Pakistan oil sales posted decline of 5 percent on year-on-year basis to 25 million tons in FY18 primarily due to drop in furnace oil (FO) sales. This decline in sales growth is after a lag of 5-years when the industry posted a decline of 4 percent in FY12.
Furnace Oil sales of the industry dropped 27 percent to 7 million tons owing to reduced demand from power sector during the year. To recall, government imposed ban on usage of expensive FO for power generation during winters due to high cost of generation and availability of RLNG. Later on, the usage of FO resumed post commencement of summers when demand generally picks up however utilization levels remained on lower side.
As per Oil Companies Advisory Council (OCAC), out of the total FO sales of 9.6 million tons in FY17, 85 percent or 8.2 million tons of oil sales were made to power sector. "We believe this situation will prevail going forward as upcoming power plants are based on coal or RLNG which is likely to gradually replace FO based power plants", an analyst at Topline Securities said.
Oil sales growth excluding FO stood at 8 percent in FY18 as compared to sales growth of 13 percent in FY17. This is also lower than the last 3-year (FY15-17) average growth of 12 percent, which is an effect of rising pump prices.
Petrol/Diesel prices have risen by 35-40 percent in FY18 on back of higher international oil prices. This has started impacting industry's white oil sales. This is also evident from oil sales of June which is down 12 percent on year-on-year amid 9 percent decline in Diesel sales along with lower FO sales.
Hascol Petroleum (HASCOL) outperformed the market growing by 28 percent in FY18. "We attribute its strong performance to increased concentration on Petrol/Diesel sales, expanding storage capacity and retail network", he said.
Pakistan State Oil (PSO) and Shell Pakistan (SHELL) remained underperformers during the year. PSO, the biggest stakeholder in FO market posted sales decline of 16 percent. On the other hand, SHELL witnessed strong slowdown in its sales post oil tanker incident on June 25, 2017.