Total decides to quit the aviation business at Jinnah International Aiport

Following Shell Pakistan, Total Parco Pakistan Ltd has also decided to close TPPL’s aviation business at Jinnah International Airport Karachi and exit joint ventures (JVs) following the policies of the Civil Aviation Authority (CAA).

Pakistan State Oil (PSO) has also threatened the Civil Aviation Authority (CAA) that it will not operate at loss-making airports after the Civil Aviation Authority (CAA) issued a tender to remove state-run companies from the key airports on the pretext of promoting competition.

In a recent communication, Shell Pakistan Ltd. also conveyed a notice to the Pakistan Stock Exchange that it had decided to discontinue its aviation operations across the country.

The Civil Aviation Authority had invited tenders, inviting different parties for the establishment of a Jet Fuel refueling facility at Skardu Airport. This resulted in protests by key oil marketing companies in Pakistan like Pakistan State Oil (PSO), Shell Pakistan Ltd., and now Total Parco Pakistan.

The recent development shows that key oil marketing companies in Pakistan had decided to wind up oil supply operations to airports of Pakistan.

These are strategic operations in which major oil marketing companies are involved in joint ventures.

Sources said that the board of directors of Total Parco Pakistan in a recent meeting decided to exit joint venture oil marketing companies to shut down its aviation business.

Joint Venture companies in the aviation business with Total

There has been a joint venture between PSO, Shell, and TPPL to supply fuel to Karachi airport.

The decision of oil marketing companies to discontinue operations with the civil aviation authority was a big question mark on CAA policies, industry officials said.

Earlier, Pakistan State Oil (PSO) had warned that it would not operate at loss-making airports after the Civil Aviation Authority (CAA) issued a tender to remove a state-run company from the key airports on the pretext of promoting competition.

The Civil Aviation Authority had invited tenders, inviting different parties for the establishment of a jet fuel refueling facility at Skardu Airport.

PSO said that the Civil Aviation Authority (CAA) had issued a tender in violation of its own Aviation Policy 2019.

PSO, being a public sector entity, cannot agree to operate at loss-making airports only, while we are being removed from a major airport on the pretext of promoting competition, PSO management said in a letter sent to the secretary of petroleum.

PSO maintains Jet Fuel refueling facilities at 10 airports throughout Pakistan as per international standards and in this context, invests millions of rupees every year in upgradation and maintenance to increase productivity and efficiency.

The state-run oil marketing company, Pakistan State Oil (PSO), said that the Civil Aviation Authority (CAA) issued a tender for the establishment of a jet fuel refueling facility at Skardu Airport.

PSO informed CAA that, presently, flights to Skardu Airport are uplifting two-way fuel from Islamabad Airport, and due to the high transportation cost of fuel by road tankers from Islamabad to Skardu, the price would be very expensive, which would discourage airlines to uplift fuel from Skardu.

Still, in national interest PSO participated in the tender and agreed to establish a mobile facility for a temporary period to support the Government’s vision to promote tourism, it said.

It is important to mention here that, a few years back, Hascol Petroleum approached the Competition Commission of Pakistan (CCP) complaining that the CAA is not allowing them to establish a fuel farm at Karachi Airport for the Jet Fuel business.

Subsequently, CCP had directed CAA to tender the existing Fuel Farm i.e. Eastern Joint Hydrant Depot (EJHD), which is a JV of PSO, Shell Pakistan & Total Pakistan for the last 60 years.

PSO has challenged the direction of CCP before the Competition Appellate Tribunal which is pending adjudication and notices have been issued to concerned parties including CAA.

Regardless of our continuous engagement with CAA and explanations that as per CAA Policy 2019, Fuel farm can be leased through “direct allotment”, but in violation of their own policy, CAA issued EOI for Operation & Management of EJHD, Karachi Airport.

 The ownership of the Hydrant Refueling System that was purchased by PSO and its JV partners through an Agreement of Sale dated April 7, 1994, is also claimed by CAA, PSO said.

Initially, CAA was willing to offer PSO Nawabshah, Sukkur & Old Gwadar Airports to take over/establish jet fuel facilities under direct contract, which are loss-making airports that they did not consider tender.

We are of the view that the existing CAA approach is not public sector friendly as they are offering PSO to operate at all loss-making airports and at the same time evicting PSO from Karachi Airport, which is to some extent a viable business option, PSO authorities informed the secretary petroleum division.

PSO, being a public sector entity, cannot agree to operate at loss-making airports only, while we are being removed from a major airport on the pretext of promoting competition, it said.

PSO has been playing a key role in maintaining supply at a critical time when other oil marketing companies had backed out.

During a time of fuel shortage, as happened in June 2020, PSO was the only company that had bailed out and rescued the country from drying up by providing fuel on a war footing. Due to this, PSO had also paid a heavy cost of Rs 12 billion following the the enhancement of fuel supplies.