PSO loses 5% market share

ISLAMABAD:

The permission for oil import granted to a private energy firm has created an upheaval in the market as the company is eating into the market share of state-owned Pakistan State Oil (PSO).

Sources told The Express Tribune that the Oil and Gas Regulatory Authority (Ogra) granted approval for oil import by Gas & Oil Pakistan Limited (GO), backed by the Saudi oil giant Aramco, despite opposition from the local oil refineries.

Refineries argued that Pakistan already had surplus stocks of oil; therefore the private oil marketing company (OMC) should not be given the green light for petroleum imports.

Market sources said that the private firm was offering oil supply to its clients at a discount of Rs10 per litre, which was even higher than the margin of OMCs, which stood at Rs8 per litre.

“This situation has started eating into the market share of PSO,” an official remarked.

Sources said that GO had captured 5% market share of PSO, which meant that the private oil company’s share increased by the same 5%.

As per law, only PSO can import petroleum products while the OMCs cannot make such purchases overseas if the refineries or OMCs have petroleum stocks.

The oil industry including the refineries, while airing serious concern, has hit out at Ogra for allowing a private firm the import of petroleum products.

The industry regulator and the ministry concerned have remained silent, but some government officials and PSO are voicing concern about “unfair competition” and the potential threat to government-to-government (G2G) fuel supply deals.

GO is supplying significant quantities of petroleum products, particularly diesel, to filling stations across Pakistan. Aramco recently completed the acquisition of a 40% equity stake in GO, a move originally announced in late 2023.

GO has sourced the supply of petroleum products from Aramco and has offered discounts ranging from Rs4 to Rs10 per litre on high-speed diesel (HSD) and Rs3 to Rs4 per litre on motor gasoline (MS or petrol). It has offered OMCs the option of selling petroleum products at discounted rates and directly providing them their margin.

However, according to industry players, these discounts have not resulted in meaningfully lower prices for consumers at petrol stations. At present, the OMCs’ margin is Rs7.65 per litre.

The fuel imports came after GO secured permission from Ogra and the government of Pakistan for diesel import. This decision has put an additional pressure on the country’s foreign exchange reserves.

Additionally, GO is believed to be providing products as a loan to other OMCs, thereby boosting its sales volume.

PSO, which holds a leading position in the country’s oil marketing industry, has expressed strong dissatisfaction with the situation, citing concerns over the “unfair” competition and the impact on its operations.

When contacted, an Ogra spokesperson said that the volume of products to be imported by the licensed OMCs is decided by Ogra after a thorough evaluation of the sales potential, existing inventory and refinery production/supply capabilities in the monthly product review meeting (PRM).

In the PRM for June 2024 held in May 2024, HSD and MS were found to be in deficit in the country. Accordingly, HSD and MS deficits were assigned to the OMCs, keeping in view their sales and the 20-day stock buildup requirement.

“GO and PSO were permitted to import diesel from Saudi Aramco and Kuwait Petroleum, respectively,” the spokesperson said.

It is pertinent to mention that GO lifted 27,500 metric tons more than the 36,000 tons made available by the refineries in the PRM, thereby fulfilling its obligation of lifting local products.

Historically, GO maintained a market share of up to 11% in the case of diesel, which declined to 2.18% in March 2024. However, since the equity investment in GO by Saudi Aramco and the supply agreement, one of the leading global energy companies is facilitating the recovery of its market share and ensuring uninterrupted supplies to its 1,200 retail outlets, the spokesperson said.

“Ogra is committed to improving the existing data-driven decision-making and diversification of supply sources that can improve the security of fuel supply in Pakistan,” the Ogra official added.