FOR oil marketing companies (OMCs), the year 2002 ushered in with a brilliant note as their sales surged by 13 per cent in January alone to 1.48 million tons as compared to 1.30 million tons in the same month of 2001.
“The figures reflect a true picture of the economy which showed signs of improvement in the beginning of the year. In fact, it is the energy which fuels the economy,” claim officials in oil industry.
Factors indicate the economy to be coming out from the negative impacts of September 11 debacle in the USA. Market sentiments are improving, external factors appear encouraging as more aid and loans are in the pipeline and many more investor-conferences have been planned for near future. Besides, exports to European countries are set to rise following the EU’s decision to enhance quota by 15 per cent from January 1, 2002.
The OMCs, like the Pakistan State Oil (PSO), Shell Pakistan Limited (SPL) and the Caltex Oil Pakistan (COP) are under pressure since September incidents, on account of falling consumption of the POL products, domestically.
On an average, consumption of the POL products kept declining by 10 per cent following the September incidents which slowed down the global economies, staggered large scale manufacturing, pushed back exports, put a tab on conversion of petrol cars into the CNG, fuelled reliance on hydel power generation, and a shift to gas from power in cement plants.
The OMCs are likely to remember July-December 2001-2002 period which decreased the sales volumes with the prices depicting a falling trend. Industry sales for the POL products during these six months declined by 11 per cent.
The Shell Pakistan Limited which announced its results of July-December 2001-2002 on February 7, showed a drop in after-tax profit to Rs185 million from Rs485 million in the same period of 1999-2000. Its operating profit also fell to Rs226 million from Rs747 million mainly on account of enhanced sales tax of up to Rs513 million paid during July-December 2001. Shell’s overall sales have increased in the last six months particularly in fuel oil by bidding away a WAPDA contract from the PSO, which was regained by the PSO last month.
Sales of the PSO (jet fuel, petrol, kerosene, high speed diesel, light diesel oil, furnace oil) showed a rise to 1.10 million tons last month as compared to 956,585 tons in January 2001.
The PSO sold 171,000 tons of fuel oil to WAPDA. Other reasons that led to surge the fuel oil sales were some additional demand from the cementmakers who have already started their shipments to Afghanistan. In Pakistan, more than 70 per cent of fuel oil is used by power generation firms followed by industrial sector consuming over 15 per cent of fuel oil.
WAPDA would require additional fuel oil to activate its thermal power generation due to an increase in demand of electricity in March and April. WAPDA had relied on hydel power generation in the last six months due to the improved water situation. However, Pakistan may face water shortage in case of drought, which drains out major reservoirs, putting further strain on the economy. The IRSA, which manages water supplies from reservoirs in all the four provinces, has estimated a water shortfall of 51 to 54 per cent during this Rabi season but officials maintain the present level at 80 per cent. Very little winter rainfall this season had pushed water to dangerously low levels, while melting of snow from the Himalayan mountains is not expected until May.
The PSO also did well in other products and sold additional volumes of HSD, petrol and LDO at the rate of 14,000 tons, 3,000 tons and 6,000 respectively as compared to corresponding period of the last year.
Sales of Shell Pakistan too, surged to 266,760 tons in January 2002 as compared to 245,369 tons, while Caltex likewise increased its figure to 104,434 tons as against 101,001 tons in January 2001. Only jet petroleum proved an exceptional case in terms of negative growth in sales. It was only PSO sales whose sales surged o 34,500 tons last month as against 34,286 tons, while Shell sales dropped to 10,100 tons from 14,855 tons and Caltex to 460 tons from 1,160 tons. Cancellation of flights by major foreign airlines after September attacks had led to a decline in consumption of jet petroleum. Demand for jet fuel may improve in months to come as major foreign airlines have now come back.
In HSD, all the three companies showed growth in sales as the PSO’s sales stood at 300,188 tons from 286,873 tons, while Shell’s sales recorded at 164,000 tons from 151,349 tons and the Caltex’s 60,763 tons from 43,817 tons. Road transport, especially heavy vehicles absorb more than 90 per cent of the OMCs sales.
In petrol, the PSO sold 37,715 tons last month as compared to 35,156 tons, while Shell also posted growth by selling 39,360 tons from 36,331 tons. Caltex’s sale registered a rise to 19,010 tons from 16,533 tons.
It is surprising that sale of petrol, after remaining thin since July 2001, has risen despite frequent shifting of cars into the CNG. Pakistan’s consumption of POL products was 18.2 million in 2000-2001 and the petroleum ministry expects a growth of up to 18.3 million tons in 2002-2003 and upto 19.1 million tons in 2005-2006 after a possible commissioning of Bosicor Refinery in the current year and Pak-Iran Refinery by 2,005.
