AHL Research has published an informative report on the Pakistan State Oil Company Limited. PSO management held an annual general meeting today.
- PSO’s white oil market share fell to 45% in FY25 from 51–52% last year, amid rising competition and peer discounting. To regain share, the company is expanding its retail network in underperforming regions, optimizing pipeline utilization to cut costs, and setting up a trading subsidiary to enhance procurement flexibility pending federal approval.
- Management explained that domestic (household) RLNG diversion, which had previously been a major contributor to PSO’s receivables, has declined sharply. In earlier years, diversion value had stood at PKR 200bn, and has now fallen to around PKR 80bn. This reduction reflects gradual government price and tariff revisions, which have improved cost recovery for Sui companies. Furthermore, the Prime Minister’s inauguration of new RLNG connections is expected to enhance recoveries and stabilize SNGPL’s revenue stream.
- The government’s PKR 1.2–1.3trn circular debt reduction plan has been signed, but the allocation of funds to PSOs remains unclear. Some of the amount is for coal and gas power plants.
- Management acknowledged that the OMC margin revision remains long overdue and has not yet been approved by the government. They explained that although the ECC summary for revision was submitted, it was returned for reassessment due to ongoing market price wars among oil marketing companies. The government is currently uncertain about the true adequacy of margins, given that some OMCs are offering discounts of up to PKR 8/ltr, which raises questions about cost sufficiency.
- The effective corporate tax rate stands near 42%, factoring in base tax, super tax, and flat tax on LNG.
- The company’s foreign debt has fallen from USD 1.3bn to USD 900mn, with plans to trim it by an additional USD 300mn by the end of this year, reflecting the company’s strong focus on deleveraging and cost efficiency.
- Management highlighted that line fill income is recurring and directly tied to interest rates and working capital deployment, forming part of PSO’s core operations. Line fill cost is a product-related expense incurred to maintain the required product volume in the pipeline for operational purposes.
- Management noted that under the Greenfield and Brownfield refinery policies, Pakistan could save between USD 1.6–2.0bn annually in foreign exchange currently paid as premiums to international traders.
- Regarding the Sindh Infrastructure Development Cess (SIDC) imposed by the Sindh government on petroleum product imports, a decision to collect bank guarantees was made in September ’21. However, the Russia-Ukraine war constrained parties’ ability to comply. In the case of RLNG, the cess was passed on to consumers, and the federal government is now in discussions with provincial authorities to resolve the matter. The SIFC has also intervened, and management expects the cess will likely continue to be passed on to consumers.
