KARACHI: After spending more than a year analysing the deal, Pakistan State Oil has finally decided not to acquire 30% of Pakistan Refinery Ltd (PRL) as the ‘prevailing dynamics’ in the energy sector does not allow them to go-ahead, the company’s financial adviser BMA Capital said in a statement issued on Wednesday.
The country’s largest oil marketing company PSO announced in May last year that it plans to buy Shell’s 30% stake in PRL, a company in which PSO already has an 18% share.
The ‘public announcement of intention’ period had expired on May 28, 2011, however, the Securities and Exchange Commission of Pakistan granted an extension till August 25, 2011 to make a final decision. PSO withdrew public announcement of intention on Wednesday, a day before its expiry.
Analysts had questioned the viability of the acquisition since rumours had started of the acquisition more than a year ago.
However, one source earlier this month told The Express Tribune that “due to the circular debt issue, PSO has had a lot of problems in maintaining a steady fuel supply. Owning more shares of PRL would help them stabilise those supplies,” said a source. PRL currently supplies between 30% and 40% of PSO’s fuel supplies. PSO, as an oil marketing company, does not have its own refining capacity.
Receivables of the company have swelled to Rs157 billion as of March 2011 due to the circular debt.
Earlier this month, sources told The Express Tribune that Pak-Arab Refinery Company (Parco), a firm jointly owned by government of Pakistan and the Emirate of Abu Dhabi, decided to join Pakistan State Oil (PSO) in a joint bid to acquire Shell Pakistan’s share in PRL.
PRL’s refinery facility is located on the coastal belt of Karachi and is a hydro skimming refinery designed to process imported and local crude oil. The refinery can process up to 47,000 barrels of crude oil per day. While PRL produces several types of oil products, it primarily converts the crude oil into furnace oil.
Published in The Express Tribune, August 25th, 2011.
Correction: An earlier version of this article incorrectly mentioned Pakistan Refinery Ltd (PRL) as National Refinery Ltd (NRL). The correction has been made.