Despite plunge in oil prices, the company was making profits due to its unique business model, said officials. In the last ten years, PARCO has made payments of Rs600 billion to the government on account of dividends and various taxes and levies. PHOTO: FILE
The government is likely to drop a ‘jewel’ from its privatisation list after the Ministry of Petroleum and Natural Resources opposed the official move to sell at least 10% stake in Pak Arab Refinery Company (PARCO).
The Privatisation Commission has called a meeting of its board to review the option of removing PARCO from the list of entities that have been selected for capital market transactions, said sources in the Ministry of Finance and Privatisation.
Total PARCO acquires Chevron Pakistan
The Commission convened the meeting after the Ministry of Petroleum opposed the proposal either to list PARCO on the stock exchange or to sell its 10% stake to Abu Dhabi government - minority shareholder in the refinery.
PARCO is a Joint Venture Company between Pakistan and Abu Dhabi. Abu Dhabi Petroleum Investment Company watches its government’s interests. Under the bilateral arrangement, the Abu Dhabi government has the first right of refusal in case the government decides to sell its shares.
The petroleum ministry has recommended that Pakistan should continue maintaining its existing 60% shareholding in PARCO. It said that the government should neither offer its 10% shares to Abu Dhabi nor go for divestment through enlisting on the stock exchange.
The petroleum ministry is of the view that if Abu Dhabi accepts the offer, it will disturb government’s control over a strategic asset of the country.
It has asked the commission that the entity be deleted from the list of companies being considered for privatisation.
Pakistan has already informed the International Monetary Fund (IMF) that it may remove PARCO from the list of public sector enterprises that it plans to privatise under the $6.2 billion bailout programme.
The petroleum ministry’s documents stated that PARCO had total equity of Rs750 billion and its total assets increased to Rs126 billion in 2015. In the year ended in June 2015, the company’s revenue increased to Rs307 billion and its after tax profit stood at Rs13.6 billion.
Despite plunge in oil prices, the company was making profits due to its unique business model, said officials. In the last ten years, PARCO has made payments of Rs600 billion to the government on account of dividends and various taxes and levies.
The PARCO has 100,000 barrel per day refinery capacity and is said to be the only company producing Euro-II compliant diesel.
PARCO has been on the privatisation list since 1997. Subsequently, in October 2013, the Cabinet Committee on Privatisation (CCoP) also approved the PARCO for privatisation.
The government had identified 10 entities for capital market transactions in the areas of oil and gas, banking, and insurance sectors for block sales and primary or secondary public offerings. It has already completed United Bank Limited (UBL), Pakistan Petroleum Limited (PPL), Allied Bank Limited, Habib Bank Limited (HBL) transactions.
The divestment of Oil and Gas Development Company Limited’s shares was cancelled due to lukewarm response by the international investors and opposition from political parties.
PARCO willing to invest in Pakistan Refinery
The government is also in the process of hiring a financial advisor for State Life Insurance Corporation. The PC Board would also review the proposal of excluding the Mari Petroleum Limited from the privatisation list, although chances of it happening are slim, said sources.
IDBL privatisation
The government has decided to privatise the Industrial Development Bank Limited (IDBL) amid its deteriorating financial conditions. In October last year, Prime Minister Nawaz Sharif approved the proposal to initiate the privatisation process of IDBL.
The IDBL is facing severe financial crunch due to drying up of liquidity, credit lines and governance issues.
The PC Board is likely to give go ahead of initiating the IDBL privatisation process, said the sources. They said the Commission may set a condition that only those parties can acquire the bank that have experience with the financial sector and a successful track record for turning around a financial sector institution.
Published in The Express Tribune, January 19th, 2016.
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