KARACHI: The economic slowdown and significant increase in petroleum prices due to rupee devaluation crumbled overall petroleum sales, which declined 25 percent for the year ended June 30, 2019.
Excluding Furnace Oil (FO) sales, volumes declined by 13 percent, highest attrition in more than a decade.
“With the government’s November 2018 decision to implement the ban on FO based energy generation; this product saw the greatest decrease of 58 percent in FY19. However, it must be noted that this decision was enforced towards the end of 1HFY19 while lifting of FO was allowed in the later part of 2HFY19 to meet base-load energy demand. Hence, the 58 percent decline may not be truly reflective of the decision’s impact,” Ali Zaidi at JS Global Capital said in a report.
High Speed Diesel (HSD) sales slid by 19 percent in FY19, truly depicting the economic conditions of the outgoing financial year.
Motor Spirit (MS) was the only product to register positive growth of 1.0 percent against an average growth of 9.0 percent over the past 20 years. “Muted sales in the MS segment could be attributed to the declining purchasing power of consumers amidst inflation and increase in petrol prices by 30 percent in the last year,” Muhammad Sohail at Topline Securities noted.
In June 2019 alone, particular, a total of 1.36 million tons of petrol, oil, lubricant (POL) products were sold, reflecting a 19 percent decline compared with May 2019. MS, HSD and FO all posted declines of 6.0 percent, 37 percent and 5.0 percent in June 2019 on sequential basis.
It is the same story when we compare June 2019 data on a yearly basis: MS demand was down 8.0 percent, HSD sales declined by 24 percent and FO sales fell 57 percent. As a result, total sales were down 29 percent in June 2019 compared with June 2018.
Looking at historic trends, analysts see increasing popularity in MS as the spread between HSD and MS has consistently narrowed up to FY18, and eventually going into negative territory in FY19. “If we assume this trend is to continue, we believe that HSD deregulation could become even more important,” Ali Zaidi said.
Pakistan State Oil’s (PSO) recovery in terms of market share took a slight dent as it fell 4 percentage points MoM to 47 percent in June 2019. Attock Petroleum Limited (APL), however, increased its market share by 2 percentage points MoM to 11 percent while Hascol Petroleum Limited (HASCOL) lost the same in June 2019. Shell Pakistan Limited (SHEL) has managed to maintain its market share at 8 percent for three consecutive months.
On a full year basis, PSO has lost considerable market share from 51 percent in FY18 to 42 percent this year. This was mostly taken up by smaller oil marketing companies (OMCs) which cumulatively took up a chunk of this (7 percentage points) taking their market share to 29 percent.
APL and SHEL managed to take up extra 1 percent of the pie each as they increased their market share to 10 percent and 8 percent respectively in FY19.
Muhammad Sohail has flagged further slowdown in the economy, increase in turnover tax and currency depreciation as key risks to the sector.