Floods drag down oil sales by 24 per cent

Oil sales have dipped 24 per cent to 3.3 million tons amid flooding across the country during August, according to JS Global Capital on Wednesday.

Decrease in furnace oil and high speed diesel sales on a monthly basis was among the main causes for the overall decline, highlighted JS Global Capital analyst Atif Zafar.

High speed diesel sales declined by 34 per cent followed by furnace oil sales which were down 22 per cent on a monthly basis.

Pakistan State Oil (PSO), the market leader, was the most affected as sales fell 27 per cent on a monthly basis whereas Attock Petroleum Limited (APL) and Shell volumes were down 10 and 19 per cent, respectively.

APL sales were immune to the floods as it operates in northern Punjab region while Shell’s loss in sales was stemmed due to furnace oil supply initiated to Nishat Chunian Power Limited and Nishat Power Limited, said Zafar in the company research report.

There remains a downward risk to earnings estimates for these companies if sales keep decreasing and the government refuses to reduce turnover tax rate, said Zafar.

Furnace oil sales, which have been a primary growth determinant in recent times for the industry, declined 22 per cent on monthly basis led by a supply disruption to power plants following logistical issues caused by the floods, added Zafar.

Agricultural activity came to a standstill in the flooded areas and that triggered the fall in high speed diesel sales, said Zafar.

PSO sales during this period dipped by 12 per cent to 2.2 million tons mainly due to its larger presence in the flood-affected areas. Resultantly, PSO lost its market share by 3.2 percentage points to 67.2 per cent, while APL and Shell improved their shares to 6.1 per cent and 14.8 per cent respectively.

Published in The Express Tribune, September 9^th, 2010.