Oil sales in Pakistan recover by 9% MoM in October 2022

Pakistan’s oil sales went up by 9% from the previous month to 1.66 million tons in October 2022. This was mostly due to better access after the floods, the start of the Rabi sowing season, and lower prices compared to the previous month.

HSD/MOGAS increased by 37/8% MoM respectively while FO declined by 33% MoM.

However, oil sales recorded a 16% YoY decline in Oct-22 due to falling in all major petroleum products; MOGAS was down by 11% YoY, HSD was down by 15% YoY, and FO was down by 37% YoY.

The YoY drop in oil sales is primarily due to a rise in fuel prices, 2) lower car sales, 3) reduced overall economic activity, and lower FO-based power generation.

Among the listed entities, Pakistan State Oil (PSO) sales posted an increase of 6% MoM and a decline of 18% YoY to 851k tons.

PSO market share declined to 51% in Oct 2022 compared to 52% share at the same time last year (Oct-21). Attock Petroleum (APL) sales declined by 2% MoM and 16% YoY.

While Shell Pakistan sales increased by 13% MoM and declined by 19% YoY. APL and SHEL market share for Oct-22 was 8% each, respectively compared to 8% share at the same time last year (Oct-21).

During 4MFY23, oil sales are down 22% YoY to 6.15mn tons due to an economic slowdown with a decline visible in all major petroleum products.

The harsher monsoon season and consequent floods have also had a major impact on sales.

Product wise FO and HSD have witnessed the most major drop with a decline of 26% YoY, while MOGAS sales declined by 18% YoY.

We expect FY23 oil sales to drop by 20-25% YoY, mainly due to reduced economic activity, a decline in auto sales, and higher petroleum prices, Topline Research said in a report.

The Economic Coordination Committee (ECC) of the Government approved a 63% increase in the sale margins of OMC on petroleum products.

This increase is to Rs6/liter from the existing rate of Rs3.68 on petrol and diesel but directed that the decision would come into force on the next price review subject to fiscal space available with the government in upcoming price reviews.

After approval by ECC, the cabinet will assess the fiscal space and give the final nod so we wait for final approval of the increase in OMC margins.

In the latest price revision effective from Nov 01, 2022, the government has kept the prices of MOGAS and HSD unchanged. OGRA had meanwhile recommended an Rs2.8/liter decrease in the price of MOGAS and an increase of Rs3.5/liter in HSD.

The recommended decrease in the price of MOGAS has mostly been adjusted by increasing Petroleum Levy to Rs50/liter.

The recommended increase in the price of HSD has been adjusted by decreasing the Inland Freight by Rs3.5/liter while the ex-refinery price has decreased by Rs2.29/liter. Petroleum Levy has been increased by 5.45 to Rs12.59/liter.

According to the GOP agreement with IMF, Petroleum Levy on both POL products needs to be increased to Rs50/liter. This figure has already been achieved for MOGAS however, the GST levy is still pending.

We have calculated an initial estimate of OMC price revision on EPS product-wise. Assumptions in these calculations are a 20% YoY decline in OMC sales for FY23 and extrapolation of product-wise market share of each OMC based on the last 12 months’ sales. For 4MFY23 OMC sales have declined by 22% YoY.

In percentage terms, highest impact will be witnessed by SHEL which has a 56% composition of MOGAS in its total sales and 41% composition of HSD. PSO and APL have 34/39% and 36/36% composition of MOGAS/HSD respectively