organizations whether they are profit making entities or causing huge losses to the exchequer. All of them have to be privatized at the time as policy decisions of the present government.
Encouraged by the positive response of the market, some private sector organizations in the energy sector were also planning to offer shares to the public for capital formation and broadening the base of the stake holders.
In this connection, the Attock Petroleum Ltd (APL) has also decided to offer about 10 million shares at a value of Rs57.75 per share some in January 2005. The company would offer 10 million shares of the total shares outstanding of 40 million. The APL, it may be mentioned is associated with Attock Oil Group of Companies, an integrated Group in the oil and gas sector of the country. This group is also involved in exploration and production, refining and marketing as well.
The Pharaon Commercial Investment Group of Kingdom of Saudi Arabia is the sponsor of the company, having diversified global interests in upstream and downstream petroleum, chemical, cement and real estate business.
The local shares of Attock Petroleum include Attock Oil Company, Attock Refinery Ltd, Pakistan Oilfields and Attock Cement Pakistan Ltd.
The APL product portfolio comprises motor gasoline, light diesel, kerosene oil, jet petroleum, furnace oil, high speed diesel and other POL products including oil and lubricants. APL has commissioned 85 retail outlets across the country and has a plan to open 22-25 sites each year.
It is worth mentioning that APL claims its net earnings which were estimated at Rs335.7 million and net sales to the tune of Rs6.9 billion. The total volume of petroleum products sold stood during 2004 were estimated at 438,452 tons as against 381,532 tons in the previous year.
Within the Karachi Stock Exchange, the oil marketing companies including PSO and Shell Pakistan so far holding the marketing share of which over 67 percent goes to the credit of PSO which is a heavily trade share. The two companies in the recent past have engaged in competition in terms of business and marketing strategies, which brought out the best in PSO. Going forward, the privatization of PSO is of key emphasis as investors are of the view that PSO privatization would act as a catalyst to the companies share prices and its efforts to increase market.
There is a consensual assessment that Pakistan has a strong and rich base of natural resources as most of the resources i.e. oil and gas have been unexploited so far. Consequently, the situation led to heavy consumption of crude oil to meet domestic demand. Hence leading to higher input cost due to reliance for fueling energy in local industry. Though, Pakistan is a net importer of crude oil as it produces less than 20 percent indigenous, however, during course of time, the country has attained self-sufficiency in natural gas production. Oil and gas sector contribute to meet 38 percent and 44 percent energy demand respectively. However, demand for natural gas is expected to rise substantially in the next few years. With an increase of roughly 50 percent by 2006, the government would have to look for additional resources to bridge the widening gap. In this regard there are plans to make the fuel of choice for all electric generation power plants in future. This would necessitate a sharp rise in production of natural gas and besides completion of cross border gas pipeline projects at the earliest, experts feel.
There are more than 12 players which have been engaging exploration and production activities in the country. PPL is the market leader as it has a share of 25.3 percent in gas followed by OGDC with an average share of 20.6 percent in the total production of gas. Third largest gas producer is Mari Gas having 13.9 percent share in gas sector. On the oil production side BP has a large share with a giant share of 37 percent in crude production followed by OGDC with 34 percent market share.
OGDC is the only listed company having large share both in oil and gas followed by PPL and POL.