Pursuant to the notification from the Ministry of Petroleum & Natural Resources (MPNR), dated February 12, 2015, whereby Pakistan State Oil (PSO) was informed by the MPNR that the federal government, in exercise of the powers under Section 7 of the Marketing of Petroleum Products (Federal Control) Act, 1974 “the Act” has dissolved/de-notified the BOM with immediate effect.
The above-referred notification also stated that the PSO managing director shall exercise and perform all the powers and functions of the board under Section 6(4) of the Act till a new BOM is appointed by the government of Pakistan.
During the period under review, the company’s profitability has been adversely affected by the sharp decline of 51 per cent in the OPEC basket price of crude oil, $ 109 per barrel in July 2014 (July 2013: $ 100 per barrel) to $ 53 per barrel in March 2015 (March 2014: $ 104 per barrel).
This significant decline in crude oil prices, an uncontrollable external factor, together with the inventory levels/management of the company to prevent any dry out situation in the country has resulted in significant inventory losses during the second and third quarters of Financial Year 2015 (FY2015).
However, there has been an increasing trend of crude oil prices subsequent to the period end and the company expects that inventory gains will reverse the earlier such losses thereby contributing positively to PSO’s profitability.
The 51 per cent decline in crude oil prices has also resulted in a 20 per cent reduction (9MFY2014: 10 per cent growth) in the sales turnover to Rs 824 billion (9MFY2014: Rs 1,023 billion). During the third quarter FY2015, the company witnessed an overall volumetric growth of 9 per cent (3QFY2014: 5 per cent decline) net 14 per cent positive shift over the SPLY.
During the third quarter, PSO’s market share for Motor Gasoline was 48 per cent (FY2014: 47.5 per cent), for HSD was 49.4 per cent (FY2014: 51.4 per cent) and for Furnace Oil was 63.1 per cent (FY2014: 68.1 per cent).
The company has reported a Profit After Tax of Rs 3.2 billion (9MFY2014: Rs 19.4 billion) during the period under review. The main factors for this decline being the lesser receipts of late payment surcharge of Rs 3.4 billion (9MFY2014: Rs 11.9 billion) and inventory losses of Rs 8.3 billion (9MFY2014: Rs 6.1 billion gain). Cash flows and earnings of the company now remain under pressure only as a consequence of the inability of the power and aviation sectors to pay for the very significant dues for supplies of furnace oil and aviation fuel made by the company. Other than these overdue amounts, the company is debt free.
The company’s commitment to the energy security of Pakistan has been enhanced by the diversification into LNG as a fuel for power generation and other sectors.