Pakistan set for Rs7.5bln investment in oil storage infrastructure in 3 years

KARACHI: Pakistan is expecting at least seven billion rupees in investment from new oil marketing companies in building of storage infrastructure within the next three years, officials said, as growing demand of retail fuels is attracting investors to capitalise on the country’s low oil inventory capacity.

Officials at the ministry of energy told The News that Oil and Gas Regulatory Authority (Ogra) granted provisional or construction licences to 15 new companies, which are mostly local, to build storage infrastructure across the country. They are registered with the Securities and Exchange Commission of Pakistan.

“In line with the government policy, every new company has to invest not less than Rs500 million on infrastructure development in three years from the issuance of provisional license,” a ministry’s official said, requesting anonymity. “Accordingly, the applicants are in the process of completing the pre-requisites for considering their requests for licence. All such cases shall be processed once they complete the requirements as per applicable law/rules.”

Officials stressed the need of improvement in oil storage capacity across the country with each new oil marketing company required to develop oil depots and installations location wise to cater 20 days requirement.

“Development of further storage infrastructure is very vital strategically, and plays fundamental role in supply chain as Pakistan is net oil importing country,” an official of the energy ministry said.

Currently, there are more than 7,000 retail outlets of OMCs operational in the country, according to the annual report 2016/17 of Ogra. There are around 10 OMCs with major ones including state-owned Pakistan State Oil, Attock Petroleum, Shell, Hascol, Parco and Byco.

Umair Naseer, deputy head research at Topline Securities said there is need of further investment in OMCs sector as demand of retail fuels is increasing, while inventory holding capacity stands at less than a month.

Sales of motor gasoline rose 13 percent year on year to 4.91 million tons in the first eight months of the current fiscal year of 2017/18, while diesel sale increased nine percent to 6.04 million tons during the period.

“Actually, an inventory capacity for motor gasoline is for 15 days and since the demand is growing there is need for further investment in storage,” Naseer said. The ministry’s official said government is encouraging the new firms to give priority to rural areas while developing infrastructure. “As per government policy, the licencees are required to focus in far flung areas.”

Naseer of Topline Securities said China-Pakistan Economic Corridor’s (CPEC) route would be attractive for new oil companies to establish outlets.

“Gwadar and other areas with CPEC focus will see a growing vehicular traffic,” he added. “I think it may otherwise be difficult to convince private companies to build network in far flung areas that lack road and other infrastructure.”

A government document said oil marketing companies are expected to start construction of oil depots at Gujrat, Okara, Hub, Gatti, Vehari and Benazirabad, while some of them are nearing completion at Keamari, Amangarh (Nowshera), Thalian, Kotla Jam (Bhakkar), Machike, Sahiwal, Habibabad and Quetta.