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July 31, 2020

PSO earmarks Rs880 million to reinforce storage infrastructure

Business

July 31, 2020

KARACHI: State-owned Pakistan State Oil (PSO) has planned Rs880 million of investment to improve its storage capacity and avert oil shortage that was caused recently amid lockdown resulting in long queues of vehicles at fuel stations, it was learnt on Thursday.

The amount would be spent on increasing storage capacity at PSO’s Machike terminal to ensure uninterrupted fuel supplies across the country and to fulfill the increasing demand of petroleum products.

PSO is establishing two more storage tanks of 22,000 metric tons capacity each for motor gasoline and diesel, according to the company’s annual procurement plan for FY2021. Project is progressing fast and the expansion is expected to be completed by the end of this year.

“Moving forward, our areas of focus will remain on increasing POL storage to increase days cover, and ensure fuel availability across Pakistan while providing unmatched experience to our customers at PSO retail outlets by upgrading our retail infrastructure and offerings,” PSO said in its last annual report. “Company is managing the risk through effective supply chain management. Whereas, planned increase in storage capacity will help the Company in managing it more effectively.”

PSO having around 45 percent market share contributed over 55 percent of the nation’s total storage capacity.

Pakistan faced an unprecedented oil shortage a couple of months back as oil marketing companies (OMCs) were said to have abandoned the regulated activity of marketing by either discontinuation of supplies or provision of insufficient supplies at retail outlets. However, OMCs ascribed petrol shortage in the country with the oil import ban imposed in late March due to surplus position of local refineries after the coronavirus-induced lockdown suppressed demand. But, the demand resurged significantly following an ease in lockdown.

With combined storage capacity of over 500,000 metric tons, OMCs could have stored 2-3 months of the country’s oil supply.

Motor gasoline requirement in Pakistan has significantly increased over the years due to changing business dynamics as well as a significant shift in customer preferences.

Petroleum, oil, lubricants sales witnessed a downfall of 11 percent with the major contributor being Furnace oil, which went down 36 percent during FY2020. The slump in sales during the year can be attributed to the COVID-19 lockdown initiated after 2QFY20, which pulled down the demand of oil products led by economic slowdown, shutdown of manufacturing plants, and temporary ban on transport and import-export related activities.

During FY2020, PSO’s sales volumes witnessed a decrease of 7 percent to 7.2 million tons. This can be attributed to 46 percent decrease in volumes of furnace oil. However, motor gasoline and high speed diesel volumes increased 5 percent and 6 percent, respectively, in FY2020.