KARACHI: Oil transportation and storage sector is likely to record better throughput volume and profitability in the current fiscal year, after facing a slump in the previous year due to import restrictions, a study showed on Monday.
"This is expected to result in better profitability of the sector after remaining moderately leveraged during the last five financial years," the study conducted by Pakistan Credit Rating Agency (PACRA) said.
In Pakistan, road transport comprises 69 percent of total oil movement across the country, followed by pipelines at 29 percent, whereas 2 percent of the transport is catered through railways.
With respect to road transport, the total number of tank lorries/road bowsers stands at 14,000-16,000, as of July 2023, with capacities varying in the range 10-30 tonnes.
Pakistan Railways, on the other hand, operates 5,400 tank wagons for transporting fuel oils, however, its movement capacity is severely hampered by infrastructure constraints and locomotive availability.
Average annual consumption of petroleum products in Pakistan stands at 17.5 million tonnes, accounting for 45 percent of the country's total energy consumption. Over the period of last five years (CY19-23), MOGAS formed 42 percent, while HSD made up 39 percent of the country's total energy products' consumption.
For FY23, the consumption of MOGAS and HSD declined by 17 percent and 29 percent year-on-year, owing to higher inflation levels and increased prices for petroleum products, which came about due to rising international oil prices.
With respect to oil transported through pipelines, Pak-Arab Pipeline Company Limited (PAPCO)'s deliveries formed 30 percent of the MOGAS and HSD consumed during FY23. However, these also registered 68 percent decline year-on-year owing to reduced demand and lower imports of petroleum crude and products.
During the period, petroleum crude imports declined by 16 percent whereas those for petroleum products were lower 39 percent year-on-year. This had resulted largely from the import restrictions that were imposed by the SBP in May 2022. However, these have been subsequently lifted in June 2023.
During FY22-23, the transport sector of the economy accounted for 78 percent of the total petroleum consumption in the country.
Pipelines are considered as a cheap and environment friendly mode of oil product movement. This mode of transportation does not only provide efficiency to goods transport within the country but is also used for cross borders movement of oil and gas. It is a strategically important sector considering its importance in the country's energy system.
Despite lower throughput during FY23, the sector registered 14 percent growth in its sales revenue. However, the Sector's financial risk is also low. Although the long-term borrowings on lower side, however these borrowings could be expected to increase if expansion of pipeline network to TaruJabba (Peshawar) is executed in the coming years.
OGRA regulates and determines the tariffs applicable on deliveries through pipelines. The sector's revenue ceiling is therefore two-fold, comprising, a) the fixed tariff as stated and b) the quantity of oil transported via pipelines, with the latter remaining limited vis-à-vis pumping and storage capacity.