KARACHI: Pakistan State Oil (PSO) Managing Director Syed Taha has said he’s actively trying to bring the focus of the company’s sales efforts back to the retail segment.

In a recent interview with Dawn, Mr Taha said the company’s focus had previously drifted from the retail business that he described as the “bread and butter” of the country’s largest corporate entity in terms of revenue.

“Our market share was at its lowest ebb two years ago. We were 33 per cent in mogas (petrol) and 36pc in diesel. Our focus was out,” he said.

According to the industry-wide data for the first eight months of 2021, PSO commands a market share of 43pc in petrol and 47pc in diesel. On an annual basis, it managed to grow its volumetric sales of petrol and diesel in the eight-month period by 23pc and 19pc, respectively. The two categories constituted more than three-quarters of the company’s volumetric sales in the last eight months.

Sees demand for these fuels to increase annually 5-5.5pc to 9m tonnes each

Mr Taha said he’s optimistic about taking the market share in these two categories to more than 50pc soon. “We set up 70 gas stations last year. We’re setting up another 70 this year. Every station gives us almost 34-40 tonnes, with an incremental impact (on sales) of 0.3-0.4pc,” he said.

In furnace oil, PSO held a market share of 58pc in Jan-Aug against 35pc a year ago. “Now we’re focused on getting more and more industrial consumers. Last year, we fetched new business from major customers like Frontier Works Organisation and National Logistics Cell, which generated significant revenue,” he said.

PSO announced an all-time high quarterly profit of Rs10.9bn in April-June, taking the 2020-21 earnings to Rs29.2bn versus a loss of Rs6.4bn a year ago. According to Arif Habib Ltd, the jump in annual profitability was because of a 24pc increase in sales volumes besides an inventory gain of Rs13bn against an inventory loss of Rs20.5bn in the preceding year.

The PSO MD expects the annual demand for petrol and diesel to increase 5-5.5pc to 9m tonnes each. Major drivers of growth in the volumetric sales of liquid fuels are going to be the auto sector and increased trade with Afghanistan, he said.

Mr Taha said he’s “pre-emptively” setting up storage facilities in locations with “new pockets of consumption”. For example, the storage facility of 45,000 tonnes in Machikay will “increase our response time,” he said, adding that the company is doing particularly well in urban centres. “We struggle in certain rural pockets. We struggle in Faisalabad because we don’t have storage there. Our response time is higher.”

In addition to increasing the number of pumps in parts of Khyber Pakhtunkhwa and Gilgit-Baltistan to cater to the fast-evolving tourism sector, PSO is ramping up its presence in Balochistan where it already operates 201 retail sites. The company operated about 3,500 retail outlets across the country at the end of the last fiscal year.

“Besides the unwritten obligation as a public-sector company to serve the Balochistan market, we also have a strong commercial interest there. Iran is negotiating with the Western powers. Whenever it gets access to the international market, it’ll stop selling (petrol in Balochistan) at a discount,” he said, adding that demand for petrol and diesel in Balochistan “almost doubled” last year.

Circular debt

He said PSO’s daily retail sales of Rs3bn are financing the circular debt building up in the gas sector. He criticised the media for putting up banner headlines on spot purchase of expensive LNG cargoes but ignoring the cheaper ones.

Saying that even major LNG buyers like China, Japan and South Korea do spot purchases to meet 20-30pc of their demand, the PSO MD insisted long-term deals and spot buying go hand-in-hand to strike an “optimal balance” and mitigate market risks.

He said the chronic circular debt has made a transition from furnace oil to gas. “Our receivables from Sui Northern Gas Pipelines have gone up to Rs140bn,” he said, noting that receivables of Pakistan LNG Ltd, the only other LNG importer, are also close to Rs100bn now. “Our circular debt in the power sector should be close to Rs200bn,” he said.

He said one possible way to address the rising circular debt in the gas sector is the early implementation of the weighted average cost of gas (WACOG).

Acknowledging that there’s resistance from the provinces to the WACOG, he said it should at least be applied to the power sector, which has demand for roughly two billion cubic feet per day. “It’s doable. You have federal bodies there,” he said, noting that bridging the cost-price gap was fundamental to the stability of the energy sector.

Published in Dawn, September 26th, 2021