Two dozen firms jump on oil marketing bandwagon

New entrants encouraged by sector’s significant growth, relaxed conditions

KARACHI: About two dozen firms have jumped on the fuel sale business in the last six months owing to the significant growth and relaxed conditions that are part of becoming a full-fledged oil marketing company.

The Oil and Gas Regulatory Authority (Ogra) licenced 21 new firms during July-December 2016 to build oil storage facilities in areas where they have planned to open petrol pumps.

The number of new licences is surprising keeping in view the authority had issued an almost equal number of such licences (20) in the last 70 years.

The new companies are estimated to be investing Rs10.5 billion to build the planned storage facilities in the next three years.

It is yet unknown as to how much storage capacity would be added to the system in the given timeframe.

Ogra, however, said “the industry has added 140,347 tons of storage both for MS {petrol} and HSD {High Speed Diesel} in the system with an approximate investment of Rs14.4 billion since the transfer of regulatory functions to Ogra from the Ministry of Petroleum and Natural Resources {in 2006}.”

“The {21 new} companies would be issued licences of full-fledged oil marketing companies after they make available the proposed storage facilities,” said Imran Ghaznavi, the Ogra spokesman.

An analyst said the new companies are joining the sector due to significant surge in demand for petroleum products and relaxation of conditions to become an oil marketing company in the country. The Pakistan Bureau of Statistics (PBS) reported a 50% increase in the import of petroleum products in the six months when Ogra issued new oil storage construction licences.

Pakistan has imported 11.76 million tons of refined and crude oil during July-December 2016 as compared with 7.82 million tons in the same period in 2015, according to the PBS.

Imported oil meets around 75% of the country’s demand, while the remaining is met through local production.

A local brokerage house reported the other day that oil marketing companies sold a total of 15.17 million tons in the first seven months (July 2016 to January 2017) of the current fiscal year 2017 - a year-on-year growth of 17%.

Moreover, in 2010, the then government exorbitantly relaxed the criteria for establishing a new oil marketing company. Accordingly, a new company in the making now may kick start its journey with minimum Rs100 million equity in hands and Rs500 million investment size.

Ghaznavi said Ogra has issued marketing licences to four companies since July 2016. “They have met the basic criteria of establishing storage facilities. Now, they would start opening petrol pumps in the areas and provinces where they have constructed the storage infrastructure,” he said.

Published in The Express Tribune, February 9^th, 2017.

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