March 4, 2002	Monday	Zilhaj 19, 1422

AS THE privatization of Pakistan State Oil (PSO) draws near, an oil giant now seems keen to take over its certain assets instead of acquiring its complete business.

Markets are now initially swirling with news of taking over of the PSO’s major share by the Kuwait Petroleum Company (KPC) followed by the Shell Pakistan Limited (SPL). Till now, no official word has come out from the KPC. But it seems that Shell has some plans to take a slice from the PSO.

Privatization Minister Altaf Saleem last week had already hinted that many prominent oil companies of the world have shown interest in the PSO.

The Shell is keen to bid for the Pakistan State Oil’s certain assets like terminals instead for applying for major shares in its business.

“There is a little possibility to bid for the whole of PSO’s business,” Chairman and Chief Executive Shell Pakistan Limited (SPL), Farooq Rahmatullah told Dawn.

The Shell is very much interested in the process of its privatization instead of bidding for the oil giant to acquire its complete business, he says.

Farooq adds, the government has to keep in mind a lot of things prior to the privatization of the PSO as government and the financial advisor for the transaction — JP Morgan — believe that the oil giant will be sold to only one entity.

In this situation, the company which may take the PSO will virtually enjoy a monopoly in diesel and fuel oil keeping in view the rural markets where 65 per cent of the country’s population resides.

The PSO currently enjoys a market share of 85 per cent in diesel and 90 per cent in fuel oil, Shell chief said.

The government is expected to privatize the PSO by the end of the third quarter of the calender 2,002 by selling its 54 per cent stake. The government will invite expression of interest (EoI) in the current month.

On deregulation, diesel has also been planned to be completely deregulated on July 2,002 and in case one company takes the share of PSO, 80 per cent of the market will be dependent on the one company, Shell chief says.

The government should look into this aspect of monopoly before heading for the PSO’s privatization and split it into two or three companies in order to create a healthy competition.

The Shell has invested around $170 million in Pakistan to date and as per annual investment plan, the company invests $20-25 million. He said the Shell Petroleum Company UK increased its investment in the Shell Pakistan Limited by purchasing an additional 5.744 million share for $22.3 million earlier this month.

In Pakistan market, Shell enjoys 44 per cent market share in petrol, 31 per cent in diesel, 44 per cent in lubricants, 10-12 per cent in fuel oil and 30 per cent in jet petroleum.

Pakistan State Oil (PSO) enjoys 85 per cent in fuel oil, 60 per cent in diesel, 40 per cent in motor gasoline, 60 per cent in aviation and 40 per cent in lubricants. PSO has retail distribution network of 3,800 outlets besides largest network of storage depots and terminals.

No one in the PSO is now ready to offer his comment on its privatization, saying that it is the government’s decision.

The Privatization Commission (PC) is of the view that the privatization is crucial for strengthening fiscal finances and improving services.The PC however feels that the privatization process is lengthy but transparent and there is a level playing field for all potential investors.

The status of upcoming transactions in oil and gas are as follows: Plan to offer sale of 51 per cent share in the Oil and Gas Development Corporation (OGDCL) by third quarter of 2,002 followed by envisaged sale of 51 per cent for Pakistan Petroleum Limited (PPL) by fourth quarter of 2,002.

The targeted bidding date for the sale of 51 per cent share of Sui Northern Gas Pipelines and Sui Southern Gas Company is first quarter of 2,003.

The Privatization Ministry feels that it is the right time to come and invest in Pakistan as economic indicators have now started showing positive signs after September 11 incidents in the USA.

Many market analysts believe that the privatization process has finally taken off to some extend and it may yield results. They feel that the very idea of state control has caused limitation for business opportunities.

There has been a bad luck for Pakistan that the governments’ instability and fear of policy makers had frightened away the foreign investors. Lack of consistent policies has been another reason for foreign investors to have low confidence in Pakistan.