PSO Sample Report Spring 2022

PAKISTAN STATE OIL
Final Submission: All Accounts
Course: Investments
Submitted to: Maha Ijaz
Programme: BBA (Hons) Double Majors Finance & Marketing
Section: C
Submitted by:
Manahil Waqar
Muhammad Wahaj Faisal
Nahel Asif
Dated: 11th May 2022
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Contents
SECTION I: BETA CALCULATION ...................................................................................................... 8

___________________________________________________________________________________ 18
SECTION II: FINANCIAL STATEMENTS ......................................................................................... 19
Historical Data .......................................................................................................................................... 20
Balance Sheet (2007-2021) ..................................................................................................................... 20
Income Statement (2007-2021)............................................................................................................... 27
Cash Flow Statement (2007-2021) ......................................................................................................... 38
Vertical Analysis ....................................................................................................................................... 49
Balance Sheet (2007-2021) ..................................................................................................................... 49
Horizontal Analysis................................................................................................................................... 78
Balance Sheet (2007-2021) ..................................................................................................................... 78
__________________________________________________________________________________ 107
SECTION III: FORECASTED FINANCIAL STATEMENTS ......................................................... 108
Future Data.............................................................................................................................................. 109
Balance Sheet (2022-2026) ................................................................................................................... 109
Income Statement (2022-2026)............................................................................................................. 112
Cash Flow Statement (2022-2026) ....................................................................................................... 114
Vertical Analysis ..................................................................................................................................... 117
Balance Sheet (2022-2026) ................................................................................................................... 117
Horizontal Analysis................................................................................................................................. 125
Balance Sheet (2022-2026) ................................................................................................................... 125
__________________________________________________________________________________ 133
SECTION IV: BALANCE SHEET ....................................................................................................... 134
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Non-Current Assets ................................................................................................................................ 135

Property Plant & Equipment ................................................................................................................. 136
Company Analysis ................................................................................................................................ 139
Industry Analysis .................................................................................................................................. 148
Economic Analysis ............................................................................................................................... 158
Statistical Forecasting ........................................................................................................................... 170
Right of Use Assets .................................................................................................................................. 173
Intangibles ............................................................................................................................................... 177
Long Term Investments ......................................................................................................................... 187
Long Term Loans, Advances and other receivable.............................................................................. 208
Long Term Deposits and Prepayments ................................................................................................. 229
Deferred Tax Asset – net ........................................................................................................................ 250
Retirement Benefits ................................................................................................................................ 273
__________________________________________________________________________________ 277
Current Assets ......................................................................................................................................... 278
Stores, Spares & Loose Tools ................................................................................................................. 279
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Stock in Trade ......................................................................................................................................... 305
Trade Debts ............................................................................................................................................. 347
Economic analysis ................................................................................................................................ 377
Loans and Advances ............................................................................................................................... 394
Short term deposits and prepayments .................................................................................................. 412
Other Receivable ..................................................................................................................................... 428
Economic analysis ................................................................................................................................ 452
Taxation – net .......................................................................................................................................... 459
General Analysis ................................................................................................................................... 462
Cash & Bank Balance ............................................................................................................................. 468
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________________________________________________________________________________ .... 500

Equity ....................................................................................................................................................... 501
Share Capital ........................................................................................................................................... 502
Reserves ................................................................................................................................................... 511
Non-Controlling Interest ........................................................................................................................ 546
__________________________________________________________________________________ 551
Non-Current Liabilities .......................................................................................................................... 552
Retirement and other service benefits ................................................................................................... 553
Long Term Borrowings .......................................................................................................................... 561
Lease Liabilities....................................................................................................................................... 579
Other Payable .......................................................................................................................................... 591
__________________________________________________________________________________ 595
Current Liabilities .................................................................................................................................. 596
Trade and Other Payable ....................................................................................................................... 597
Unclaimed Dividend................................................................................................................................ 638
Unpaid Dividend ..................................................................................................................................... 643
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Provisions ................................................................................................................................................. 648
Current Portion of Lease Liability ........................................................................................................ 662
Accrued Markup/Interest ...................................................................................................................... 674
Short term borrowings ........................................................................................................................... 695
__________________________________________________________________________________ 726
SECTION X: INCOME STATEMENT ............................................................................................... 727
Sales .......................................................................................................................................................... 728
Cost of Goods Sold .................................................................................................................................. 786
Industrial Analysis ................................................................................................................................ 802
Other Income........................................................................................................................................... 831
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Distribution and Marketing Expense .................................................................................................... 859
Administrative Expense.......................................................................................................................... 890
Other Expense ......................................................................................................................................... 911
Finance Cost ............................................................................................................................................ 933
Taxation ................................................................................................................................................... 960
__________________________________________________________________________________ 987
SECTION XI: APPLICATION OF VALUATION MODELS ........................................................... 988
Accounting Valuation Model ................................................................................................................. 989
Introduction ........................................................................................................................................... 991
Working ................................................................................................................................................ 992
Conclusion ............................................................................................................................................ 992
Free Cash Flow Model ............................................................................................................................ 993
Introduction ........................................................................................................................................... 995
Working ................................................................................................................................................ 996
Conclusion ............................................................................................................................................ 996
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P/E Model ................................................................................................................................................ 997

Introduction ........................................................................................................................................... 999
Conclusion ............................................................................................................................................ 999
__________________________________________________________________________________
................................................................................................................................................................ 1000
SECTION XI: REMARKS FROM LAST SUBMISSION ................................................................ 1001
SECTION I: BETA
CALCULATION
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__________________________________________________________
_________________________
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SECTION II: FINANCIAL
STATEMENTS
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Historical Data
Balance Sheet (2007-2021)
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Income Statement (2007-2021)
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Cash Flow Statement (2007-2021)
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Vertical Analysis
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Horizontal Analysis
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__________________________________________________________
________________________
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SECTION III:
FORECASTED FINANCIAL
STATEMENTS
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Future Data
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Vertical Analysis
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Horizontal Analysis
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__________________________________________________________
________________________
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SECTION IV: BALANCE
SHEET
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Non-Current Assets
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Property Plant & Equipment
Breakdown:
Property, Plant and Equipment 2021 Vertical Analysis
Operating assets 32,810,904 85.30%
Capital work-in-progress 5,653,483 14.70%
38,464,387 100.00%
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Horizontal Analysis: Average (66.31%)
2021 2020 2019 2018 2017 2016
PPE 7.77% 3.21% 371.95% 5.51% 5.10% 4.33%
Vertical Analysis: Average (5.32%)
2021 2020 2019 2018 2017 2016
PPE 9.29% 9.51% 7.62% 1.82% 1.77% 1.93%
Forecasted Values
After analyzing all the industrial and economic factors, it is safe to assume that the PPE of the
company will increase in the future. The percentage by which the account will increase was a
challenge to understand. However, after looking at the historical data and analyzing the account
through statistical measures, it is safe to assume that the account will increase between 8-10%, a
figure which can be supported by historical data. The trend can be seen in the figure below.
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400.00%
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(50.00%)
(100.00%)
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Company Analysis
Factors Effect
Increase in Capital Expenditure Increase
Capital Work in Progress Increase
Increase in Tanks and Pipes Increase
Filling Stations Increase
Oil Storage Facilities Increase
Upgradation in Fleet Increase
Increase in Retail Outlets Increase
When we take a look at the vertical analysis of PSO from years 2016 to 2021, an average of
5.32% was found. On the other hand, when we take a look at the Horizontal Analysis of PSO
from years 2016 to 2021, the calculated average we get is 66.31% due to the sudden increase and
decrease in some years.
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PPE
45,000,000
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
2021 2020 2019 2018 2017 2016
Factors that highly influence the PPE of a company may include the increase or decrease in
investing activities and operating assets etc. Further we’ll be dissecting the factors and the causes
of the increase and decrease of the PPE of PSO year by year from 2021 to 2016.
In FY21, Cash outflow from investing activities has increased primarily due to additions in
property, plant and equipment.
Year 2021:
The company’s fixed assets in category of property plant and equipment increased only by 10%
indicating maintenance level capital expenditure.
• Increase in Capital Expenditure: efforts were drawn to align PSO’s capital nature
spending in line with overall corporate strategy. Company ensured superior customer
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forecourt experience through development of well-equipped state of the art retail outlets
and also product availability through development and enhancement of storage facilities
across Pakistan. Product awareness and reach were primarily the focused areas.
• Capital Work in progress increased: This includes the increase in tanks and pipelines,
services filling stations, plants and machinery etc.
• Increase in Tanks and Pipelines: Pipeline links have been completed to connect
operational locations with White Oil Pipeline to make product movement safer and more
efficient. 71 new vision retail outlets were also added to the company's footprint.
• Increase in Rehabilitation Storages: The company fast tracked infrastructural projects
to gain operational efficiency. 174,000 tons of new and rehabilitated storages were added
which significantly increase the number of day's cover of petroleum products.
• Launch of first digitally integrated oil storage facility: The company made significant
strides on its journey of digital transformation with the launch of Pakistan's first digitally
integrated oil storage and dispatch terminal in Karachi.
Sources:
➢ Annual Report (2021)
➢ https://www.brecorder.com/news/40115417
Year 2020:
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Property, plant and equipment of PSO saw an increase from year 2019 to 2020 which was
3.21%. Factors that affected this increase are listed down below;
• Increase in Operating Assets: Included in operating assets are fully depreciated assets
having cost of Rs.16,262,751 (2019: Rs.15,700,444).
• Increase in Storage Tanks: The Infrastructure Construction Department initiated
several mega projects to rehabilitate and develop POL product storages throughout the
country and increase days cover as per OGRA’s requirement. Rehabilitation of 164,000
MT storage tanks was initiated at Keamari and Zulfiqarabad Oil terminal (ZOT). As of
June 30, 2020, 6 storage tanks having a storage capacity of 21,750 MT were successfully
completed and commissioned. Development of new 151,000 MT storage tanks is also
under progress at five locations.
• Increase in Pipeline facility: In FY20, two additional pipeline facilities between PSO
and PARCO terminals at Machike and Shikarpur were successfully connected.
Construction works on pipelines at Mehmoodkot and Faisalabad are in progress for the
receipt of multi-grade products.
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• Increase in Service and filling Station: Service and filling stations include cost of
Rs.11,537,703 incurred by the Company on underground storage tanks, dispensing units
and other equipment, construction and related work.
Sources:
➢ Director’s Report (2020)
Year 2019:
There was a drastic increase in the Property, Plant and Equipment account of PSO. Factors are
given below;
• Drastic Increase in Operating Assets: The possession of these assets at EJHD and
NIAP is with Shell Pakistan Limited and Attock Petroleum Limited respectively. In view
of large number of assets, the Group considers it impracticable to disclose particulars of
assets not in the possession or name of the Group as required under the Fourth Schedule
to the Companies Act, 2017.
• PSO opened Bahria Orchid Filling Station in Lahore: PSO is the first OMC, offering
fuel filling facility at the Bahria Orchard Lahore. Apart from general commuters of the
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area; the outlet will also cater to the customers passing through the busy Raiwind Road.
The fuel filling facility brings real convenience for customers living in the area, who will
benefit from quality petroleum and lubricant products along with convenience shopping
at the company's rapidly expanding Shop Stop brand.
• Increase in Pipelines: Replacement of 550 meters of 20 inches dia Tanker Discharge
pipeline connecting Keamari terminals to Oil Piers was also completed.
• Underground Storage Tanks also increased: Service and filling stations include cost of
Rs.10,818,953 (2018: Rs.10,276,823) incurred by the Group on underground storage
tanks, dispensing units and other equipment, construction and related work.
Sources:
➢ https://fp.brecorder.com/2019/09/20190919518856/
Year 2018:
PPE Increased for the Year 2018 as compared to the previous 2017.
• Increase in Capital work in progress: This includes the increase in tanks and pipelines,
• Increase in the cost incurred on Service and filling stations: Service and filling
stations include cost of Rs. 10,276,823 (2017: Rs. 9,792,023) incurred by the Company
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on underground storage tanks, dispensing units and other equipment, and construction
and related work.
• Increase in the cost of ‘New Vision Scheme’: It also includes cost incurred on
modernization and development under the "New Vision Scheme" on approximately 2,019
(2017: 1,947) out of the total 3,514 (2017: 3,489) retail filling station of dealers and
consumer sites.
• Increase in Advances to suppliers and contractors for tanks, pipelines and storage
development projects
• Upgradation in Fleet: To ensure safe and secure POL transportation through road, PSO,
in line with OGRA regulatory requirements and with the consent of all its stakeholders
including PSO’s business partners i.e., our Cartage Contractors, has launched its fully
compliant fleet. The fleet consists of state-of-the-art modern tank lorries which are in full
compliance with OGRA & NHA requirements equipped with best-in-class gauges, and
roll over prevention mechanism to minimize the chances of accidents.
Source:
Year 2017:
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PPE increased by 5.10% in 2017 as compared to 2016. Reasons are given below:
• Increase in Capital work in progress: This includes the increase in tanks and pipelines,
• Increase in the cost incurred on Service and filling stations: Service and filling
stations include cost of Rs. 9,792,023 (2016: Rs. 9,425,439) incurred by the Company on
underground storage tanks, dispensing units and other equipment, and construction and
related work.
• Increase in Retail Outlets: PSO’s nationwide retail outlet network was expanded with
the addition of more than 60 New Vision Retail Outlets (NVROs) making a grand total of
3,489 sites as of FY2017.
Sources:
Year 2016:
PPE increased by 4.33% in 2016 as compared to 2015 but there was lesser investments
seen in 2016. Reasons are given below:
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• Increase in operating Assets: Service and filling stations include cost of Rs. 9,425,439
(2015: Rs. 8,850,945) incurred by the Company on underground storage tanks,
dispensing units and other equipment, construction and related work.
• Decrease in Capital work in progress: There was a slight decrease in tanks and
pipelines, filling stations, plant and machinery etc.
Sources:
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Industry Analysis
Factors Effects
Incentive given to OMCs to increase storage capacity Increase
Refiners go on strike Decrease
Upgrading Refineries including PARCO Increase
Investments in Pipelines to help OMCs Increase
In case of this particular account, the four companies which have been taken into consideration in order
to avail the latest data ate HTL, APL, BPL and PSO. The total value of property, plant and equipment
(PPE) of all five years of the companies is given below.
Total PPE of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 6,944,509 7,327,476 34,581,849 35,691,707 38,464,387
HTL 2,465,200,699 1,386,311,847 1,583,889,323 1,693,745,762 1,833,545,894
APL 4,339,301 6,417,787 8,348,942 13,839,661 16,616,819
BPL 758,226 742,636 732,090 827,317 807,389
Industry 2,477,242,735 1,400,799,746 1,627,552,204 1,744,104,447 1,889,434,489
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Total Market Share of all Companies in 5 Years w.r.t PPE
Companies Total Market Share
PSO 1.35%
HTL 98.07%
APL 0.54%
BPL 0.04%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t PPE
Total Market Share

120.00%
98.07%
100.00%
80.00%
60.00%
40.00%
20.00%
1.35% 0.54% 0.04%
0.00%
PSO HTL APL BPL
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Analysis: The graph given above clearly tells us that HTL has the highest number of PPE in the industry
and the second place has been secured by PSO. However, if HTL is considered an outlier, PSO would
have the highest market share in terms of PPE in the industry.
PSO’s PPE Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
PSO Industry's Yearly Share 0.28% 0.52% 2.12% 2.05% 2.04%
Graph Indicating PSO’s PPE Share in the Industry w.r.t Years
PSO Industry's Yearly Share

2.50%
2.12%
2.00% 2.05% 2.04%
1.50%
1.00%
0.50% 0.52%
0.28%
0.00%
2017 2018 2019 2020 2021
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Analysis: The graph given above clearly indicates that PSO’s share of PPE with respect to the industry
has grown over the period of time. The first table of the PPE of all companies also shows that there was
an increase in the PPE of all the companies.
Yearly Change/Growth in PPE of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly PPE Growth 5.10% 5.51% 371.95% 3.21% 7.77%
Graph Indicating Change/Growth in PPE of PSO
PSO Yearly PPE Growth

400.00%
371.95%
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00% 5.10% 5.51% 3.21% 7.77%

2017 2018 2019 2020 2021
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Analysis: It can be analyzed that the PPE of PSO changed to a great extent in 2019. The change was
extremely drastic and the highest among all years. However, the growth was low in 2020. In 2021, the
PPE of PSO can be seen to increase again.
Growth/Change in the Industry’s PPE Overtime:
Years 2017 2018 2019 2020 2021
Industry's Yearly Growth 33.07% -43.45% 16.19% 7.16% 8.33%
Graph Indicating Growth/Change in the Industry’s PPE Overtime:
Industry's Yearly Growth

40.00%
33.07%
30.00%
20.00%
16.19%
10.00% 8.33%
7.16%
0.00%
2017 2018 2019 2020 2021
-10.00%
-20.00%
-30.00%
-40.00%
-43.45%
-50.00%
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Analysis: The PPE of the entire industry dropped in 2018. This happened mainly because of a drop in the
PPE of HTL and BPL. However it increased in 2019, majorly because of an increase in PSO’s PPE. It
dropped in 2020 but in 2021 it increased again.
Incentive Provided to OMCs in 2021 for Expansion of Storage Capacity
The graphs given above clearly indicate that the PPE of the OMCs increased after 2020 and that was
majorly because the government provided incentives to those OMCs which supplied oil in the
international market. PSO is one of those companies due to which the PPE of PSO tended to increase as
well with an increase in overall industry’s PPE. This was done to have more levels of petroleum reserves
so that the export could be facilitated.
Future Outlook:
These incentives prove to be very beneficial for the OMCs because it allows them to increase their
assets further. If the government’s support is taken throughout, then the PPE of the OMCs are expected
the increase in the future.
Source:
➢ https://www.thenews.com.pk/print/692667-pakistan-oil-refinery-and-marketing-policy-2020-
incentive-packages-for-refinery-omcs-in-the-pipeline
➢ https://www.orfonline.org/research/energy-news-monitor-volume-xvii-issue-30/
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Pakistan Refinery Limited Shuts Down due to Storage Capacity Issues
Even though investments were received by OMCs for the expansion of their storage capacity, these
investments were not enough. In late 2021, Pakistan Refinery Limited shut down its operations. Since
the power sector is not lifting refined fuel oil from the local refineries, almost all of them are facing
storage constraints and shutting down further production gradually. Rented storages have massive
costs. So no one is interested in that, except one company that plans to export fuel oil. The source
claimed the Power Division had made a mess of things with the PSO having imported refined oil in large
quantities at the expense of the local refineries.
“The IPPs say they don’t have the money to pay PSO because of non-payment of their arrears. Hence,
the PSO was reluctant to supply oil to them,” as reported by a senior PRL executive. He went on to
predict that all refineries would shut down in 15 days if the issue wasn’t resolved immediately.
Future Outlook:
If this issue is not catered to, the PPE of many companies will go to waste. That is because they are
constantly importing oil from their international suppliers but they are not providing that fuel to their
customers because they have defaulted majorly. However, if this issue pertains, the all the refineries will
go on strike which would lead to a fall in the PPE in the future of OMCs. Alongside that, in 2022, PRL
started its operations again because it was facing heavy losses and the government’s new oil policy.
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Source:
➢ https://www.dawn.com/news/1664286
➢ https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/120121-
refinery-news-roundup-news-emerges-on-closures-in-asia-pacific
➢ https://tribune.com.pk/story/2328329/why-oil-refineries-are-underutilised
Government to Upgrade Oil Refineries by 2026-2027
Considering how the refineries were going on strike and shutting down, the government has asked all
the refineries to make a plane of upgrading and expanding further. This also includes the refinery
associated with PSO which is PARCO. These refineries will submit a plan in 2022 and this will be worked
upon by the government on an urgent basis. The new policy gives them a number of incentives including
five-year tax holidays on import of crude oil, incentive in their products prices through tariff protection,
which will earn them additional revenue to invest, upgrade and remain in the business. They will be
required some five-year to fully implement the plans after committing revival plans, meaning they
would get fully upgraded by the years 2026-27. This would prove to be beneficial for them.
Future Outlook:
The PPE of PSO and other OMCs is expected to increase because of this in the future because this would
take 3-4 years to be established and expanded. However, once it is established, OMCs like PSO would
not have to rely on imports to meet the local demand because currently, the low output at domestic
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PAKISTAN STATE OIL
refineries has prompted the government and oil marketing companies (OMCs) like Pakistan State Oil
(PSO) and others in the private sector to meet local demand of oil products through imports.
Source:
➢ https://tribune.com.pk/story/2311149/pakistan-refineries-in-upgrade-phase
➢ https://www.spglobal.com/commodityinsights/en/market-insights/latest-
news/petrochemicals/050522-refinery-news-roundup-progress-on-new-plants-in-the-middle-
east
➢ https://www.thenews.com.pk/print/937581-refineries-expansion-plans-hit-snags-on-policy-
delay
➢ https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/110221-
refinery-news-roundup-plants-in-asia-pacific-ramp-up-run-rates
Investments in Tankers and Pipelines for OMCs by Refiners
The PPE also increased because the investments were made in the number of tankers available for the
OMCs and also in the pipelines. At present two pipelines - the White Oil Pipeline (WOP) and
Mehmoodkot-Faisalabad-Machike (MFM) pipeline - are transporting diesel to meet the entire demand
of upcountry. Pak-Arab Pipeline Company Limited (Papco) and Pak-Arab Refinery Company Limited
(Parco), the pipeline operators, have executed a project costing $194 million to convert the two
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PAKISTAN STATE OIL
pipelines into such facilities that will transport multiple petroleum products like diesel and petrol in an
efficient way with less freight cost. OMCs had also made a huge investment to build storage tanks and
set up associated facilities at various delivery points along the pipelines.
Future Outlook:
The government is in support of the OMCs as they are not ready to bear the losses of pipeline deliveries
due to low margins. As a result of this, the losses will be sent forward to the customers. The investments
in the pipelines are only expected to increase in the future. However, if the oil tankers keep going on
strike, this would result in losses for PSO and other OMCs.
Source:
➢ https://tribune.com.pk/story/2295831/omcs-refuse-to-bear-losses
➢ https://economictimes.indiatimes.com/industry/energy/oil-gas/oil-bond-dues-the-rationale-
behind-not-reducing-your-fuel-bill-due-to-high-transportation-costs /articleshow/85391680.cms
➢ https://tribune.com.pk/story/2306905/fear-of-petrol-shortage-looms-as-oil-tankers-go-on-
countrywide-strike
➢ https://www.globalvillagespace.com/oil-tankers-blackmail-pakistan-announce-strike-over-silly-
demands/
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PAKISTAN STATE OIL
Economic Analysis
Factor Effect
Lift on the ban of furnace oil Increase
Increase in Imports (Agreement with SFD) Increase
Automotive Policy Increase
Technological Changes Increase
Growing Energy Demands Increase
Currency Devaluation Decrease/ Slow down the growth
If we look at the historical data of PSO for property, plant and equipment, it is very clear that
throughout the past 5 years, the company has been increasing its PPE, with the highest increase
recorded in 2019 when the company increased its PPE by a staggering 371%. This was mainly
accounted for to the investment in Pak-Arab Pipelines Company Limited on account of adoption
of new standard.
Moreover during the latest year 2021, the company increased its non-current assets by 3.4%
which was mainly accounted to additions in the PPE during the fiscal year. These additions to
PPE were made keeping in mind that PSO had to increase the reliability, availability, efficiency
and capacity of its infrastructure to meet the country's growing energy needs. So among other
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PAKISTAN STATE OIL
things, the company added a capacity of 55 thousand tons to its storages. All the economic
reasons for this change in the company’s PPE have been analyzed below.
Source:
➢ https://psopk.com/en/media-center/press-releases/news-details?newsId=451
➢ Annual Report, 2019
➢ Annual Report 2021
Lift on the ban of furnace oil
During the fiscal year 2021, there was an increase in the demand for fuel and furnace oil due to
an increase in electricity demand, which was coupled with the shortage of natural gas for power
generation and dry docking related issues. PSO requested the federal government for advising
the domestic refineries for maximum allocation to PSO so that power sector demand can be
fulfilled, informing that they managed to provide 100,000 metric tons of furnace oil to K-Electric
against its demand of 120,000 metric tons.
Keeping in view this situation, the Cabinet Committee on Energy under Minister for Planning
Asad Umar approved withdrawal of ban on import of furnace oil and PSO was given NOC to
import two frim cargoes and one optional cargo of furnace oil as reported by The News. The
chief executive of KE also confirmed this in the statement, “We are getting furnace oil from PSO
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PAKISTAN STATE OIL
on day to day basis in order to meet the generation demands and to avoid any unwarranted
situation”.
In order to store the freshly imported furnace oil, the company needed to expand its
infrastructure and thus they invested heavily its property, plant and equipment.
Future Outlook
In the future it was initially predicted that the demand for furnace oil would continue to increase
as the country is facing shortage of natural gas so import of furnace oil will become necessary
for power generation. This prediction was contradicted when in January 2022 refineries stopped
importing furnace oil as they were overflowing with this fuel, owing to zero demand from
independent power producers who happen to be the major consumer of furnace oil. This was
because at that time LNG was available in excess and due to its cheaper prices, the power
producers preferred LNG over furnace oil.
Now the demand for furnace oil has again increased owing to Gunvor defaulting and backing out
on the 4 RLNG cargo deliveries for April-June 2022, shifting the entire burden back on furnace
oil which is being consumed at maximum in the power sector despite being lower on the merit
order. So for future it is difficult to predict what will happen to the demand of furnace oil as this
is a cycle which continues. In any case, PSO is likely to increase its PPE by investing more in
storage facilities, keeping in mind the rising demand.
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PAKISTAN STATE OIL
Source:
➢ https://www.thenews.com.pk/print/683166-pso-to-opt-for-gallop-import-of-furnace-oil
➢ https://www.thenews.com.pk/print/918251-gas-crisis-aggravates-gunvor-again-backs-
out-of-lng-cargo-delivery
➢ https://tribune.com.pk/story/2308972/pol-demand-surges-to-two-year-high
➢ https://www.brecorder.com/news/40166530/petroleum-woes-ahead
➢ Director’s report, 2021
Increase in Imports (Agreement with the SFD)
Keeping in mind the massive increase in demand, according to reports Pakistan is likely to see a
rise in the import of petroleum products
After a slight decline in the demand for petroleum products during 2020, the country recorded
highest every demand during 2021 despite the price hike. In order to meet the increasing
demand, the country would be importing diesel and petrol for local consumption as local supply
from the refineries would not be enough to meet demand. This was further reported in economic
times where it was mentioned that Pakistan’s oil import bill has surged over the past year.
Moreover according to the latest agreement with Saudi Find for Development, the country will
be importing petroleum products on deferred payments to meet the local demand. Now PSO
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PAKISTAN STATE OIL
being the largest OMC in the country needs to be at the top with the rise in imports as they need
enough capacity to store and deliver the product to the final consumer. Due to this the company
has been making investments in its PPE as can be seen in its balance sheet and cash flow
statement.
Future Outlook
As has been reported by economic times and trading economics, the imports for the country are
only expected to increase. According to other sources PARCO and NRL alone are expected to
import more than 30 million barrels of oil collectively. This along with the rising energy crisis
and increase in the demand for petroleum products is likely to keep the imports high as is also
illustrated in the graph below.
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PAKISTAN STATE OIL
This would ultimately mean that PSO will keep investing in its PPE to expand its storage facility
even more so that it continues to be a reliable and efficient company, which is the best at what it
does and continues to meet the demand and energy needs of the people of Pakistan.
Source:
➢ https://www.thenews.com.pk/print/947799-pakistan-to-import-32-7-million-barrels-oil-
under-sfd-programme
➢ https://www.reuters.com/article/health-coronavirus-pakistan-oil-idINKCN2280FN
➢ https://tradingeconomics.com/pakistan/imports
➢ https://economictimes.indiatimes.com/news/international/business/pakistan-oil-eatable-
import-bills-surge-by-60-per-cent/articleshow/90894283.cms
➢ https://www.thenews.com.pk/print/929210-pakistan-may-import-500-000-tonnes-of-
petrol-next-month
Automotive Policy
During the fiscal year 2021, the government has envisioned to achieve a GDP growth of 4.4% in
the year 2022 and have taken several steps to supplement this vison. One such policy is the
reduction in the duty structure. The government reduced the duty and tax structure on vehicles
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PAKISTAN STATE OIL
under 850 cc horsepower which is deemed to have a positive impact on the demand of petroleum
products in the country. To top this The Automotive Industry Development & Export Plan
(AIDEP) 2021-2026 increased competition for automobiles in the market with car sales
exhibiting a staggering growth of 40.2%, which indicated both the revival of the economy as
well as a an exponential increase in the demand for fuel and diesel in the country. In order to
meet the increased demand and cater to all the customers, the company made heavy investments
in its PPE as new retail outlets were opened and new pipelines and tankers were added in the
country.
Future Outlook
If we look at the next five years, it can be said that the demand for cars will continue to increase
as new players have been entering the market which would ultimately result in the increased
demand for petroleum products such as fuel. This implies that the company will be making
investments in PPE as time passes. However if we talk about the next 10 years, the demand for
petroleum products might decrease as people will start shifting towards electric vehicles, yet the
investments in PPE would still increase as now, instead of adding more outlets and pipelines, the
company will be adding EV chargers to its portfolio.
Source:
➢ https://www.thenews.com.pk/print/921238-dissecting-govt-s-new-auto-policy-2021-26
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PAKISTAN STATE OIL
➢ https://www.thenews.com.pk/print/949699-car-sales-increase-by-25pc-in-march
➢ https://www.thenews.com.pk/print/919801-auto-sales-likely-to-witness-growth-in-2022
Technological changes
A transition is taking place on the retail industry as a change in the consumer demand can be
observed. The new EV policy for four wheelers is expected to increase competition in the market
while promoting sustainable development and preserving the environment. It is envisioned to
have an increase of 30% and 90% share in the light and heavy vehicles sales respectively within
the next 5-10 years. Moreover the salient features of the policy include a phased transition of the
automotive industry to electric vehicles. This implies that OMCs like PSO will start shifting their
focus towards establishing and installing EV charges in the country, thus adding more to its PPE.
This transition has already been started by PSO as they have successfully installed and
commissioned its first electric EV charger in Islamabad under the name PSO Electro. Moreover
the company has also joined hands with Frontier Works Organization (FWO) to install state of
the art EV chargers on the Lahore-Sialkot motorway.
Future Outlook
Within a span of 5-10 years, companies are expected to invest heavily in EV chargers and
technology as it can be observed that the consumer demand is shifting. So is the case with PSO
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PAKISTAN STATE OIL
as we expect that in the future the company will invest heavily in technology and thus these
investments will increase its PPE.
Source:
➢ https://www.thenews.com.pk/print/693968-pso-installs-ev-charging-facility
Growing energy demands
The energy crisis in Pakistan is growing. Electricity demand in the country is at peak and it is
only expected to increase in the future as we approach hotter months of June and July. Contrary
to the high demand of electricity in the country, the supply has not been very good as could
clearly be seen during Ramzan when many cities faced power shortages or load shedding. The
higher electricity demand can be attributed to an exponential increase in the population as well as
a consumers using more electrical appliances and working towards improving their standard of
living.
Nonetheless in order to meet the higher electricity demand fuel is imported as the local supply is
not enough to meet the demand. This extra demand also creates problems in terms of circular
debt as the government has subsidized the prices, which results in the rise of import bill and
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PAKISTAN STATE OIL
reduction of foreign reserves. The higher import is to be stored and delivered by OMC’s and
with PSO being the largest OMC in the country, it has invested it its PPE to ensure everything is
done smoothly.
Future Outlook
In the future it is expected that the demand for electricity would continue to increase. This
ultimately implies that the imports are also expected to increase thus the company is also
expected to invest more in PPE in the future.
Source:
➢ https://www.scienceimpactpub.com/Docs/jei62019.pdf
➢ https://energsustainsoc.biomedcentral.com/articles/10.1186/s13705-018-0167-y
➢ https://www.sciencedirect.com/science/article/pii/S2211467X21001711
Currency Devaluation
Currency devaluation plays a very important role in determining the buying power of any
company. A stronger currency ultimately means that the cost incurred will be lower while a weak
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PAKISTAN STATE OIL
currency implies vice versa. In case of Pakistan, however the currency position has not been very
stable as the Pakistani Rupee has continued to devalue under the PTI government.
The positive impact of a stronger currency is also reflected in the balance sheet of the company
when during the period 2018-2019, the company made heavy investments in PARCO which was
mainly in account of change in the IFRS. At that time the currency was trading at between $1 for
Rs.122. However after the PTI government came into power, there was record devaluation in the
within the past 4 years as now the dollar is trading at $1 for Rs.185. Thus the rate of increase in
the PPE of the company also slowed down as it seemed very expensive to be investing in PPE.
Future Outlook
In the future it is predicted that the Pakistani currency will continue to devalue by a further at
least 18%, as reported by trading economics. This ultimately implies that the cost for investing in
the PPE will increase which increases the likelihood that the company might choose not to invest
in PPE, rendering to high costs as the main reason. However on the contrary it can also be
assumed that foreign companies might invest in Pakistan as the cost for investing will be cheaper
due to weak currency. However, keeping in mind the current political situation in Pakistan, this
is highly unlikely. The forecast for currency devaluation against dollar is illustrated in the graph
below.
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PAKISTAN STATE OIL
Source:
➢ https://tradingeconomics.com/pakistan/currency
➢ https://www.ndtv.com/world-news/under-imran-khan-govt-pakistani-rupee-depreciated-
by-30-5-per-cent-report-2640765
➢ https://www.wionews.com/south-asia/187-to-a-us-dollar-political-crisis-in-pakistan-led-
to-the-free-fall-of-its-currency-469545
➢ https://www.thenews.com.pk/print/914762-pak-currency-in-freefall-rs54-lost-against-
dollar-in-current-govt-s-tenure
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PAKISTAN STATE OIL
Statistical Forecasting
Methods chosen
• Subjective Analysis
Methods used
• Naïve (15 Years)
• Excel forecasting
• Horizontal Analysis
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PAKISTAN STATE OIL
45,000,000.00
40,000,000.00
35,000,000.00
30,000,000.00
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
PPE Naïve Forecast
400.00%
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2010
2014
2018
2022
2026
2007
2008
2009
2011
2012
2013
2015
2016
2017
2019
2020
2021
2023
2024
2025
(50.00%)
(100.00%)
Page | 171
PAKISTAN STATE OIL
45,000,000.00
40,000,000.00
35,000,000.00
30,000,000.00
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
0.00
2005 2010 2015 2020 2025 2030
Series1 Series2
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PAKISTAN STATE OIL
Right of Use Assets
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PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Right-of-use Assets 9.47% 0.00% 0.00% 0.00% 0.00% 0.00%
2021 2020 2019 2018 2017 2016
Right-of-use Assets 1.30% 1.31% 0.00% 0.00% 0.00% 0.00%
Forecasted Value
The account was just introduced in 2020 hence not much information is available on the account
so a general company analysis has been done and the account has been increased in a range of
10-15%.
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PAKISTAN STATE OIL
Company Analysis
from years 2016 to 2021, the calculated average we get is 47.5% due to the sudden increase.
Right-of-use Assets
6000000
5000000
4000000
3000000
2000000
1000000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Right-
of-use Assets of PSO year by year from 2016 to 2020.
Year 2021-20:
There was an increase of 9.47% in the year 2021, due to the following reasons;
• The right-of-use assets were recognized based on the amount equal to lease liabilities,
adjusted for any related prepaid and accrued lease payments previously recognized. Lease
liabilities were recognized based on the present value of the remaining lease payments,
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PAKISTAN STATE OIL
discounted using the incremental borrowing rate at the date of initial application. The
Group does not have any sub-lease or finance leases as on July 1, 2019.
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PAKISTAN STATE OIL
Intangibles
Breakdown:
Intangibles 2021 Vertical Analysis
Net carrying value
Balance at beginning of the year 90,885 56.28%
Additions at cost 106,528 65.97%
Amortisation charge for the year -35,930 -22.25%
Balance at end of the year 161,483 100.00%
Gross carrying value
Cost 645,447 399.70%
Accumulated amortisation -483,964 -299.70%
Net book value 161,483 100.00%
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PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Intangibles 77.68% 50.33% 206.38% -32.90% - -
37.86% 12.91%
2021 2020 2019 2018 2017 2016
Intangibles 0.04% 0.02% 0.01% 0.00% 0.01% 0.01%
Forecasted Values
Intangibles is a very minor account of the company and had no factors from the industry or the
economy which would affect the account. Hence a general company analysis of the account was
done according to which the account has been increased within a range of 60-70%. This is also
illustrated in the graph below.
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PAKISTAN STATE OIL
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(50.00%)
(100.00%)
Company Analysis
Factors Effects
Implementation of ERP System (SAP), anti- Increase
virus software and other office related
software
Decrease in book value of software and license Decrease
from years 2016 to 2021, the calculated average we get is 41.72% due to the sudden increase or
decrease.
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PAKISTAN STATE OIL
Intangibles
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the
Intangibles of PSO year by year from 2016 to 2020.
Factors Affecting the Intangible Assets (2016-2021):
• An intangible asset is recognized if it is probable that the future economic benefits that
are attributable to the asset will flow to the Company and that the cost of such asset can
also be measured reliably.
• Generally, costs associated with developing or maintaining computer software
programs are recognized as an expense as incurred. However, costs that are directly
associated with identifiable software and have probable economic benefits exceeding one
year, are recognized as an intangible asset. Direct costs include the purchase cost of
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PAKISTAN STATE OIL
software and related overhead cost. Intangible assets acquired separately are measured on
initial recognition at cost.
Source:
➢ Annual Report
Year 2021:
• Implementation of ERP System (SAP), anti-virus software and other office related
software: Cost increased by 19.7%
Source:
Year 2020:
software: Cost increased by 11%.
Source:
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PAKISTAN STATE OIL
Year 2019:
software: Cost increased by 18.10%.
• Increase in book value of software and license: Increase by 206.3%
Source:
Year 2018:
There was a decrease of 32.9% in the year 2018, due to the following reasons;
• Decrease in book value of software and license: Decrease by 39.5%
Source:
Year 2017:
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PAKISTAN STATE OIL
Source:
Year 2016:
Source:
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PAKISTAN STATE OIL
Methods chosen
Methods used
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PAKISTAN STATE OIL
180,000.00
160,000.00
140,000.00
120,000.00
100,000.00
80,000.00
60,000.00
40,000.00
20,000.00
0.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
PPE Naïve Forecast
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2010
2014
2018
2022
2026
2007
2008
2009
2011
2012
2013
2015
2016
2017
2019
2020
2021
2023
2024
2025
(50.00%)
(100.00%)
Page | 185
PAKISTAN STATE OIL
Chart Title
180,000.00
160,000.00
140,000.00
120,000.00
100,000.00
80,000.00
60,000.00
40,000.00
20,000.00
0.00
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Series1 Series2
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PAKISTAN STATE OIL
Long Term Investments
Breakdown:
Long-Term Investments 2021 Vertical Analysis
Investment in related parties
Investment held at fair value through other
comprehensive income
In an unquoted company
- Pak-Arab Pipeline Company Limited (PAPCO)
Equity held: 12% (2020: 12%)
No. of shares: 8,640,000 (2020: 8,640,000) of Rs. 100 each 7,874,629 68.90%
Investment in associates
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PAKISTAN STATE OIL
In unquoted companies
- Asia Petroleum Limited (APL)
Equity held: 49% (2020: 49%)
No. of shares: 46,058,570 (2020: 46,058,570) of Rs. 10/-
each 3,453,641 30.22%
Pak Grease Manufacturing Company (Private) Limited
Equity held: 49.26% (2020: 49.26%) 101,246 0.89%
No. of shares: 1,536,593 (2020: 1,536,593) of Rs. 10/- each 3,554,887 31.10%
11,429,516 100.00%
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PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Long-Term Investments -1.34% 29.72% 86.69% 9.01% -91.25% -1.08%
2021 2020 2019 2018 2017 2016
Long-Term Investments 2.76% 3.09% 1.97% 1.19% 1.12% 14.65%
Forecasted Values
If we look at the historical data for this account, it can clearly be seen that the account is
consistently increasing by a great amount. It was only in 2021 that the account decreased, the
reason for which have been analyzed in the company analysis of this particular account. So, after
considering all the industrial factors, we are assuming that the account will increase between 10-
20% for the next 5 years, as shown above.
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PAKISTAN STATE OIL
Company Analysis
Factors Effect
Gain on revaluation of investment in Pak Arab Increase
Pipeline Company
PSO acquired 84 million shares from Shell Increase
PSO investments in PIBs Increase
Investments from APL Increase
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PAKISTAN STATE OIL
Long-Term Investments
60000000
50000000
40000000
30000000
20000000
10000000
0
2021 2020 2019 2018 2017 2016
Factors that highly influence the long-term investments of a company may include the increase
or decrease are interest rates and the return etc. Further we’ll be dissecting the factors and the
causes of the increase and decrease of the long-term investments of PSO year by year from 2021
to 2016.
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PAKISTAN STATE OIL
Pakistan is the part owner of many major companies such Pak-Arab Pipeline Company Limited
(Equity Held: 12%), Asia Petroleum Limited (Equity Held: 49%) and Pak Grease Manufacturing
Company (Private) Limited (Equity Held: 49.26%).
Year 2020-2021:
The long-term investments decreased (1.3%) from the year 2020 to 2021 but in 2020
there was an increase (29.72%) in the long-term investments.
• Gain on revaluation of investment in Pak Arab Pipeline Company (2020): Pakistan
State Oil (PSO) has signed multiple infrastructural MoUs of strategic importance with
Pak Arab Refinery Limited (PARCO) and Pak Arab Pipeline Company (PAPCO)
which aim to safeguard the country’s petroleum product supply chain and enable
economical and environment friendly transportation of fuels.
Source:
➢ Annual Report (2021-2020)
➢ https://www.brecorder.com/news/40089628/pso-enters-into-strategic-partnership-with-
parco-papco
Year 2018-2019:
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PAKISTAN STATE OIL
The long-term investments increased (86.6%) from the year 2018 to 2019 and in 2018 there was
an increase (9.01%) in the long-term investments.
• PSO acquired 84 million shares from Shell: Before 2019, majority of PRL's shares
were held primarily held by PSO, Shell and Hascol together hold over 70 percent of the
shares. However, it FY19, Pakistan State Oil Company Limited (PSO) acquired 84
million shares from Shell Petroleum Company Limited, UK, which increased its
shareholding in the Company to 52.68 percent, making PSO the parent company of
PRL. The table gives the breakdown of the shareholding.
Source:
Year 2017-2016:
The long-term investments decreased majorly (91.2%) from the year 2017 to 2016 and in
2016 there was a decrease (1.08%) in the long-term investments.
• Investments from Asia Petroleum Limited Increased
• PSO invested in Pakistan Investment Bonds that matured in 2017: This represents
investment in Pakistan Investment Bonds (PIBs) amounting to Rs. 45,906,112 made in
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PAKISTAN STATE OIL
June 2013 in accordance with plan duly approved by the Economic Coordination
Committee (ECC) -Government of Pakistan (GoP) out of the proceeds received against
partial settlement of circular debt issue then prevailing in the energy sector.
Source:
Page | 194
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Formation of investor friendly policies for OMCs Increase
Recovery from pandemic resulted in profits for OMCs Increase
Provision of 11.73Bn PDC to OMC will improve profits Increase
In case of this particular account, the four companies which have been taken into consideration
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of long term
investments of all five years of the companies is given below.
Total Long Term Investment of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 4,388,257 4,783,585 8,930,555 11,584,720 11,429,516
HTL 35,813,717 0 0 0 61,658,100
APL 1,198,044 1,137,657 903,965 807,973 842,469
BPL 0 0 0 0 0
TOTAL 41,400,018 5,921,242 9,834,520 12,392,693 73,930,085
Total Market Share of all Companies in 5 Years w.r.t Long Term Investments
Page | 195
PAKISTAN STATE OIL
PSO 28.66%
HTL 67.93%
APL 3.41%
BPL 0.00%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Long Term Investments
Total Market Share of Long Term Investments

80.00%
70.00% 67.93%
60.00%
50.00%
40.00%
28.66%
30.00%
20.00%
10.00%
3.41%
0.00%
0.00%
PSO HTL APL BPL
Analysis: The graph given above clearly tells us that HTL has the highest number of long term
investments in the industry and the second place has been secured by PSO. However, if HTL is
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PAKISTAN STATE OIL
considered an outlier, PSO would have the highest market share in terms of long term
investments in the industry.
PSO’s Long Term Investments Share in the Industry w.r.t Years
Graph Indicating PSO’s Long Term Investments Share in the Industry w.r.t Years

100.00%
93.48%
90.00% 90.81%
80.00% 80.79%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
15.46%
10.00% 10.60%
0.00%
2017 2018 2019 2020 2021
Analysis: The graph given above indicates the long term investments of the company have
increased after 2017. However, these investments dropped considerably in 2021. These were not
Page | 197
PAKISTAN STATE OIL
as low as they were in 2017 however. These investments were highest in 2020. This is majorly
because HTL had zero long term investments in these years so PSO had a bigger share.
Yearly Change/Growth in Long Term Investments of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth -91.25% 9.01% 86.69% 29.72% -1.34%
Graph Indicating Change/Growth in Long Term Investments of PSO
Page | 198
PAKISTAN STATE OIL

100.00%
86.69%
80.00%
60.00%
40.00%
29.72%
20.00%
9.01%
0.00% -1.34%
2017 2018 2019 2020 2021
-20.00%
-40.00%
-60.00%
-80.00%
-91.25%
-100.00%
-120.00%
Analysis: It can be analyzed that the long term investments were the highest in 2019 for PSO.
They grew substantially. This can be closely linked with an increase in the PPE to the maximum
figure in 2019 as well. The growth in the investments dropped in 2020 due to the pandemic.
However, there was a slight drop in the investments in 2021. In the other years, these grew at a
steady rate.
Growth/Change in the Industry’s Long Term Investments Overtime

Page | 199
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth -19.04% -85.70% 66.09% 26.01% 496.56%
Graph Indicating Growth/Change in the Industry’s Long Term Investments Overtime

600.00%
500.00% 496.56%
400.00%
300.00%
200.00%
100.00%
66.09%
26.01%
0.00%
-19.04%
2017 2018 2019 2020 2021
-85.70%
-100.00%
-200.00%
Page | 200
PAKISTAN STATE OIL
Analysis: The long term investments of the industry were the absolute highest in 2021. This was
majorly because of the investments made by HTL which increased the overall figure for the
industry. Several changes were being made in 2021.
Factors Affecting Long Tern Investments
Lower Investments in 2020 due to the Oil Crisis Catered to in 2021 by Revising Policies
There were low investments in 2020 because the OMCs were unable to make profits. They were
incurring losses in a time when they could be way too profitable. The oil prices fell in 2020 in
the international market and all the countries were importing oil. However, our government
imposed a ban on the import of oil. When the whole world was buying petrol and diesel and
filling up their tanks, Pakistan was struggling to meet its requirements due to the ban imposed by
the then DG Oil, the OMAP chairman said. Officials demanded acceptance of their demands on
priority basis and measures to check rupee slide against dollar as OMCs were suffering massive
foreign exchange losses because of its rapid depreciation. The industry has already suffered
losses of more than Rs. 60 billion and a mechanism must be immediately implemented to address
this anomaly. They also stressed there was an immediate need to introduce investor-friendly
policies to encourage OMCs to invest in outlets to provide quality fuels at the right price and in
the right quantity alongside best services. They said the government was leading the country’s
economy in right direction through its policies and the OMC’s fully supported it in every aspect.
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PAKISTAN STATE OIL
Future Outlook:
The fact that they stressed on the need of introducing investor friendly policies which would
encourage the OMCs to invest in the refineries and other long term investment tools tells us that
the long term investments of the OMC industry is expected to increase in the future.
Source:
➢ https://www.thenews.com.pk/print/899070-omcs-pin-2020-petroleum-crisis-on-energy-
ministry
Net Profits Left Room for Investments in 2021
After 2020, when the lockdowns were lifted and economic activity prospered, the OMCs were
making profits again and PSO made profits in trillion figures. This allowed the OMCs to
experience a growth in the long term investments and they could finally make the pending
decisions. The FY21 showed healthy recovery in the sale of the petroleum products (HSD and
MS Petrol) that was on a decline in the preceding FY19 and FY20. Overall sales stood higher by
18 percent compared to the previous year, meaning more tax revenue.
Future Outlook:
Page | 202
PAKISTAN STATE OIL
The long term investments of the company are expected to increase in the near future due to the
availability of higher profits. Moreover, the fact that the OMCs will be keeping higher margins
as well would also increase their profits, leaving more room for investments to be made.
Source:
11.73Bn Worth of PDC Approved for OMCs in Early 2022
The price differential claim given to the OMCs would help in increasing their profits and would
leave more chances for investments in their fixed assets and other decisions that were previously
pending. The ECC of the Cabinet considered the summary submitted by Petroleum Division on
March 7, 2022 which approved the procedure for making PDC payment to the OMCs and
refineries. The ECC approved a special PDC payment procedure to pay the PDC speedily. In this
regard, the PSO has informed that the PDC is generated through sale of petroleum products
therefore; OMCs will be at loss if PDC reimbursement is based on procurement rather than sales.
Private OMCs may shy away from the market and stop selling products in market. The PSO is of
the opinion that the consumers will only realise the benefit of the PDC when the product is sold
by the OMCs and mere procurement will not be sufficient. On March 1, 2022, the Oil
Page | 203
PAKISTAN STATE OIL
Companies Advisory Council (OCAC) in a letter to the Petroleum Division stated, “In order to
avoid imminent shortage of petroleum products, we request that the PDC element should be
removed by revising petroleum product prices immediately or alternatively a subsidy mechanism
be founded”.
Future Outlook:
If the government keeps its promise of providing the PDC claims, the OMCs would have nothing
to worry about. Foreign exchange losses impact their profits to a great extent and this leaves a
lower margin for investments to be made by the companies. The long term investments can be
increased with increase in profits by PDC claims.
Source:
➢ https://www.brecorder.com/news/40161047/omcs-pdcs-up-to-mar-31st-ecc-approves-
another-rs1173bn-as-suppl-grant
➢ https://www.pakistantoday.com.pk/2022/04/19/ecc-approves-rs68-billion-grant-for-
disbursement-of-price-differential-claims-to-omcs/
➢ https://newztodays.com/pso-payment/
➢ https://dailytimes.com.pk/901753/ecc-approves-rs8-2-billion-ramzan-relief-package/
Page | 204
PAKISTAN STATE OIL
Methods chosen
Methods used
Page | 205
PAKISTAN STATE OIL
60,000,000.00
50,000,000.00
40,000,000.00
30,000,000.00
20,000,000.00
10,000,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
LT Investments Naïve Forecast
Chart Title
2,500.00%
2,000.00%
1,500.00%
1,000.00%
500.00%
0.00%
2014
2007
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(500.00%)
Page | 206
PAKISTAN STATE OIL
60,000,000.00
50,000,000.00
40,000,000.00
30,000,000.00
20,000,000.00
10,000,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Series1 Series2
Page | 207
PAKISTAN STATE OIL
Long Term Loans, Advances
and other receivable
Breakdown:
Long-Term Loans, Advances and Other Receivables 2021 Vertical Analysis
Loans - considered good
Executives 153,715 37.23%
Employees 332,323 80.48%
486,038 117.71%
Current portion shown under current assets -176,260 -42.69%
309,778 75.02%
Advances - considered good (secured)
Employees 80,042 19.39%
Page | 208
PAKISTAN STATE OIL
Current portion shown under current assets -25,303 -6.13%
54,739 13.26%
Other receivables
Considered good 48,387 11.72%
Considered doubtful 8,143 1.97%
56,530 13.69%
Provision for impairment -8,143 -1.97%
48,387 11.72%
412,904 100.00%
Page | 209
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Long-Term Loans and
Advances -10.12% 32.53% -13.03% -3.22% 18.79% 7.48%
2021 2020 2019 2018 2017 2016
Long-Term Loans and
Advances 0.10% 0.12% 0.08% 0.10% 0.10% 0.10%
Forecasted Values
After analyzing the historical data and taking into consideration the industry analysis of the
company, we have assumed that the account will decrease between 10-13% for the next 5 years.
This has been mainly on account of the reversal of loans during the pandemic as well as the
recovery from other receivables, among other factors.
Page | 210
PAKISTAN STATE OIL
Company Analysis
Factors Effects
Decrease in the loans to Executives Decrease
Decrease in the loans Decrease
Increase in the advances given to the Employees Increase
When we take a look at the vertical analysis of PSO from years 2016 to 2021, an average
of 0.10% was found. On the other hand, when we take a look at the Horizontal Analysis of PSO
Long Term Loans and Advances

500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2021 2020 2019 2018 2017 2016
Page | 211
PAKISTAN STATE OIL
Further we’ll be dissecting the factors and the causes of the increase and decrease of the
long-term loans and advances of PSO year by year from 2021 to 2016.
Year 2021:
After analyzing the horizontal analysis of long-term loans and advances, we see a
decrease of 10.2%. Factors will be discussed below;
• Decrease in the loans to Executives by 2%.
• Decrease in the loans to Employees by 10%.
• Increase in the advances given to the Employees by 40.3%.
Source:
Year 2020:
After analyzing the horizontal analysis of long-term loans and advances, we see an
increase of 32.53%. Factors will be discussed below;
• Increase in the loans to Executives by 37%.
• Increase in the loans to Employees by 58%.
• Decrease in the advances given to the Employees by 15.25%.
Source:
Page | 212
PAKISTAN STATE OIL
Year 2019:
Source:
Year 2018:
Source:
Page | 213
PAKISTAN STATE OIL
Year 2017:
Source:
Year 2016:
• Decrease in the loans to Employees by 30%.
• Increase in the advances given to the Employees by 50.58%.
Source:
Page | 214
PAKISTAN STATE OIL
Page | 215
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Reversal of loans taken by employees during the pandemic Decrease
Receivables recovered under other receivables section Decrease
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of long term loans
and advances of all five years of the companies is given below.
Total Long Term Loans, Advances and Other Receivables of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 411,777 398,525 346,617 459,376 412,904
HTL 1,049,136 280,132 0 0 0
APL 299,733 423,396 0 0 0
BPL 1,030 1,466 894 353 488
TOTAL 1,761,676 1,103,519 347,511 459,729 413,392
Total Market Share of all Companies in 5 Years w.r.t Long Term Loans and Advances and
Other Receivables
Page | 216
PAKISTAN STATE OIL
PSO 49.66%
HTL 32.53%
APL 17.70%
BPL 0.10%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Long Term Loans and Advances and Other
Receivables
Page | 217
PAKISTAN STATE OIL
Total Market Share

60.00%
49.66%
50.00%
40.00%
32.53%
30.00%
20.00% 17.70%
10.00%
0.10%
0.00%
PSO HTL APL BPL
Analysis: The graph given above tells us that PSO is the leader when it comes to long term loans
and advances being offered. HTL was not able to surpass PSO for this particular account. The
lowest market share is with BPL.
PSO’s Long Term Loans, Advances and Other Receivables Share in the Industry w.r.t
Years
Years 2017 2018 2019 2020 2021
PSO Industry's Yearly Share 23.37% 36.11% 99.74% 99.92% 99.88%
Page | 218
PAKISTAN STATE OIL
Graph Indicating PSO’s Long Term Loans, Advances and Other Receivables Share in the
Industry w.r.t Years

120.00%
100.00% 99.74% 99.92% 99.88%
80.00%
60.00%
40.00%
36.11%
23.37%
20.00%
0.00%
2017 2018 2019 2020 2021
Analysis: The graph given above indicates that this account has had an increasing trend
throughout the years. However, now, the share of PSO with respect to the industry is stagnant
Page | 219
PAKISTAN STATE OIL
and is not increasing as it was earlier. Nevertheless, the loans and advances are high of the
company if compared with the industry.
Yearly Change/Growth in Long Term Loans, Advances and Other Receivables of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth 18.79% -3.22% -13.03% 32.53% -10.12%
Graph Indicating Change/Growth in Long Term Loans, Advances and Other Receivables
of PSO
PSO Yearly LTLAOR Growth

40.00%
32.53%
30.00%
20.00%
18.79%
10.00%
0.00%
2017 2018 2019 2020 2021
-3.22%
-10.00% -10.12%
-13.03%
-20.00%
Page | 220
PAKISTAN STATE OIL
Analysis: It can be analyzed that there is no fixed pattern in the growth of LTLAOR of PSO.
These were the highest in 2020 among all yeas and were lowest in the 2019. However, the figure
has dropped for PSO to a great extent.
Growth/Change in the Industry’s Long Term Loans, Advances and Other Receivables
Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly Growth -55.91% -37.36% -68.51% 32.29% -10.08%
Graph Indicating Growth/Change in the Industry’s Long Term Investments Overtime
Page | 221
PAKISTAN STATE OIL

40.00%
32.29%
20.00%
0.00%
2017 2018 2019 2020 2021
-10.08%
-20.00%
-40.00% -37.36%
-55.91%
-60.00%
-68.51%
-80.00%
Analysis: Since PSO is the major contributor of the industry’s LTLAOR, the industry followed
somewhat a similar pattern as compared to PSO as well. These were the highest in 2020, lowest
in 2019. Currently, they are growing at a decreasing rate.
Factors affecting Long term Loans, Advances and Other Receivable
Lower Loans and Advances Approved for Employees Post Pandemic
According to the directors reports of all the companies mentioned above, several loans and
advances were provided to the employees because of the pandemic crisis. The companies they
Page | 222
PAKISTAN STATE OIL
were working at were the last resort of them. Due to this, as we can see that the market share of
PSO is the highest for this account, PSO gave out the most loans and advances to its employees
in that period of time. However, this will drop in the future because this happened as a result of a
crisis. These levels were low in the beginning as well.
Repayment of Loans and Advances taken by Employees of OMCs
There was a drop in the receivables which were considered good and which were considered
doubtful. This happened mainly because the employees returned the loans that they took from
the companies at the right time without any delays.
Future Outlook:
OMCs would give out more loans and advances if the country faces another pandemic or a crisis
of similar manner. Other than that, the chance of this account increasing is very low. In the
future, if the employees take loans or advances from the companies, they can be trusted as they
would return the amount on time.
Source:
➢ Director’s Report PSO
➢ Director’s Report HTL
➢ Director’s Report APL
Page | 223
PAKISTAN STATE OIL
➢ Director’s Report BPL
➢ https://www.nytimes.com/live/2022/05/05/world/covid-19-brings-unforseen-crisis
Page | 224
PAKISTAN STATE OIL
Methods chosen
Methods used
Page | 225
PAKISTAN STATE OIL
700,000.00
600,000.00
500,000.00
400,000.00
300,000.00
200,000.00
100,000.00
0.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Long term loans Naïve Forecast
Page | 226
PAKISTAN STATE OIL
40.00%
30.00%
20.00%
10.00%
0.00%
2015
2019
2023
2007
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2020
2021
2022
2024
2025
2026
(10.00%)
(20.00%)
(30.00%)
Page | 227
PAKISTAN STATE OIL
Chart Title
700,000.00
600,000.00
500,000.00
400,000.00
300,000.00
200,000.00
100,000.00
0.00
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Series1 Series2
Page | 228
PAKISTAN STATE OIL
Long Term Deposits and
Prepayments
Breakdown:
Long-term deposits 2021 Vertical Analysis
Long-term deposits 357,041 100.00%
Page | 229
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Long-Term Deposits and 56.29% -35.29% 60.19% 11.98% - 40.79%
Prepayments 10.45%
2021 2020 2019 2018 2017 2016
Long-Term Deposits and 0.09% 0.06% 0.08% 0.05% 0.05% 0.06%
Prepayments
Forecasted Values
After analyzing the historical data and taking into account all the factors that can affect the
account, we assume that the account will increase between 25-30% for the next 5 years. This can
Page | 230
PAKISTAN STATE OIL
also be supported through the trend line shown below which depicts that the account has an
increasing trend.
80.00%
60.00%
40.00%
20.00%
0.00%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(20.00%)
(40.00%)
(60.00%)
Company Analysis
Factors Effects
Long Term Deposits increased Increase
Prepaid Rental Increased Increase
decrease.
Page | 231
PAKISTAN STATE OIL
Long-Term Deposits and Prepayments

400000
350000
300000
250000
200000
150000
100000
50000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Long-
Term Deposits and Prepayments of PSO year by year from 2016 to 2020.
Year 2021:
There was an increase of 56.29% in the year 2021,
• Long Term Deposits increased by 56.29%.
Source:
Year 2020:
Page | 232
PAKISTAN STATE OIL
There was a decrease of 35.29% in the year 2020,
Source:
Year 2019:
Source:
Year 2018:
• Prepaid Rental Increased by 7.18%
Source:
Year 2017:
Page | 233
PAKISTAN STATE OIL
There was a decrease of 11.98% in the year 2017,
• Prepaid Rental Decreased by 14.8%
Source:
Year 2016:
Source:
Page | 234
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Deposits to increase with an increase in long term investments for Increase
PPE
Deposits kept for the refineries to ensures uninterrupted supply Increase
Rising interest rates make deposits attractive Increase
Prepayments of rented storage capacity to increase Increase
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of long term
deposits and prepayments of all five years of the companies is given below.
Total Long Term Deposits and Prepayments of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 196,816 220,399 353,058 228,454 357,041
HTL 59,083,196 41,092,506 28,460,350 9,719,718 29,401,655
APL 29,928 3,922 46,860 128,555 227,617
BPL 69,986 100,839 122,761 122,761 3,174
Page | 235
PAKISTAN STATE OIL
TOTAL 59,379,926 41,417,666 28,983,029 10,199,488 29,989,487
Total Market Share of all Companies in 5 Years w.r.t Long Term Deposits and
Prepayments
Total Market
Companies Share
PSO 0.80%
HTL 98.70%
APL 0.26%
BPL 0.25%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Long Term Deposits and Prepayments
Page | 236
PAKISTAN STATE OIL
Total Market Share

120.00%
98.70%
100.00%
80.00%
60.00%
40.00%
20.00%
0.80% 0.26% 0.25%

0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest level of long term deposits
and prepayments as compared to other companies. PSO, is at second place in this case.
PSO’s Long Term Deposits and Prepayments Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
PSO Industry's Yearly
Share 0.33% 0.53% 1.22% 2.24% 1.19%
Page | 237
PAKISTAN STATE OIL
Graph Indicating PSO’s Long Term Deposits and Prepayments Share in the Industry w.r.t
Years

2.50%
2.24%
2.00%
1.50%
1.22% 1.19%
1.00%
0.50% 0.53%
0.33%
0.00%
2017 2018 2019 2020 2021
Analysis: The graph given above indicates that this account has had an increasing trend
throughout till 2020. After 2020, the company’s share in terms of the industry fell and that was
majorly because HTL took the lead with a sharp increase in its LTDP.
Yearly Change/Growth in Long Term Deposits and Prepayments of PSO
Page | 238
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
PSO Yearly PPE
Growth -10.45% 11.98% 60.19% -35.29% 56.29%
Graph Indicating Change/Growth in Long Term Deposits and Prepayments of PSO
PSO Yearly LTDP Growth

80.00%
60.00% 60.19%
56.29%
40.00%
20.00%
11.98%
0.00%
2017 2018 2019 2020 2021
-10.45%
-20.00%
-35.29%
-40.00%
-60.00%
Page | 239
PAKISTAN STATE OIL
Analysis: It can be analyzed that there is no fixed pattern in the growth of LTDP of PSO. The
long term deposits and prepayments decreased significantly in 2020. However, they have had an
increasing trend in the previous years. After 2020, the account restores to increasing again.
Growth/Change in the Industry’s Long Term Deposits and Prepayments Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth -41.66% -30.25% -30.02% -64.81% 194.03%
Graph Indicating Growth/Change in the Industry’s Long Term Deposits and Prepayments
Overtime
Page | 240
PAKISTAN STATE OIL

250.00%
200.00%
194.03%
150.00%
100.00%
50.00%
0.00%
2017 2018 2019 2020 2021
-30.25% -30.02%
-41.66%
-50.00%
-64.81%
-100.00%
Analysis: The long term deposits and prepayments of all the OMCs have increased in 2021. The
industry had an upward trend throughout but it dropped considerably in 2020. It was the highest
in 2021 as compared to all other years.
Factors affecting Long Term Deposits
Long Term Deposits kept for Oil Refineries to Ensure Uninterrupted Oil Supply
This particular element is very important for the OMC industry. The companies have heavy
amounts of payables in their financial statements which are due to the oil refineries. Due to this,
Page | 241
PAKISTAN STATE OIL
when the OMCs are in need of more oil, they ask for it through providing deposits as a guarantee
that they will be paying them for the oil that they have purchased. This allows them to reduce the
trust deficit to some extent. Nauman Ali Butt, the secretary general of the association, said none
of the oil companies except Pakistan State Oil (PSO) were supplying fuel to the dealers. Butt
claimed that all private companies had suspended their operations and that PSO was the only
supplier currently operation in the province. PSO was struggling to manage oil supplies, owing
to its increasing liquidity crisis as international oil suppliers demanded hard currency from the
cash-strapped state-run entity for fresh supplies as well as higher premiums on delayed
payments.
Future Outlook
The payables of the OMCs are expected to increase in the future which would mean that the trust
deficit of the refineries would increase as well due to which the long term deposits would have to
increase as well in the future.
Source:
➢ https://arynews.tv/ogra-rejects-speculations-of-fuel-shortage-in-pakistan/
Page | 242
PAKISTAN STATE OIL
➢ https://www.thenews.com.pk/print/950004-fuel-shortage-feared-as-subsidy-payments-
stuck-in-pipeline
Increase in Deposits as a Result of Increase in PPE and Long Term Investments
There is a direct link between these three accounts. We have already established that an increase
in PPE is taking place due to an increase in the long term investments. After the Hascol case,
banks have become reluctant in lending loans for financing to companies. So, OMCs have to
place deposits in the banks in order to get financing from them.
Future Outlook
The deposits are expected to increase in the future because the OMCs and the government is
working on the upgradation of the refineries and the fixed assets of the OMCs to strengthen the
bone of exports for the country in terms of oil.
Sources:
➢ https://tribune.com.pk/story/2331075/govt-gives-in-to-petrol-dealers-demands
➢ https://tribune.com.pk/story/2341681/refineries-demand-more-financing
➢ https://tribune.com.pk/story/2345893/banks-reluctant-to-open-lcs-for-oil-import
Page | 243
PAKISTAN STATE OIL
Rising Interest Rates make Long Term Deposits an Attractive Investment
Companies usually buy long term deposits because when the cost of borrowing money increase,
saving money becomes more attractive. The interest rates in Pakistan have been increasing ever
since. This only means that in the future the long term deposits are expected to increase if the
companies want to take advantage of high interest rates.
Sources:
➢ https://tribune.com.pk/story/2351831/high-interest-rate-will-destroy-economy
➢ https://tribune.com.pk/story/2355353/economy-to-face-further-pressure
➢ https://www.fitchratings.com/research/sovereigns/pakistans-political-volatility-adds-to-
external-financing-risk-12-04-2022
➢ https://thediplomat.com/2022/04/economic-fallout-of-pakistan
Increase in Prepayment of Rented Storage Capacity
When the refineries went on strike in 2019 and 2020, OMCs had to rely on rented storage
capacity and for that they had to make prepayments. This has been increasing since a very long
time because the OMCs have high payables and the refineries demand their money which the
OMCs are unable to provide. So, rented capacities are the only option that they are left with.
Future Outlook
Page | 244
PAKISTAN STATE OIL
This is expected to increase as the upgradation is showing delays for the refineries and any time
now the refineries can go on strike. PSO and other OMCs would have to rely on rented storage
capacities after that.
Source:
➢ https://www.pakistantoday.com.pk/2022/03/01/chairman-ogra-calls-urgent-meeting-of-
omcs-refineries-to-discuss-oil-price-related-matters/
➢ https://www.brecorder.com/news/40135972/petrol-pumps-in-lahore-partial-strike-
observed
➢ https://tribune.com.pk/story/2307103/oil-transporters-govt-to-begin-negotiations
➢ https://tribune.com.pk/story/2330681/countrywide-petrol-strike-on-nov-25
➢ https://propakistani.pk/2022/02/23/refinery-shortage-is-imminent-in-pakistan/
Page | 245
PAKISTAN STATE OIL
Methods chosen
Methods used
Page | 246
PAKISTAN STATE OIL
400,000.00
350,000.00
300,000.00
250,000.00
200,000.00
150,000.00
100,000.00
50,000.00
0.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
LT Deposits Naïve Forecast
80.00%
60.00%
40.00%
20.00%
0.00%
2015
2019
2023
2007
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2020
2021
2022
2024
2025
2026
(20.00%)
(40.00%)
(60.00%)
Page | 247
PAKISTAN STATE OIL
Page | 248
PAKISTAN STATE OIL
450,000.00
400,000.00
350,000.00
300,000.00
250,000.00
200,000.00
150,000.00
100,000.00
50,000.00
0.00
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Series1 Series2
Page | 249
PAKISTAN STATE OIL
Deferred Tax Asset – net
Breakdown:
Deferred Tax Asset 2021 Vertical Analysis
Taxable temporary difference in respect of:
Accelerated tax depreciation -1,603,384 -12.16%
Investment in associates accounted for under
equity method -464,144 -3.52%
Equity investment held as FVOCI -1,524,813 -11.57%
Right-of-use assets -1,518,340 -11.52%
Fair value of net assets acquired on acquisition -117,710 -0.89%
Deductible temporary difference in respect of:
Page | 250
PAKISTAN STATE OIL
Provision for:
Tax amortization 1,369 0.01%
Lease Liabilities 1,565,540 11.88%
Impairment of Stores and spares 20,713 0.16%
Provision for slow moving products 25,967 0.20%
Impairment on trade debts 996,872 7.56%
Impairment on other Receivables 934,989 7.09%
Retirement and other service benefits 1,661,290 12.60%
Excise, taxes and other duties 21,121 0.16%
Liabilities offered for taxation 12,070,807 91.57%
Recoupable carried forward tax loss 1,109,313 8.42%
Recoupable minimum turnover Tax - -
others 2,361 0.02%
13,181,951 100.00%
2021 2020 2019 2018 2017 2016
Deferred Tax Asset -21.76% 42.12% 1.25% -1.71% 10.42% 34.66%
Page | 251
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Deferred Tax Asset 3.18% 4.49% 2.61% 2.91% 3.04% 3.15%
Forecasted Values
After analyzing the historical data and taking all the factors which might affect the account into
consideration, we assume that the account will decrease between 22-25% as shown above. This c
is also supported by the trendline graph below.
1,400.00%
1,200.00%
1,000.00%
800.00%
600.00%
400.00%
200.00%
0.00%
2013
2007
2008
2009
2010
2011
2012
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(200.00%)
(400.00%)
Page | 252
PAKISTAN STATE OIL
Company Analysis
Factors Effects
Decrease in credit/debit balances Decrease
Decrease in the impairment on other Receivables Decrease
Decrease in Liabilities offered for taxation Decrease
Subsidiaries provided by the GoP Increase
Exchange loss due to rupee devaluation Decrease
Increase in the provision for retirement and other Increase
service benefits
Page | 253
PAKISTAN STATE OIL
Deferred Tax Asset

18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease of the deferred
Tax Asset of PSO year by year from 2021 to 2016.
Year 2021:
Upon analyzing the Deferred Tax Asset, it can be seen from the horizontal analysis that there
was a decrease of 21.76% due to the following reasons;
• Decrease in credit/debit balances: There was a decrease of 0.4% on account of
accelerated depreciation allowance.
• Decrease in the impairment on other Receivables: There was a decrease of 17.3%.
• Decrease in Liabilities offered for taxation: There was a decrease of 6.9%.
Source:
Page | 254
PAKISTAN STATE OIL
Year 2020:
was an increase of 42.1% due to the following reasons;
• Increase in credit/debit balances: There was an increase of 283.9% on account of
• Incremental minimum tax paid and unused tax losses: Increase in Deferred tax asset
due to recognition of deferred tax asset on incremental minimum tax paid and unused tax
losses.
• Subsidiaries provided by the GoP: Due to the on going pandemic COVID-19,
Government has provided subsidiaries to PSO.
• Decrease in the impairment on other Receivables: There was a decrease of 8.3%.
Source:
Year 2019:
Page | 255
PAKISTAN STATE OIL
• Increase in the provision for impairment of stores and spares: Increased by 22.4%.
• Increase in the provision for slow moving products: Increased by 7.4%.
• Increase in the provision for retirement and other service benefits: Increased by
57.7%.
• Increase in the provision for excise, taxes and other duties: Increased by 7.40%.
Source:
Year 2018:
was a decrease of 1.71% due to the following reasons;
• Exchange loss due to rupee devaluation and future corporate rates: Deferred Tax
Asset reduced due to Future corporate rates of tax by Rs. 1.3 billion, exchange loss due to
rupee devaluation and significant reduction in mark-up/interest received from PIBs due to
their maturity in July 2017. The aforesaid decline in PIBs interest was, however,
Page | 256
PAKISTAN STATE OIL
mitigated by decline in Finance. One time reversal of deferred tax asset due to decline in
future corporate tax rates to 25% by FY 2023 (1% in each tax year).
• Decrease in the provision for tax amortization: Decreased by 28%.
Source:
➢ https://www.brecorder.com/news/amp/4625968
Year 2017:
14%.
• Increase in liabilities offered for taxation: Increase by 7.3%.
Source:
Year 2016:
Page | 257
PAKISTAN STATE OIL
13.65%.
• Increase in liabilities offered for taxation: Increase by 40%.
Source:
Industry Analysis
Factors Effects
Decrease in carried forward tax loss of OMCs Decrease
Decrease in minimum turnover tax Decrease
Improved Profitability of Subsidiary Company Decrease
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value deferred taxation of
all five years of the companies is given below.
Page | 258
PAKISTAN STATE OIL
Total Deferred Taxation of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 11,912,602 11,709,058 11,854,947 16,848,132 13,181,951
HTL 0 0 0 107,956,234 48,245,631
APL 0 0 0 936,005 0
BPL 0 0 0 0 0
TOTAL 11,912,602 11,709,058 11,854,947 125,740,371 61,427,582
Total Market Share of all Companies in 5 Years w.r.t Total Deferred Taxation
Total Market
Companies Share
PSO 29.42%
HTL 70.16%
APL 0.42%
BPL 0.00%
Page | 259
PAKISTAN STATE OIL
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Deferred Taxation
Total Market Share

80.00%
70.16%
70.00%
60.00%
50.00%
40.00%
29.42%
30.00%
20.00%
10.00%
0.42% 0.00%
0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of deferred
taxation in their accounts. PSO is at second place.
Page | 260
PAKISTAN STATE OIL
PSO’s Deferred Taxation Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 100.00% 100.00% 100.00% 13.40% 21.46%
Graph Indicating PSO’s Deferred Taxation Share in the Industry w.r.t Years

120.00%
100.00% 100.00% 100.00% 100.00%
80.00%
60.00%
40.00%
20.00% 21.46%
13.40%
0.00%
2017 2018 2019 2020 2021
Page | 261
PAKISTAN STATE OIL
Analysis: The graph given above indicates for the first three years, only PSO had deferred
taxation in their accounts. However, after 2019, their share dropped when HTL’s deferred
taxation increased as well.
Yearly Change/Growth in Deferred Taxation of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly PPE
Growth 10.42% -1.71% 1.25% 42.12% -21.76%
Graph Indicating Change/Growth in Deferred Taxation of PSO
Page | 262
PAKISTAN STATE OIL
PSO Yearly Deferred Tax Growth

50.00%
42.12%
40.00%
30.00%
20.00%
10.00% 10.42%
0.00% 1.25%
-1.71%
2017 2018 2019 2020 2021
-10.00%
-20.00%
-21.76%
-30.00%
Analysis: It can be analyzed that deferred tax fell in 2018 grew in 2019. It was the highest in
2020 but dropped and was the lowest in 2021 in all five years.
Growth/Change in the Industry’s Deferred Taxation Overtime
Years 2017 2018 2019 2020 2021
Page | 263
PAKISTAN STATE OIL
Industry's Yearly
Growth 9.37% -1.71% 1.25% 960.66% 262.45%
Graph Indicating Growth/Change in the Industry’s Deferred Taxation Overtime

1200.00%
1000.00%
960.66%
800.00%
600.00%
400.00%
262.45%
200.00%
0.00% 9.37% -1.71% 1.25%

2017 2018 2019 2020 2021
-200.00%
Page | 264
PAKISTAN STATE OIL
Analysis: The deferred taxation was the highest in 2020. It was majorly because of sharp
increase in HTL’s deferred taxation and PSO’s taxation as well. In 2021, this dropped for both
the OMCs. We can also see a decreasing trend from 2017-2019.
Factors affecting Deferred Tax
Decrease in Carried Forward Tax Losses of OMCs Post Pandemic
When the OMCs experienced net losses, they also experienced tax losses because they had no
income to pay taxes from in the first place. These tax losses were carried forward by the
companies and were used to increase their profitability in 2021. This can be seen by an increase
in the taxable income of the OMCs. The oil industry says that the oil commission report ignored
key factors of the fuel shortage. It says that the commission ignored the unprecedented Covid-19
impact on product planning, procurement and supplies. The Petroleum Division disallowed
imports during April 2020 as 70% HSD and 40% PMG were imported. This uncalled-for ban and
the subsequent delay in permission affected the supply chain and the stock level of OMCs started
to decline drastically. The overall sales of the companies were extremely low due to this and
hence they incurred losses as well.
Future Outlook
Page | 265
PAKISTAN STATE OIL
The OMCs would use the deferred tax asset to increase their profitability in the future. The asset
increased due to the pandemic; otherwise it had a decreasing trend and would continue having
one in the future.
Source:
➢ https://tribune.com.pk/story/2318147/fia-seeks-help-in-probe-into-omcs
Decrease in Carried Forward Minimum Turnover Tax for OMCs
Four different types of changes have been made in this regime through the Finance Act 2021.
One of them is generalized reduction in minimum turnover tax paid from 1.5 percent to 1.25
percent. This took place in 2021. In a report, Islamabad Policy Institute (IPI) said the turnover
tax is effectively negating the provisions of Section 57 of the Income Tax Ordinance, 2001 and is
putting a significant additional financial burden on the long-term viability of the regulated
petroleum sector. The fixed margin for OMCs on petrol and HSD in Rs2.97 against retail prices
of Rs108.56 for petrol and Rs110.76 for HSD. The rate of 0.75 percent of turnover is excessive
as the OMCs are bound to sell the goods on fixed margin which constitutes less than 3 percent of
the turnover and where margin is less than 3 percent of the turnover (meaning gross profit lesser
Page | 266
PAKISTAN STATE OIL
than 3 percent of turnover) imposition of minimum tax at the rate of 0.75 percent of the turnover
is harsh and exorbitant. The objective of minimum tax is to require the companies which suffered
loss or made low profit during a tax year to contribute reasonable amount in relation to their
respective turnover towards the government exchequer during that year something they would be
entitled to adjust against normal tax liability of subsequent years.
Future Outlook
The turnover tax has been reduced by the government. This means very minimal levels of
turnover taxes will be carried forward in the future. This would decrease the deferred taxation as
well in the future.
Sources:
➢ https://www.brecorder.com/news/40104989#:~:text=Four%20different%20types%20of%
20changes,pay%20minimum%20tax%3B%20(III)
➢ https://www.thenews.com.pk/print/839984-omcs-pay-significantly-higher-than-
corporate-tax-rates
Use of Deferred Tax Assets for Subsidiaries of OMCs
Page | 267
PAKISTAN STATE OIL
The deferred tax asset can be used to increase the profitability by reducing the taxable income.
That is exactly what the OMCs have done in 2021. For example, PSO has increased the
profitability of its subsidiary Pakistan Refinery Limited by using its carried forward tax losses
and turnover taxes. This is why in 2021, the value was lower.
Future Outlook
Deferred tax assets are expected to fall because OMCs would use these carried forward losses in
the future as well because they can face similar unforeseen issues in the future as well.
Sources:
➢ https://www.thenews.com.pk/print/952209-pakistan-refinery-profit-soars-over-9-fold-in-
q3fy22
➢ https://www.thenews.com.pk/print/954116-pso-s-q3-net-profit-soars-273pc-to-rs32-58bn
➢ https://propakistani.pk/2022/04/28/pso-posts-record-breaking-profits-for-9-months-of-
fy22/
Page | 268
PAKISTAN STATE OIL
Methods chosen
Methods used
Page | 269
PAKISTAN STATE OIL
18,000,000.00
16,000,000.00
14,000,000.00
12,000,000.00
10,000,000.00
8,000,000.00
6,000,000.00
4,000,000.00
2,000,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
Deferred tax Naïve Forecast
1,400.00%
1,200.00%
1,000.00%
800.00%
600.00%
400.00%
200.00%
0.00%
2025
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2026
(200.00%)
(400.00%)
Page | 270
PAKISTAN STATE OIL
Page | 271
PAKISTAN STATE OIL
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Series1 Series2
Page | 272
PAKISTAN STATE OIL
Retirement Benefits
Page | 273
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Retirement Benefits 79.25% 0.00% 0.00% 0.00% 0.00% 0.00%
2021 2020 2019 2018 2017 2016
Retirement Benefits 0.36% 0.22% 0.00% 0.00% 0.00% 0.00%
Forecasted Values
Since this is a new account, very little information is available hence only a general company
analysis has been done according to which the account has been increased within a range of 60-
70% at a decreasing rate.
Page | 274
PAKISTAN STATE OIL
Company Analysis
Factors Effects
Increase in Gratuity and Pension Funds Increase
Retirement Benefits
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase of the Retirement Benefits
of PSO year by year from 2021 to 2020.
Year 2021-20:
Page | 275
PAKISTAN STATE OIL
An increase of 79.25% is seen after analyzing the Retirement Benefits from year 2021 to
2020. Due to the following reasons;
• Increase in Gratuity and Pension Funds: The company approved and fund pension
scheme for both management and non-management employees. The scheme provides
pension based on the employees last drawn salaries. Pension are payable for life. The
company also operates unfunded gratuity scheme for all its employees. There was an
increase of 40.2% in the Pension Funds given to ex-employees.
Source:
➢ https://www.ukessays.com/essays/commerce/pso-company-hrm-term-report-commerce-
essay.php
Page | 276
PAKISTAN STATE OIL
__________________________________________________________
________________________
Page | 277
PAKISTAN STATE OIL
Current Assets
Page | 278
PAKISTAN STATE OIL
Stores, Spares & Loose Tools
Breakdown:
Stores, Spares, Chemicals and Loose Tools 2021 Vertical Analysis
Stores, spares, chemicals and loose tools 1,453,351 108.26%
Provision for obsolete / slow moving -110,870 -8.26%
1,342,481 100.00%
Page | 279
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Stores, Spares and Loose 35.39% 11.50% 270.57% 17.90% -7.05% 5.43%
Tools
2021 2020 2019 2018 2017 2016
Stores, Spares and Loose 0.32% 0.26% 0.20% 0.06% 0.05% 0.06%
Tools
Forecasted values
After looking at all the industrial and economic factors which might affect the account as well as
the historical data, we assume that the account will increase between 15-25% for the next 5 years
that too at an increasing rate. This can mainly be accounted to increased demand of petroleum
products. This prediction can be supported by the trendline graph below.
Page | 280
PAKISTAN STATE OIL
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(50.00%)
Company Analysis
Factors Effects
Stores, spares, chemicals and loose tools Increase
increases
Increase in provision for obsolete / slow Increase
moving
decrease.
Page | 281
PAKISTAN STATE OIL
Stores, Spares and Loose Tools

1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Stores,
Spares and Loose Tools of PSO year by year from 2016 to 2020.
Year 2021:
There was an increase of 35.39%, due to the following reasons;
• Stores, spares, chemicals and loose tools increases by 44.3%
• Increase in provision for obsolete / slow moving by 18%.
Source:
Year 2020:
Page | 282
PAKISTAN STATE OIL
• Increase in provision for obsolete / slow moving by 64.4%.
Source:
Year 2019:
• Increase in provision for obsolete / slow moving by 91.1%.
Source:
Year 2018:
• Stores increased by 15.3%
• Spares, chemicals and loose tools increases by 17.1%.
Source:
Page | 283
PAKISTAN STATE OIL
Year 2017:
There was a decrease of 7.03%, due to the following reasons;
• Stores decreased by 6.04%
• Spares, chemicals and loose tools decreased by 7.61%
Source:
Year 2016:
• Stores increased by 3.13%
• Spares, chemicals and loose tools increased by 3.30%
Source:
Page | 284
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Increase in retail outlets of all OMCs Increase
Investment in Petrochemical symposium by OMCs Increase
in order to avail the latest data ate HTL, APL, BPL and PSO. The total values of stores, spares
and loose tools of all five years of the companies are given below.
Total Stores, Spares and Loose Tools of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 203,542 239,981 889,295 991,583 1,342,481
HTL 50,156,870 26,759,589 24,186,433 0 0
APL 48,658 75,841 92,287 12,460,539 12,865,862
BPL 5,800 2,606 2,415 2,215 3,873
TOTAL 50,414,870 27,078,017 25,170,430 13,454,337 14,212,216
Total Market Share of all Companies in 5 Years w.r.t Total Stores, Spares and Loose Tools
Page | 285
PAKISTAN STATE OIL
Total Market
Companies Share
PSO 2.81%
HTL 77.57%
APL 19.60%
BPL 0.01%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Stores, Spares and Loose Tools
Page | 286
PAKISTAN STATE OIL
Total Market Share

90.00%
80.00% 77.57%
70.00%
60.00%
50.00%
40.00%
30.00%
19.60%
20.00%
10.00%
2.81%
0.01%
0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of stores, spares
and loose tools in their accounts. APL is in the second place whereas PSO has the third position.
PSO’s Stores, Spares and Loose Tools Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 0.40% 0.89% 3.53% 7.37% 9.45%
Graph Indicating PSO’s Stores, Spares and Loose Tools Share in the Industry w.r.t Years
Page | 287
PAKISTAN STATE OIL

10.00%
9.45%
9.00%
8.00%
7.37%
7.00%
6.00%
5.00%
4.00%
3.53%
3.00%
2.00%
1.00% 0.89%
0.40%
0.00%
2017 2018 2019 2020 2021
Analysis: The graph given above shows that there has been an increasing trend of PSO’s market
share with respect to the industry in terms of stores, spares and loose tools.
Yearly Change/Growth in Stores, Spares and Loose Tools of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly PPE
Growth -7.05% 17.90% 270.57% 11.50% 35.39%
Page | 288
PAKISTAN STATE OIL
Graph Indicating Change/Growth in Stores, Spares and Loose Tools of PSO

300.00%
270.57%
250.00%
200.00%
150.00%
100.00%
50.00%
35.39%
17.90%
11.50%
0.00% -7.05%
2017 2018 2019 2020 2021
-50.00%
Analysis: It can be analyzed that the highest growth of PSO’s stores, spares and loose tools took
place in 2019. However, there was a drop in 2020. In all other years, the account has increased.
Growth/Change in the Industry’s Stores, Spares and Loose Tools Overtime
Years 2017 2018 2019 2020 2021
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PAKISTAN STATE OIL
Industry's Yearly
Growth 10.73% 32.64% -7.04% -46.55% 5.63%
Graph Indicating Growth/Change in the Industry’s Stores, Spares and Loose Tools
Overtime

40.00%
32.64%
30.00%
20.00%
10.00% 10.73%
5.63%
0.00%
2017 2018 2019 2020 2021
-7.04%
-10.00%
-20.00%
-30.00%
-40.00%
-46.55%
-50.00%
-60.00%
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PAKISTAN STATE OIL
Analysis: The stores spares and loose tools of the industry fell in 2019 majorly because of a fall
of this account at HTL’s end. However, after 2020, the industry’s trend for this account can be
seen to have increased as well.
Factors affecting Stock, Spare and Tools
New Retail Outlets Set to Start of Major OMCs in Pakistan
According to the Director’s report of PSO, BPL, APL etc. they are set to open more retail outlets
in the coming future. This would lead to an increase in this account over the period of time. PSO
in particular opened 71 new retail outlets. Every retail outlet would have its own shop stop which
would again lead to an increase in this account. APL too experienced a double digit growth in
2021 which would allow it to further expand its retail outlets across Pakistan.
Future Outlook
The retail outlets would not open in the future if another pandemic takes place. In 2020, the
account had the lowest figure. However, the account is expected to grow in the future as the
OMCs are set to make more profits by increasing their customer base.
Source:
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First Petrochemical Symposium seeks investments from OMCs
Currently, OMCs in Pakistan rely on imports for the chemicals in their production and
distribution. However, this new petrochemical symposium can help in reducing the import bill
and cost of these companies and act as a substitute. The symposium’s goal is to initiate a
conversation and spark interest in Pakistan’s petrochemical industry. The day’s schedule
includes a panel of specialists, including policymakers and corporate sector executives, who will
discuss the petrochemical industry’s prospects and how it may help Pakistan achieve exponential
economic growth. Pakistan is at a disadvantage because of its underdeveloped petrochemical
industry, which accounts for 5% of the country’s entire import bill. However, this industry
presents huge investment prospects to help Pakistan achieve long-term economic prosperity.
Future Outlook
The stores, spares and loose tools would definitely increase in the future because the OMCs have
enough buying power to cater to their needs of expansion.
Source:
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PAKISTAN STATE OIL
➢ https://newztodays.com/petrochemical-symposium-industry/
➢ https://nation.com.pk/2022/03/14/pakistans-first-petrochemical-symposium-to-be-held-
on-thursday/
➢ https://www.spglobal.com/commodityinsights/en/market-insights/latest-
news/petrochemicals/050522-refinery-news-roundup-progress-on-new-plants-in-the-
middle-east
Economic Analysis
Factor Effect
Increase in Imports Increase
Currency Devaluation Increase
Inflation Increase
Stores, spares and loose tools are similar to inventory for PSO. This means that the factors which
affect the stock in trade for the company will also effect the stores, spares & loose tools.
Historically the account can be seen increasing which is of similar nature of that of stock in
trade. The economic reasons for this have been analyzed below.
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PAKISTAN STATE OIL
Increase in Imports
be importing petroleum products on deferred payments to meet the local demand. PSO being the
biggest OMC in the country accounts for most amount of imports which is also reflected in its
balance sheet. It could be seen that the stock in trade for the company declined when the imports
were less in 2020 while it rose by a significant amount in 2021 when the imports started to
increase on account of an increase in the demand.
Future Outlook
only expected to increase in the future. According to other sources PARCO and NRL alone are
expected to import more than 30 million barrels of oil collectively. This along with the rising
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PAKISTAN STATE OIL
energy crisis and increase in the demand for petroleum products is likely to keep the imports
high as is also illustrated in the graph below.
This would ultimately mean that PSO’s stock would continue to rise and could even reach a
record high, as compared to 2019 in order to meet the demand and energy needs of the people of
Pakistan.
Source:
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PAKISTAN STATE OIL
petrol-next-month
under-sfd-programme
During 2018, the currency was trading at between $1 for Rs.122. However after the PTI
government came into power, there was record devaluation in the within the past 4 years as now
the dollar is trading at $1 for Rs.185. this ultimately meant that PSO enjoyed inventory gains as
the inventory which they had bought for cheap was now expensive, which is also reflected in the
balance sheet of the company where the company had the highest level of stock in trade in 2019,
which was right after the PTI government came into power and the rupee devalued
Future Outlook
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PAKISTAN STATE OIL
least 18%, as reported by trading economics. This ultimately implies that the cost of buying the
stock would increase, and at the same time the company will be enjoying inventory gains if the
rupee continues to devalue like this thus increasing the stock in trade in the future. The forecast
for currency devaluation against dollar is illustrated in the graph below.
Source:
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PAKISTAN STATE OIL
International oil prices and Inflation
Since 2014 the international oil prices have seen the most significant volatility. The oil market
has taken on new features that affect the development of the global economy. According to EIA,
US shale oil production increased from 4.96 million barrels per day in 2017 to 5.59 million
barrels per day in 2022. In addition, there are geopolitical events, trade frictions, and OPEC’s
agreement have occurred in recent years, causing the volatility of oil price.
In a developing country like Pakistan, which has such high dependence on imported oil, an
increase in oil prices leads to inflationary pressure which in turn increases budget deficit making
imports more expensive. The government has refrained from passing on the complete price
increase to the consumers because it fears it will exacerbate inflation and stifle economic activity
which presents a significant challenge to the government’s plans of ending its tenure with a
strong growth phase.
This inflationary pressure and variances in the price of oil internationally has led to the company
enjoying inventory gains as the value of the already stock in hand increased, with the possibility
that the new stock also increases.
Future Outlook
Looking forward the international oil prices are forecasted to increase mainly on account of the
war between Russia and Ukraine, as can also be seen in the graph below which in turn means
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PAKISTAN STATE OIL
that the inflation in the country will increase as well. Keeping in mind that the demand for
petroleum products is predicted to increase in the future, this in turn would also increase the sales
as has been predicted which would ultimately lead to the company increasing its stock in trade in
the future as well as enjoying inventory gains as has been reported in the director’s report.
Source:
➢ https://economictimes.indiatimes.com/news/international/world-news/petroleum-prices-
in-pakistan-likely-to-increase-by-rs-10-per-litre/articleshow/89843799.cms
➢ https://profit.pakistantoday.com.pk/2022/02/26/oil-prices-expected-to-increase-from-
march-1/
➢ https://www.geo.tv/latest/398774-petrol-price-expected-to-rise-in-pakistan-sources
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PAKISTAN STATE OIL
➢ https://macropakistani.com/petrol-pricing/
➢ https://tradingeconomics.com/commodity/crude-oil
➢ https://energyinformatics.springeropen.com/articles/10.1186/s42162-021-00166-4
Page | 300
PAKISTAN STATE OIL
Methods chosen
Methods used
Page | 301
PAKISTAN STATE OIL
1,600,000.00
1,400,000.00
1,200,000.00
1,000,000.00
800,000.00
600,000.00
400,000.00
200,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
Stores spares and tools Naïve Forecast
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2015
2019
2023
2007
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2020
2021
2022
2024
2025
2026
(50.00%)
Page | 302
PAKISTAN STATE OIL
Page | 303
PAKISTAN STATE OIL
1,600,000.00
1,400,000.00
1,200,000.00
1,000,000.00
800,000.00
600,000.00
400,000.00
200,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Series1 Series2
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PAKISTAN STATE OIL
Stock in Trade
Page | 305
PAKISTAN STATE OIL
Breakdown:
Vertical
Stock in Trade 2021 Analysis
Raw and packing material 9,385,377 10.55%
Petroleum and other products (gross) 56,966,018 64.05%
Less: Stock held on behalf of third parties -2,164,973 -2.43%
64,186,422 72.17%
Provision for slow moving products - -
Provision for write down to net realizable value - -
64,186,422 72.17%
In pipeline system of Pak-Arab Pipeline Company Limited 21,303,048 23.95%
and Pak-Arab Refinery Company Limited - net of loss 85,489,470 96.13%
Add: Charges incurred thereon 3,444,940 3.87%
88,934,410 100.00%
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PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Stock in Trade -
37.33% -34.49% 21.11% 23.04% 30.49% 13.09%
2021 2020 2019 2018 2017 2016
Stock in Trade 21.49% 17.26% 21.79% 20.27% 16.90% 14.85%
Forecasted Values
Stock in trade is one of the major accounts of the company and thus holds great significance.
There were many industrial and economic factors which affected the account and all of them
have been taken into account. Some pf them caused the account to decrease while the others
caused the account to increase. However, the ones which caused increase were greater in number
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PAKISTAN STATE OIL
hence we assume that the account will increase between 35-40% for the next 5 years as shown
above.
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PAKISTAN STATE OIL
Company Analysis
Factors Effects
Rise in international oil prices Increase
Increase in prices effected the GST Rate Increase
High Stock Levels Increase
Industrial Diesel Volume decreased Decrease
Reduction in the prices of petroleum products Decrease
Negative Volume Decrease
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PAKISTAN STATE OIL
Stock in Trade
120,000,000
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease of the Stock in
trade of PSO year by year from 2021 to 2016.
Year 2021:
There was an increase of 33% in 2021 as compared to the year 2020. The factors are discussed
below;
• Rise in international oil prices: The trend of International Oil Prices impacts the
financial performance of your Company and consequently the share price. Increasing
trend of oil prices may improve your Company’s financial performance and vice versa.
However, price trend impacts the Company’s performance in combination with stock and
sales situation.
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PAKISTAN STATE OIL
• Increase in prices effected the GST Rate: The price of petrol in 2021 was Rs123.30 per
liter, while cost of supply of Pakistan State Oil (PSO) increased to Rs95.41 liter. Increase
in price also effected the GST rate, which increased to Rs11.76 per liter from Rs11.28 per
liter in the first half of September.
• High Stock Levels: Raw and Packaging material increased from 7,867,223 to 9,385,377.
Sources:
Year 2020:
A drastic drip can be seen in terms of the stock in trade from 2019 to 2020, factors will be
discussed below;
• Negative Volume: Volume variance was caused by increase in market share at year end.
On the other hand, in the retail sector PSO experienced an increase in motor gasoline
volumes against an overall decline in the industry due to PSO’s increased assortment
amid low demand.
• Prince Variance due to decline in international prices: price variance was on account
of decline in international oil prices.
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PAKISTAN STATE OIL
• Industrial Diesel Volume decreased: Industry diesel volumes too were affected due to
weak industrial activity, construction activity, and reduced road and rail movement.
However, PSO managed to gain volumetric growth.
• Reduction in the prices of petroleum products: In the first half of the year Petrol was
sold at Rs.74.52 per liter. The government reduced prices of all petroleum products
except High-Speed Diesel (HSD) in order to partially pass on the impact of massive
international price reduction to the masses.
Sources:
Year 2019:
2019’s stock in trade was the best in the 6 years of analysis due to the following reasons;
• Increase in oil prices: Prices of petroleum products were increased by up to Rs23 per
liter in 2019. The price of high-speed diesel - widely used in public transport and
agriculture sector and any hike in its price impacts all sectors - went up from Rs106.68 to
Rs125.01 per liter, an increase of Rs18.42 per liter. The other major fuel is petrol which
is widely used in motorcycles and cars. Its price rose Rs23.02 to Rs113.99 per liter.
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PAKISTAN STATE OIL
• Low level of stock due to Furnace Oil: Some of the demand of petroleum products have
been the changes in the energy mix particularly shifting away from the furnace oil
towards coal and LNG; and then the comeback of furnace oil during COVID and post
COVID times due to the systemic issues in the refining system as well as the rise in
demand from the power sector.
Sources:
➢ https://tribune.com.pk/story/2128194/year-passes-pakistans-energy-sector-boasts-
success
Year 2018:
Stock in trade increased by 23% in the year 2018.
• High oil prices: PSO’s volumetric growth continued in FY18 in white oil segment,
especially motor spirit and HSD even though the retail segment faced stiff competition
from new entrants, and substantial discounts offered by competitors and the influx of
smuggled products like diesel from Iran.
• Partial offset by the decrease in the stock levels of furnace oil: Furnace oil volumes
declined by 29.6 percent year-on-year in 2018 owing to the supply situation and the
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PAKISTAN STATE OIL
government’s strategy of switching priority of existing power plants from FO to
RLNG/natural gas. PSO’s furnace oil volumes declined by 29.6 percent year-on-year in
FY18 as government’s priority changed to RLNG and coal for the power sector.
Sources:
Year 2017:
30.49% increase in stock and trade in the year 2017.
• Upward trend in international oil prices: International oil prices was said to had
surged by 77pc in the period under review which was partially reflected in local ex-
refinery prices. As a result of higher oil prices, gross profits also increased to Rs.9.2bn vs.
loss of Rs 610 million in the same period last year. Higher gross profits could be
attributed to higher margins on furnace oil (margins linked with prices)
• High level of inventory: With cost of goods sold up by 28 percent, PSO was able to keep
gross margins also up in 2017. The increase in gross profit and gross margin could be due
to inventory gains booked on account of lower fuel costs in the low oil price scenario.
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PAKISTAN STATE OIL
Year 2016:
Stock-in-trade balances have shown a declining trend over the last three years
• Reduction in oil prices increased PSO’s sales volumes significantly: The Company’s
sale volume of Motor Gasoline grew by 26%, mainly due to decrease in price of gasoline
and subsequent increase in customer demand. Furthermore, HSD sales recorded an
increase of 0.7%, due to the increased upliftment by PIA and international airlines. FO
volumes declined by 4.3% due to lower upliftment by IPP’s primarily due to shifting
from FO to natural gas.
Sources:
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PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Increase in international oil prices due to Russia Ukraine War Increase
Increase in international oil prices due to high demand low supply Increase
Increase in the prices of natural gas Increase
Increase in price variance Increase
Decreased in Stock in Transit due to CPFTA Decrease
Provision of Price Differential Claims Decrease
Refusal of PSO to keep Stock of other OMCs Decrease
in order to avail the latest data ate HTL, APL, BPL and PSO. The total values of stock in trade of
all five years of the companies are given below.
Total Stock in Trade of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 66,333,048 81,615,455 98,847,665 64,758,242 88,934,410
HTL 2,070,841,515 1,181,900,227 1,544,074,179 447,345,239 878,741,709
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PAKISTAN STATE OIL
APL 7,234,415 12,460,539 12,865,862 9,464,503 16,121,539
BPL 50,755 95,341 75,422 43,901 19,134
TOTAL 2,144,459,733 1,276,071,562 1,655,863,128 521,611,885 983,816,792
Total Market Share of all Companies in 5 Years w.r.t Total Stock in Trade
PSO 6.08%
HTL 93.03%
APL 0.88%
BPL 0.00%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Stock in Trade
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PAKISTAN STATE OIL
Total Market Share

100.00%
93.03%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00% 6.08%
0.88% 0.00%
0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of stock in trade
in their accounts. PSO is in the second place.
PSO’s Stock in Trade Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 3.09% 6.40% 5.97% 12.42% 9.04%
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PAKISTAN STATE OIL
Graph Indicating PSO’s Stock in Trade Share in the Industry w.r.t Years

14.00%
12.42%
12.00%
10.00%
9.04%
8.00%
6.40%
6.00% 5.97%
4.00%
3.09%
2.00%
0.00%
2017 2018 2019 2020 2021
Analysis: the market share of PSO in terms of stock in trade has varied throughout the years. It
was the highest in 2020 but dropped in 2021. However, the value in 2021 is greater than 2017-
2019.
Yearly Change/Growth in Stock in Trade of PSO
Years 2017 2018 2019 2020 2021
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PAKISTAN STATE OIL
PSO Yearly PPE
Growth 30.49% 23.04% 21.11% -34.49% 37.33%
Graph Indicating Change/Growth in Stock in Trade of PSO
PSO Yearly Stock in Trade Growth

50.00%
40.00%
37.33%
30.00% 30.49%
23.04%
20.00% 21.11%
10.00%
0.00%
2017 2018 2019 2020 2021
-10.00%
-20.00%
-30.00%
-34.49%
-40.00%
Analysis: It can be analyzed that the highest growth of PSO’s stock in trade in 2020. However,
there was a increase in 2021. In all other years, the account has decreased.
Growth/Change in the Industry’s Stock in Trade Overtime
Page | 320
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth 165.43% 29.76% -68.50% 88.61% 569.01%
Graph Indicating Growth/Change in the Industry’s Stock in Trade Overtime

700.00%
600.00%
569.01%
500.00%
400.00%
300.00%
200.00%
165.43%
100.00% 88.61%
29.76%
0.00%
2017 2018 2019 2020 2021
-68.50%
-100.00%
-200.00%
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PAKISTAN STATE OIL
Analysis: The industry has also experienced a downwards trend in its stock in trade and just like
PSO, the entire OMC industry faced a fall in this account till 2019 and this has increased
considerably in 2021.
Factors affecting Stock in Trade
Increase in International Oil Prices would case Piling-Up of Inventory of OMCs
Oil prices are expected to increase international in the future. This means that OMCs here would
be imported expensive oil but the government does not allow them to raise the prices of POL
products as they want to provide some relief to the customers. Due to this, they have to sell
costly POL products at lower rates. Companies tend to pile up the stock that they have, waiting
for the local prices to rise so that they can sell the products. They might also buy on cheaper rates
and provide the customers at higher rates. Internationally, Brent crude oil prices averaged nearly
$117 per barrel (/b) in March 2022, up $20/b from February's average. Prices are expected to
average $103.37/b in 2022, according to the U.S. Energy Information Administration's (EIA)
Short-Term Energy Outlook released on April 12, 2022. This is up from an annual average of
$70.89 in 2021. The EIA predicts that by 2025 Brent crude oil's nominal price will rise to $66/b.
By 2030, world demand is seen driving Brent prices to $89/b. By 2040, prices are projected to be
$132/b. By then, the cheap oil sources will have been exhausted, making it more expensive to
extract oil. By 2050, oil prices could be $185/b.
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PAKISTAN STATE OIL
Increase in International Oil Prices due to Russia Ukraine War
Russia is the third-largest producer of liquid fuels and petroleum, so when the country invaded
Ukraine in late February 2022, it had immediate impact on Brent crude oil futures prices.10 As
the conflict continued, the prices of crude oil settled in out on an upward trajectory, reaching
nearly $130/b in early March, and staying well above $100/b into April.
Increase in International Oil Prices as Demand Exceeds Supply of Oil
The coronavirus pandemic and natural events are still affecting oil demand and supply. The U.S.
experienced a drop in production following Hurricane Ida in September as the storm shut at least
nine refineries. The EIA estimates that U.S. crude oil production will average 12.01 million b/d
in 2022 and 12.95 million b/d in 2023.
Increase in the Prices of Natural Gas
Countries in Asia have relied on coal to generate power, but recent shortages have turned them to
natural gas. Higher temperatures in parts of Asia and Europe have led to high demand for natural
gas to generate power. COVID-19 has hampered Europe's natural gas production, and a colder-
than-expected heating season in early 2021 reduced supplies further. As a result, natural gas
prices soared in 2021 and are expected to remain high in 2022, and affected countries have
turned to gas-to-oil switching to reduce power generation costs.
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PAKISTAN STATE OIL
Future Outlook
The oil prices are expected to increase in the coming few years. This is something that cannot be
stopped and the only thing OMCs here can do is to mitigate the price variance to take maximum
advantage of this particular aspect. If they fail to do so, the stock in trade would increase due to
piling up of inventory.
Source:
➢ https://www.thebalance.com/oil-price-forecast-3306219
➢ http://knoema.com/infographics/yxptpab/crude-oil-price-forecast-2021-2022-and-long-
term2050#:~:text=The%20International%20Monetary%20Fund%2C%20in,for%20oil%
20in%20international%20markets.
➢ https://fortune.com/2022/03/09/worst-case-oil-forecast-240-per-barrel-global-recession/
➢ https://www.reuters.com/business/energy/oil-prices-expected-rise-with-big-variation-
projections-kemp-2022-01-18/
➢ https://economictimes.indiatimes.com/topic/crude-oil-prices
Increase in Price Variance to Act as a Disincentive to Supply Products for OMCs
With an increase in international oil prices and a depreciating currency, price variance cannot be
mitigated. The OMCs want to supply the POL products by matching the prices in the
international market. But that is not possible considering the low purchasing power of customers
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PAKISTAN STATE OIL
in Pakistan. The government has repeatedly failed to provide the PDC claims to PSO and other
companies and the circular debt of the country is increasing constantly because of this. OMCs
can face serious liquidity issues because of this if their inventory keeps piling up.
Future Outlook:
Stock in trade of OMCs is expected to increase keeping in mind how much Pakistani Rupee has
depreciated and how much the oil prices have rose. The country’s currency needs to appreciate if
improvement is to be seen.
Source:
➢ https://tribune.com.pk/story/2329024/oicci-seeks-revision-in-omcs-margins
➢ https://tribune.com.pk/story/2334040/govt-cuts-petrol-diesel-prices-by-rs5
➢ https://www.reuters.com/article/pakistan-currency-idINKBN1E22A2
CPFTA allows Fewer Stock in Transit and Efficient Delivery
It has now been two years since the terms of the revised CPFTA went into effect, through an
SRO issued by the Federal Board of Revenue that activated the reduced duties applicable on
6786 goods. One such item that has been exempted from custom duties is fuel from China which
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PAKISTAN STATE OIL
includes Motor Gasoline, HOBC and diesel. And private oil companies in Pakistan availed the
benefits substantially.
Future Outlook
In the future, OMCs can greatly benefit from fewer stocks in transit and faster deliveries from
China as a result of the CPEK road that is being made by the two countries.
Source:
➢ https://profit.pakistantoday.com.pk/2022/01/09/chinese-petrol-drive-omc-profits/
➢ https://newztodays.com/pso-oil-imports/
Provision for Price Differential Claim Improves Liquidity of OMCs
The Petroleum Division has asked the Director General, Pakistan Revenue (Sub Office) Karachi
to advise the Manger National Bank of Pakistan to arrange payment of Rs40 billion for
reimbursement of Price Differential Claims (PDC) to Oil marketing Companies (OMCs) and
refineries. According to sources in the oil industry, the government had cleared a PDC of
Rs31.73 billion up till 31st March 2022. Similarly, it has now transferred an amount of Rs40
billion on account of PDC allocated for 1-15 April, 2022 which also includes a deficit of Rs2.31
billion from 16-31 March, 2022. Furthermore, the PDCs for the second fortnight of April will be
submitted during the first week of May, 2022, said sources. They added that PDC of only Rs28.3
Page | 326
PAKISTAN STATE OIL
billion is pending with the government which needs to be deposited in the assignment account
with PSO. PDC of Rs34.19 billion is expected for the period April 1-15, 2022. However, till date
approval for the same from Competent Authority has not been initiated,” the Oil Companies
Advisory Council (OCAC) said an urgent letter to the Oil & Gas Regulatory Authority (Ogra)
and Director General Oil of the Petroleum Division.
Future Outlook
This would help OMCs in mitigating the loses that they face. It would also ensure constant
distribution and marketing of fuel and POL products in the market. The stock in trade would
reduce due to this.
Source:
➢ https://profit.pakistantoday.com.pk/2022/04/25/president-sanctions-rs40bn-for-
reimbursement-of-pdc-to-omcs-refineries/
➢ https://www.thenews.com.pk/print/948674-govt-owes-omcs-rs55bn-in-april-fuel-subsidy
➢ https://tribune.com.pk/story/2353362/ecc-approves-rs687-billion-grant
➢ https://www.thenews.com.pk/print/952776-rs40bn-released-for-oil-subsidy-payment
Refusal of PSO to Keep Stocks of Other OMCs
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PAKISTAN STATE OIL
This would further reduce the stock in trade of the company. The stock in trade of other OMCs
would increase but of PSO would decrease due to this. PSO believes that this practice is
uncompetitive in nature. They have started conversing with Shell over this.
Future Outlook:
This would allow PSO to reduce its stock in trade. They would not have to import on the behalf
of different OMCs and then store it with themselves. This would however, increase the stock in
trade of other OMCs in the industry.
Source:
➢ https://economictimes.indiatimes.com/markets/expert-view/fuel-prices-will-average-out-
in-long-run-shouldnt-worry-long-term-investors-mk-surana-
hpcl/articleshow/89425741.cms
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Economic Analysis
Factor Effect
International Oil Prices & inflation Increase
Guvnor defaults again Decrease
Agreement with Qatar Petroleum Increase
Growing energy demands Increase
Currency devaluation Increase
Increase in Imports Increase
The new EV policy Decrease
If we take a look at the historical data for stock in trade of the company, it is very evident that
except 2020 which is considered to be an abnormal year, the company’s stock in trade has been
increasing with the highest ever amount recorded in 2019 which was owed to higher prices. After
that in 2020 the world was hit by the pandemic and people were locked inside their homes. This
ultimately resulted in the decline of demand of petroleum products which is also reflected in the
financial statements of the company as the stock in trade fell by almost 35%. After that in 2021
the economy started to recover which also increased the demand for petroleum products as was
reflected in the financial statements of the company where it could be seen that the sales of the
company increased by a record amount.

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PAKISTAN STATE OIL
This implied that the stock in trade for the company also increased as it was seen that the current
assets for the company increased by 11.8& which was mainly accounted to an increase in the
stock in trade of the company. The economic reasons for such an increase in the stock have been
analyzed below.
Source:
➢ https://psopk.com/en/investors/results-reporting/financial-highlights-2020
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PAKISTAN STATE OIL
enjoying inventory gains as the value of the already stock in hand increased, with the possibility
that the new stock also increases.
Future Outlook
as has been predicted which would ultimately lead to the company increasing its stock in trade in
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PAKISTAN STATE OIL
the future as well as enjoying inventory gains as has been reported in the director’s report.
Source:
march-1/
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PAKISTAN STATE OIL
Gunvor Defaults again
Gunvor is one of the major suppliers of RLNG to Pakistan. There was an agreement between
Gunvor and the government of Pakistan where they had to supply 4 cargoes of RLNG to the
country during the period of April to June 2022. However they have defaulted again and have
backed out on these deliveries which shifted the entire burden on furnace oil again and thus had a
negative impact on the stock in trade of the company as this was unplanned.
Future Outlook
This is the fourth occasion that the company has defaulted, with them backing out before on 19
November, 10 January and 11 March. This have had a negative impact on the inventory of the
company before as they had to take immediate steps to meet the rising demand in the country.
Looking at the historical data of how the company backs out last minute, we predict that this
would only affect the stock in trade of the company negatively as it is highly likely that they will
continue to do the same in the future.
Sources:
➢ https://www.thenews.com.pk/print/952062-gas-crisis-deepens-as-eni-defaults-once-again
➢ https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/lng/032822-
gunvor-backs-out-of-lng-deliveries-to-pakistan-from-april-june-officials
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PAKISTAN STATE OIL
➢ https://www.thenews.com.pk/print/918251-gas-crisis-aggravates-gunvor-again-backs-
out-of-lng-cargo-delivery
➢ https://profit.pakistantoday.com.pk/2022/04/19/pakistan-to-file-for-damages-on-default-
by-eni-gunvor/
Agreement with Qatar Petroleum
In accordance with the vision 2030, PSO came into an LNG agreement with Qatar Petroleum as
the Qatar’s ambassador to Pakistan said affirmed that Qatar will continue helping Pakistan to
meet its energy needs.
According to the agreement Qatar Energy entered into a long-term sale and purchase agreement
with the PSO for the supply of up to three million tons per annum of the LNG. The price at
which the agreement has been made is the lowest ever price which is expected to significantly
reduce the costs of PSO in the future. Moreover it must also be noted that the launch of the direct
shipping line between Karachi port and Hamad port in Doha has greatly helped increase trade
engagements between the two countries thus in turn increasing the stock in trade of the company.
Future Outlook
The agreement really boosted the company’s stock in trade as they started getting a fixed supply
of LNG. Since the agreement is till 2030, the LNG supply to Pakistan by Qatar is confirmed for
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PAKISTAN STATE OIL
the next 8 years. This means that this supply will remain fixed and only new supply will be
added which will only increase the stock in trade in the future.
Source:
➢ Corporate briefing session
➢ https://www.thenews.com.pk/print/918280-qatar-to-continue-helping-pakistan-to-
meet-its-energy-needs
➢ https://www.offshore-technology.com/comment/qatar-petroleum-lng-cnooc-2/
➢ https://www.energyconnects.com/news/oil-and-gas/2021/march/qatar-petroleum-
enters-into-an-lng-agreement-in-pakistan/
Growing energy demands
The energy crisis in Pakistan is growing. Electricity demand in the country is at peak and it is
only expected to increase in the future as we approach hotter months of June and July. Contrary
to the high demand of electricity in the country, the supply has not been very good as could
clearly be seen during Ramzan when many cities faced power shortages or load shedding. The
higher electricity demand can be attributed to an exponential increase in the population as well as
a consumers using more electrical appliances and working towards improving their standard of
living.
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PAKISTAN STATE OIL
Nonetheless in order to meet the higher electricity demand fuel is imported as the local supply is
not enough to meet the demand. This extra demand also creates problems in terms of circular
debt as the government has subsidized the prices, which results in the rise of import bill and
reduction of foreign reserves. The higher import to meet the energy demands ultimately means
that PSO’s stock in trade will increase as they happen to be the biggest OMC in the country.
Future Outlook
In the future it is expected that the demand for electricity would continue to increase. This
ultimately implies that the imports are also expected to increase thus the company’s stock in
trade is also expected to increase
Source:
➢ https://www.scienceimpactpub.com/Docs/jei62019.pdf
➢ https://energsustainsoc.biomedcentral.com/articles/10.1186/s13705-018-0167-y
➢ https://www.sciencedirect.com/science/article/pii/S2211467X21001711
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PAKISTAN STATE OIL
the dollar is trading at $1 for Rs.185. this ultimately meant that PSO enjoyed inventory gains as
the inventory which they had bought for cheap was now expensive, which is also reflected in the
balance sheet of the company where the company had the highest level of stock in trade in 2019,
which was right after the PTI government came into power and the rupee devalued
Future Outlook
stock would increase, and at the same time the company will be enjoying inventory gains if the
rupee continues to devalue like this thus increasing the stock in trade in the future. The forecast
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PAKISTAN STATE OIL
Source:
Increase in Imports
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PAKISTAN STATE OIL
be importing petroleum products on deferred payments to meet the local demand. PSO being the
biggest OMC in the country accounts for most amount of imports which is also reflected in its
balance sheet. It could be seen that the stock in trade for the company declined when the imports
were less in 2020 while it rose by a significant amount in 2021 when the imports started to
increase on account of an increase in the demand.
Future Outlook
only expected to increase in the future. According to other sources PARCO and NRL alone are
expected to import more than 30 million barrels of oil collectively. This along with the rising
energy crisis and increase in the demand for petroleum products is likely to keep the imports
high as is also illustrated in the graph below.
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PAKISTAN STATE OIL
This would ultimately mean that PSO’s stock in trade would continue to rise and could even
reach a record high, as compared to 2019 in order to meet the demand and energy needs of the
people of Pakistan.
Source:
petrol-next-month
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PAKISTAN STATE OIL
under-sfd-programme
The New EV Policy
the next 5-10 years. Moreover the salient features of the policy include a phased transition of the
automotive industry to electric vehicles. This implies that OMCs like PSO will start shifting their
focus towards establishing and installing EV charges in the country which ultimately means that
the demand for petroleum products in the country would decline ultimately having a negative
impact on the stock in trade for the company.
This transition has already been started by PSO as they have successfully installed and
commissioned its first electric EV charger in Islamabad under the name PSO Electro. Moreover
the company has also joined hands with Frontier Works Organization (FWO) to install state of
the art EV chargers on the Lahore-Sialkot motorway.
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PAKISTAN STATE OIL
Future Outlook
Within a span of 5-10 years, companies are expected to invest heavily in EV chargers and
technology as it can be observed that the consumer demand is shifting. So is the case with PSO
as we expect that in the future the company will invest heavily in technology and although these
investments might have a positive impact on the overall assets and sales of the company, it will
reduce the stock in trade as the majority of the stock which the company holds is that of
petroleum products.
Source:
➢ https://www.thenews.com.pk/print/693968-pso-installs-ev-charging-facility
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PAKISTAN STATE OIL
Methods chosen
Methods used
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PAKISTAN STATE OIL
120,000,000.00
100,000,000.00
80,000,000.00
60,000,000.00
40,000,000.00
20,000,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
Stock in trade Naïve Forecast
Page | 344
PAKISTAN STATE OIL
Page | 345
PAKISTAN STATE OIL
120,000,000.00
100,000,000.00
80,000,000.00
60,000,000.00
40,000,000.00
20,000,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Series1 Series2
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
(20.00%)
(40.00%)
(60.00%)
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PAKISTAN STATE OIL
Trade Debts
Trade Debts Breakdown:
Trade Debts 2021 Vertical Analysis
Considered good
Due from Government agencies and autonomous bodies
Secured 198,221 0.09%
Unsecured 185,808,652 83.55%
186,006,873 83.64%
Due from other customers 4,157,539 1.87%
Secured 32,220,542 14.49%
Unsecured 36,378,081 16.36%
222,384,954 100.00%
Considered doubtful 3,572,380 1.61%
Trade debts - gross 225,957,334 101.61%
Provision for impairment -3,572,380 -1.61%
Trade debts - net 222,384,954 100.00%
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PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Trade debts 12.24% -11.47% -8.87% 15.50% 19.27% -1.39%
2021 2020 2019 2018 2017 2016
Trade debts 53.73% 52.80% 49.34% 61.00% 54.18% 52.08%
Forecasted Values
After looking at the trend and analyzing all the industrial and economic factors, we are predicting
that in the future, trade debts for PSO are likely to increase by 6-10% every year.
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PAKISTAN STATE OIL
Company Analysis
Factors Effects
Dues from previous government Increase
Receivables from SNGPL, PIA, GENCO Increase
Increase in PDC Increase
Rise in circular debt Increase
FE 25 receivables Increase
LNG supply chain disturbed Increase
Power crises Increase
Factors that highly influence the trade debts of a company may include the trade policy,
exchange rates, foreign currency reserves, inflation, demand etc. Further we’ll be dissecting the
factors and the causes of the increase and decrease of the trade debts of PSO year by year from
2021 to 2016.
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PAKISTAN STATE OIL
Year 2021:
From the year 2020 to the year 2021, there is seen a drastic change in the horizontal analysis of
the trade debts. The factors are discussed below:
• Trade Debts made on account by the subsidiary company: This also include trade
debts on account of export sales made by the Subsidiary Company i.e., Pakistan Refinery
Limited (PRL) amounting to Rs.989.8 million (2020: Rs.484.8 million) secured by way
of Export Letters of Credit.
• Overdue trade receivable customers due to inter-corporate circular debt issue and
from Government of Pakistan: As at June 30, 2021, the Group’s receivable from
Government of Pakistan and customers amounted to Rs.235,254 million which included
trade debts receivables of Rs.183,896 million from customers including the following
were past due for 6 months;
1. GENCO Holding Company Limited (GENCO): Rs.71,992 million
2. Hub Power Company Limited (HUBCO): Rs.13,317 million
3. Sui Gas Northern Pipelines Company Limited (SNGPL): Rs.93,511 million
4. The PIA has to pay Rs21.974 billion to the PSO.
• Recovery from the power sector: The PSO has recovered Rs194.283 billion from the
power sector along with late payment surcharge income. The power sector was a key
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PAKISTAN STATE OIL
defaulter of the PSO that is to pay Rs192.5 billion to the company on account of oil
supply.
• The circular debt of Pakistan State Oil (PSO) soured high as of Rs397.5 billion in
November:
PSO continued to register profits that reported an all-time high net profit after tax. The
PSO made a profit of Rs11.9 billion in the first quarter of the fiscal year 2021-22. Its
profit was owing to inventory gains that led to its higher profitability in wake of rising oil
prices.
• FE 25 loan to be received by PSO: The Company is also to receive Rs5.3 billion on
account of exchange loss on the FE 25 loan.
• Insufficient power and RLNG sectors cause PSO receivables to hit Rs 380bn: PSO
braves the loss of Rs6.089 billion in the import of LNG because of the exchange rate loss.
Source:
➢ https://www.brecorder.com/news/40134437/circular-debt-of-pso-soars-to-all-time-high
Year 2020:
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PAKISTAN STATE OIL
A negative figure can be seen in the year 2020, there has been a decrease when we compare both
the year i.e., 2020 and 2019. Trade debts went down in FY20 primarily due to recoveries from
power sector. The recoverability of these amounts is dependent on the decisions of the GoP
including availability of funds due to circular debt situation being faced by the GoP.
• Decline in trade debts mainly due to recoveries from power sector: Debtor’s turnover
has increased primarily due to decrease in trade debts by 10.4% on account of recoveries
from power sector.
• FE exchange loss recovery: Net unfavorable exchange difference of Rs. 1,799 million,
net of recoveries during the year of Rs. 27,890 million, arising on foreign currency
borrowings (FE-25), obtained under the directives of Ministry of Finance, which was to
be settled in accordance with the instructions.
• Trade debts from the Government and other customers were due: Trade debts of an
aggregate amount of Rs. 169,990 million due from GENCO Holding Company Limited
(GENCO), Sui Northern Gas Pipelines Limited (SNGPL), Hub Power Company Limited
(HUBCO) and Kot Addu Power Company Limited (KAPCO). These include past due
debts of Rs. 166,768 million against which no impairment has been recognized.
• Price differential claims on account of supply of petroleum: Price differential claims
aggregating Rs.9297 million recoverable from GoP on account of supply of petroleum
products at subsidized rates to various customers. These balances are long outstanding
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PAKISTAN STATE OIL
with no recoveries since past several years despite follow-ups by the Company with
relevant ministries.
• LNG supply chain faced a collapse: PSO and SSGC continued to push SNGPL to
ensure off-take as per the given demand or be ready to face a financial loss or a penalty of
$25 million on per LNG cargo basis. LNG vessel which came on Feb 29, offloaded the
cargo at a very slow discharge rate of 2,800 cubic meters per hour, and incurred
estimated demurrage and boil-off expense of around $185,000. The loss was put on the
account of the Power Division.
Source:
➢ https://www.brecorder.com/news/40040595/pso-receivables-touch-rs3189-billion-mark
Year 2019:
A decrease in trade debts by Rs. 26 bn. is due to recoveries from power sector offset by increase
in receivables from SNGPL can be seen in the year 2019. These were at highest in FY 2018 both
as per vertical and horizontal analysis due to delay in payments by Power Sector and SNGPL and
increase in prices of products. These went down in FY 2019 due to;
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PAKISTAN STATE OIL
• Receivables from Government of Pakistan (GoP) and the power sector: trade debts
of an aggregate amount of Rs. 180,676 million due from power generation companies
down below;
1. GENCO Holding Company Limited (GENCO)
2. Sui Northern Gas Pipelines Limited (SNGPL)
3. Hub Power Company Limited (HUBCO)
4. Kot Addu Power Company Limited (KAPCO)
These include past due debts of Rs. 165,236 million against which no impairment has been
recognized.
• Price differential claims that have been long outstanding since 2013: Claims
aggregating to Rs. 9,297 million recoverable from GoP on account of supply of
petroleum products at subsidized rates to various customers.
• FE-25 borrowings were obtained under directives of MOF: A net unfavorable
exchange difference of Rs.30,244 million arising on foreign currency borrowings (FE-
25), obtained under the directives of Ministry of Finance. About Rs48bn are payable to
the PSO by the Pakistan International Airlines (PIA) and the federal government on
account of price differential claims and exchange rate loss.
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PAKISTAN STATE OIL
• Pakistan State Oil (PSO) in dire straits with its receivables going beyond a record
Rs364bn: Receivables from the power sector alone had touched Rs265bn as of Jan 18
because of primary circular debt. In addition, a second-tier circular debt worth Rs51bn
has built up against the Sui Northern Gas Pipelines Limited (SNGPL) due to non-
payment of LNG supplies, affecting the entire gas sector.
Source:
Year 2018:
Trade debts are highest in FY 18 in last 5 years (both as per vertical and horizontal analysis) due
to the delay in payments by Power Sector and SNGPL and increase in prices of products.
• PSO faces financial difficulties, asks government for help: Pakistan State Oil (PSO)
has written letters to the federal government, saying that it is facing financial difficulties
because of its outstanding amounts against power sector, Pakistan International Airlines
(PIA) and Sui Northern Gas Pipeline Limited (SNGPL). The amounts have reached Rs
330 billion so far.
• Unpaid money by the previous government: The PSO management has written to the
Ministries of Water and Power, Petroleum and Finance about its difficult financial
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PAKISTAN STATE OIL
position in recent weeks and sought proactive support. Sources said that the previous
government had committed to pay Rs 25 billion to PSO in May but the money is still
awaited.
• Receivable failure from the Government: Persistent failure of the present government
in resolving circular debt has threatened financial viability of PSO as its receivable from
power sector, SNGPL and PIA surged to Rs 330 billion as of August 13, posing risk to
entire fuel supply chain.
• PSO’s customers fail to pay the amount they are due for: The PSO's total receivables
from the power sector alone stood at Rs 282 billion, while PIA and Sui Northern Gas
Pipelines Limited (SNGPL) owed Rs 26 billion and Rs 22 billion respectively to the oil
marketing company.
Source:
➢ https://www.brecorder.com/news/4625998/psos-receivables-reach-rs-330-billion-
20180814399303
Year 2017:
Increase in trade debts by Rs. 34.4 bn. primarily due to increase in receivables of Power Sector,
PIA and SNGPL as compared to last year. The PML-N government also cleared a circular debt
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PAKISTAN STATE OIL
worth Rs. 480 bn through a controversial scheme of cash and book payments. Whereas the
company’s receivables peaked at the end of PPP’s government at Rs 220 bn in May 2013.
• Overdue payments from PIA: PSO is also continuously meeting PIA's demand of jet
fuel. However, PIA is not making payments to PSO to settle outstanding dues, and as a
result the principal amount has swelled to Rs 13.8 billion by the end of November 2017.
• Overdue payments from SNGPL: Besides, an amount of Rs 13.4 billion was also on
receivable head from the SNGPL on account of the LNG supplies.
• The Power sector still remains a major defaulter: The total receivables from power
sector accumulated to Rs 196.5 billion including Rs 64.40 billion generated after the
inception of seven-day credit arrangements. The power sector remained a major defaulter
and multibillion rupees had been stuck in this sector following ban of use of furnace oil.
PSO had been supplying furnace oil to feed power plants but the government abandoned
use of this fuel in power plants and the PSO is now facing liquidity crunch following
refusal of power sector to clear multibillion rupees dues.
• Power sector to avoid power crises: The government instructed Ministry of Petroleum
and Natural Resources to ensure uninterrupted supplies to WAPDA, HUBCO and
KAPCO to avoid power crisis in the country however they could not make timely
payments to PSO.
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PAKISTAN STATE OIL
Source:
➢ https://www.brecorder.com/news/4561561/psos-receivables-reach-rs-317-billion-by-december-1-
20171216327677
➢ https://www.brecorder.com/news/4486477/pso-receivables-soar-to-rs-2723-billion-na-told-
20170316154779
➢ https://epaper.dawn.com/DetailImage.php?StoryImage=14_10_2017_010_005
Year 2016:
Trade debts remained almost stagnant over the last three years i.e., 2014, 2015 and 2015 due to
prevailing circular debt situation.
• Circular debt crisis looms as receivables rise to 250bn: This is the highest amount of
receivables in the accounts of the country’s largest fuel supplier that had peaked at
Rs220bn since May 2013 before the government cleared the amount through a
controversial scheme of cash payments and book adjustments.
• Late payments from the power sector: The government claimed of controlling energy
shortages and improving recoveries, a staggering Rs250 billion has been added to the
outstanding dues of the Pakistan State Oil (PSO) since June 2013. The PSO’s
management had repeatedly written to the ministries of water and power, petroleum and
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PAKISTAN STATE OIL
finance about its difficult financial position that they were in and reached out for
proactive support.
Source:
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PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Increase in prices of products Increase
Provision of Rs.450 billion to power sector Decrease
Government to lower subsidy to power sector Increase
Oil consumption reduced during pandemic Decrease
Inefficiencies of power sector Increase
Financial Crises faced by Customers Increase
OGRA shows Rs. 1 billion of PDC receivable Decrease
Refusal of importing oil for other OMCs Decrease
Rs. 100 billion provision to power sector Decrease
When it comes to the oil marketing and distribution companies, this industry makes most of its
sales on account which generate heavy proportions of trade debts. If we take into account the last
5 years, we can account for the 4 top companies and the proceeding market shares and growth
rates have been accounted for keeping these 4 companies in mind.
Total Receivables in Different Years of the OMCs:
Page | 360
PAKISTAN STATE OIL
Company
Names 2017 2018 2019 2020 2021
PSO 212,619,281 245,577,071 223,797,044 198,134,828 222,384,954
HTL 179,385,219 236,936,937 1,189,383,247 76,104,012 103,225,348
APL 10,801,077 16,475,576 16,838,255 13,970,178 11,025,245
BPL 5,001 17,654 23,422 24,776 87,665
TOTAL 402,810,578 499,007,238 1,430,041,968 288,233,794 336,723,212
Market Share (Accounts Receivables)
Total Market
Company Names Share
Pakistan State Oil 37.29%
Hi-Tech Lubricants
Limited 60.37%
Attock Petroleum Limited 2.34%
Burshane (LPG) Limited 0.01%
Total Industry AR 100.00%
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PAKISTAN STATE OIL
Total Market Share
Hi-Tech Lubricants Limited 60.37%
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%
Analysis: It can be clearly analyzed that Hi-Tech Lubricants Limited had the highest market
share in terms of the account receivables. It is more than half of the total market share in this
particular industry in terms of making sales on credit. PSO has the second highest market share.
Comparatively, the market share of APL and BPL are close to nothing. That is because they are
not among the major players as compared to PSO and HTL.
Industry’s Growth - Account Receivables:
Company Names 2017 2018 2019 2020 2021
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PAKISTAN STATE OIL
Industry's Yearly Growth 19.27% 23.88% 186.58% -79.84% 16.82%

200.00%
186.58%
150.00%
100.00%
50.00%
23.88%
19.27% 16.82%
0.00%
2017 2018 2019 2020 2021
-50.00%
-79.84%
-100.00%
Analysis: We can see that in 2019, the industry experienced a peak of 186.58% due to an
increase in the account receivables. This might have been because more sales were being made
on credit or there might be an increase in the sales level overall. This value is an outlier if we
compare it with the growth percentages of 2017, 2018 and 2021. Just like that, experiencing a
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PAKISTAN STATE OIL
fall of 79.84% in 2020 is shocking because that means that either more sales were being made on
cash or more the overall sales level dropped considerably in this industry. This will be further
analyzed through secondary research.
Yearly Growth in Market Share – Industry
Company Names 2017 2018 2019 2020 2021
Share 52.78% 49.21% 15.65% 68.74% 66.04%
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PAKISTAN STATE OIL
Yearly Growth in Market Share

80.00%
70.00% 68.74%
66.04%
60.00%
52.78%
50.00% 49.21%
40.00%
30.00%
20.00%
15.65%
10.00%
0.00%
2017 2018 2019 2020 2021
Analysis: We can see that PSO experienced a fall in its share of account receivables with respect
to the industry in year 2017, 2018 and a drastic further drop in 2019. However, after 2019, its
share in relevance to the industry increased in 2020 but it experienced a slight fall in 2021 but it
was not that considerable. This happened mainly because of an intense increase in the account
receivables of HTL in 2019 which made the proportion of PSO very minimal. The increase in the
industry’s share of account receivables can be seen in the previous graph as well were because of
HTL mainly. Even though the receivables of PSO increased in 2018, the industry’s overall value
of receivables increased at a higher rate due to increase in trade debts of HTL.
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PAKISTAN STATE OIL
Yearly Growth in Market Share – Last 5 years (Company)
Company Names 2017 2018 2019 2020 2021
PSO Yearly Growth 19.27% 15.50% -8.87% -11.47% 12.24%
PSO Company's Yearly Growth

25.00%
20.00% 19.27%
15.00% 15.50%
12.24%
10.00%
5.00%
0.00%
2017 2018 2019 2020 2021
-5.00%
-8.87%
-10.00%
-11.47%
-15.00%
Analysis: Here, we can analyze that with every passing year from 2017 till 2020, PSO has
experienced a drastic decline in its account receivables. If we look at the numbers, account
receivables are increasing but it is happening at a decreasing rate. This might be due to making
more sales on cash and lesser on credit. This can be a positive signal for the company. However,
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PAKISTAN STATE OIL
after 2020, the credit sales began to increase again after a decline of 4 years. There is a
possibility that their DSO might be improving every year. We can also see that in 2019, account
receivables decreased at a decreasing rate. As discussed in the company analysis, it was also
because of the receivables collected from Power sector and SNGPL. 2020 accounted for having
the lowest receivables in all 5 years that have been considered for the calculations.
Supporting Articles:
Increase in trade debts due to increase in the prices of products:
In 2018, the OMCs experienced immense levels of trade debts when the prices of their products
began to increase. As the prices of oil and petroleum products increased, it led to the customers
having a lower purchasing power and they started making more purchases on credit. The price of
oil increased to $72.5 and that was when the new government came into being back in 2018
whereas the price of diesel and petrol costed $112.94 and $95.42 respectively.
Future Outlook
If we compare the prices of 2018 with that of 2021 and 2022, the price of oil has increased to
$85 a barrel whereas the prices of diesel and petrol are $135 and $138 respectively. If 2018
recorded the highest prices of products marketed by the OMCs which lead to high levels of
receivables, then considering 2021 and 2022 experienced a further spike in prices then the
account receivables are further expected to increase of the OMCs in the future.
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PAKISTAN STATE OIL
Source:
➢ Director’s Report
➢ https://www.thenews.com.pk/print/900954-petroleum-prices-hiked-to-historic-high
Government offered Rs. 450 billion to the power sector in 2019 to make payments:
In 2019, we can see that PSO experienced a fall in its share of account receivables with respect
to the industry. That happened because out of all the other companies in this industry, the power
sector is highly dependent on PSO as they can easily supply oil and other petroleum products on
credit terms. So, when they received a subsidy from the government in 2019, they used it to clear
their circular debt by paying off to PSO, Shell and a few other companies in this sector.
Future Outlook
Even though the power sector got a relief but the government had something else planned. The
power sector has been known for eating up its subsidies and due to this, they do not use the cash
for its actual purpose. So, these inefficiencies might lead to higher receivables as they have
cleared some of them out so they are perceiving relaxation.
Source:
➢ https://tribune.com.pk/story/2278309/govt-offers-rs450b-to-ipps-to-clear-circular-debt
Oil consumption by the power sector decreased in 2020 due to the pandemic:
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In 2019, the oil consumption by the power sector was around 14%. This figure dropped to 11%
in 2020 in regards to the pandemic. This is also because of the power sector preferring LNG
over the furnace oil. We can see how in 2020, the entire industry’s account receivables were
decreasing at a decreasing rate and even became negative. This was because of lower demand of
oil due to which they were not much sales of credit to account for nor were there any cash sales
in that particular period of time.
Future Outlook
The power sector is more inclined towards using more renewable sources of energy and is trying
to avoid buying from the OMCs of Pakistan. If this pertains that they would not be have to make
purchases on credit which would further lead to lower receivables for OMCs in the near future.
Source:
➢ https://www.arx.cfa/~/media/516852A31D37400ABA1E75942E7C77F0.ashx
Petrol crisis experienced in late 2020 leading to lower sales:
In 2020, Pakistan experienced something which was later termed as a petrol crisis. During this
period, the OMCs had minimal petrol reserves. Due to this, they had nothing to provide to their
customers and it lowered their petrol sales. Now, sales include both, credit sales and cash sales.
When they did not have anything to sell off, their account receivables reduced as well which can
very well be noticed in all the graphs that after 2019, in 2020, the account receivables have
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dropped considerably. One of the reasons of as to why these crises took place was because petrol
prices were expected to fall in the first week of June. The major customers of OMCs decided to
make purchases in the month of June and not before it. So, in the beginning of June 2020, petrol
was swapped out of the market of all OMCs. For the cherry on top, the government also imposed
a ban on the import of petrol, leading to petrol stations drying up.
Future Outlook
Like petrol in 2020, High Speed Diesel shortages are to be reported this year in 2022. This would
again bring about a crisis for the OMCs and their receivables will be lower due to lower sales
overall as they would have nothing to sell off to their customers. This is happening because the
operations of the refineries in the European Union are lower than normal and USA itself is
experiencing a shortage. Due to this, there is almost nothing left for Pakistani OMCs.
Source:
➢ https://ipipk.org/report-the-petrol-crisis-of-june-2020/
Inefficiencies of the power sector put burden on OMCs through increasing receivables:
In 2021, different companies in the power sector such as GENCOs and CPPA, were inefficient in
paying off their trade payables. This led to high levels of trade debts for different companies in
the oil and gas marketing companies and PSO was one of those companies which were affected
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PAKISTAN STATE OIL
the most. Their receivables increased up to Rs. 398 billion, due to which they were also not able
to meet their cash obligations of around 6 refineries. Their cash position worsened and this can
also be related to an increase in the accounts receivables in 2021 as shown in all the graphs that
have been shown above.
Future Outlook
Considering that the power sector has already eaten up 3.2 trillion worth of subsidies in the last
15 years, it is expected to do the same in the following years. The government has no room for
providing more subsidies to this sector. If in the following years, lower levels of subsidies are
provided, then their efficiency of paying back to the creditors would further worsen which would
lead to more trade debts for OMCs.
Source:
➢ https://www.thenews.com.pk/print/909334-top-omc-in-economic-mess-pso-s-receivables- surge-
to-rs398-billion
➢ https://www.thenews.com.pk/print/847372-power-sector-eats-away-rs3-5tr
Financial crises caused by increasing trade debts leads to multinational OMCs wanting to leave
Pakistan:
In 2021, some of the major multinational OMCs complained about not receiving their payments
on time and the rising circular debt in the industry. Even though the government has been using
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PAKISTAN STATE OIL
PSO’s stock to fulfill this gap, but this has only been increasing their receivables and hence
increasing the receivables of the entire industry again. This can be seen in the graphs shown
above that in 2021, the receivables of the OMCs increased by 16.82%.
Future Outlook
If the situation pertains and private multinational OMCs leave Pakistan, then the burden would
be on the existing companies in the industry and mainly on PSO. All the sectors would rely on
PSO majorly and most of the sales would be made on credit again as always leading to higher
burden on PSO and trade debt in the coming years.
Source:
➢ https://profit.pakistantoday.com.pk/2021/09/06/financial-crisis-of-omcs-worsens/
OGRA shows receivables of Rs1 billion for OMCs due to price differential claims:
In 2022, the Prime Minister asked OGRA to evaluate the PDC of the OMCs and then provide a
relevant subsidy. Due to the price differential claims (buying at higher prices and selling at lower
prices) the OMCs are already facing a tough cash position. OMCs are requesting to gain the
subsidies for the previous years as well amounting to Rs.10 billion and want prices to remain at
the current level till the month of July. They would also have to sell their inventories to different
sectors at lower rates and they already buy on credit basis. This would greatly impact the
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valuation of the total receivables from different industries if prices are not aligned with the cost.
Different sectors would then pay back lower amounts due to the price differential.
Future Outlook
Even after the OMCs requested a PDC, the prime minister announced a price cut to offer a relief
to the consumers. This would further increase the receivables in terms of the PDC in the coming
future which is not good for the OMCs as they already are facing immense cash challenges due
to irrecoverable receivables.
Sources:
PSO to refuse importing oil for inter-OMCs sale until receivables paid:
In 2022, PSO completely refused to import oil for other OMCs such as SNGPL. This was mainly
because of the inability to provide for the PDC by the government and also because their
receivables have been increasing since last year due to inter-OMCs sales. They also talked about
how it would be against the public interest if such anticompetitive practices were to take place.
PSO believes that other companies in the OMC industry can import their own oil and incur the
PDC risk as they do which would increase their receivables and lower the receivables of PSO.
Future Outlook
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Considering this, we can assume that the receivables will drop for PSO in the coming future as
major OMCs rely on PSO for their oil and other petroleum products. If they would not pay them
back, then most probably they would have to lose on their supplies.
Source:
➢ https://www.thenews.com.pk/print/940949-pso-refuses-oil-import-for-omcs#
Provision worth of Rs.100 billion to the power sector to meet its obligations:
In 2022, considering ever rising receivables of the OMCs, the government of Pakistan decided to
take certain measures. The power sector has been a key defaulter of the OMCs in Pakistan. The
government has decided to provide the sector with a subsidy so that it can make payments and
meet their obligations. This would result in the receivables of OMCs to reduce in the coming
future as they would receive their payments from different companies in the power sector and
especially CPPA (Central Power Purchasing Agency).
Future Outlook
Even though, the power sector has been provided with a subsidy worth of Rs.100 billion, the
government is trying to make measures to cut the volume of subsidy. This means that if the
government is able to do that, they would have to purchase more on credit and make late
payments and the situation would worsen in the near future and the receivables of the OMCs
would then increase.
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Source:
➢ https://newztodays.com/power-sector-in-pakistan/
Further Indication of an Increase in Trade Debts in the Future
➢ Increase in receivables by SNGPL (Biggest Defaulter)
Years 2018 2019 2020 2021
Payment from
SNGPL 118,873,402 53,457,589 68,296,465 93,510,930
➢ Historical Decrease in AR turnover and Increase in Trade Debts to Sales Ratio
Years 2017 2018 2019 2020 2021
Trade Debts 118,873,402 245,577,071 223,797,044 198,134,828 222,384,954
Average Trade Debts 148,572,210 182,225,237 234,687,058 210,965,936 210,259,891
Sales 878,146,786 1,056,900,563 1,185,484,132 1,121,161,417 1,223,678,351
AR Turnover 5.91 5.80 5.05 5.31 5.82
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AR/Sales Ratio 13.54% 23.24% 18.88% 17.67% 18.17%
Analysis: It can be analyzed that the trade debt turnover has decreased for three years till 2019.
This means the company was not efficient in collecting its receivables. However the ratio
improved during the pandemic as the government gave subsidies to its customers such as
GENCO and due to this their receivables decreased. The receivables from the biggest defaulters
are still there however.
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Economic analysis
Factors Effects
Gas Circular Debt to Increase Increase
Deregulation of Gas Sector Increase
Capacity Payments Decrease
Generation Capacity Expansion Plan Decrease
Line Losses Increase
Late Payment Surcharge Increase
Weak Governance of Wapda Increase
Trade debts went up in 2021 as compared to 2020 mainly because of lower recoveries from
SNGPL, GENCO and HUBCO which proved to be the biggest defaulters of the company. The
company’s receivables have been all time high which has also resulted in it having negative cash
flows. The management told that more than 80% of its total dues is held with the usual culprit-
power sector, with the non-payments likely to create oil supply crisis. There have been many
reasons due to which these companies have been unable to pay back to PSO which have been
discussed below.
Source:
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PAKISTAN STATE OIL
➢ Annual report, 2021
Gas Circular debt
Of the few major defaulters of PSO, Sui Northern Gas Pipelines Limited (SNGPL) emerged as
one in the LNG sector, which is due to pay around Rs.161 billion to PSO. The link between PSO
and SNGPL is that PSO imports LNG from Qatar and other suppliers and supplies it to SNGPL
which onward sell it to the customers as per pricing mechanism given by the government of
Pakistan.
The elephant in the room is the disparity between cost of gas and consumer tariffs given by the
government of Pakistan. There is no debate on the fact that gas prices in Pakistan have been a
long dichotomy. Cost of gas is far more than the prices at which these are supplied to the end
consumers. Moreover considering that the gas allocations and pricing decisions in Pakistan have
always been political, there have been a lot of debates on the inefficient consumer pricing
mechanism of natural gas.
The current cost of local natural gas is 700 per mmbtu while the cost for imported gas is 2400
per mmbtu. On the contrary the selling price for both local and imported gas stands at 350 per
mmbtu which means there is a loss of 350 for local and 2050 per mmbtu for imported gas.
Pakistan was lucky to have deep reserves of gas in Sui Baluchistan. Unfortunately, people
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consider the low-price pipeline gas availability is a fundamental right, however, it’s a luxury. But
because of the political decisions in Pakistan the luxury of providing cheap gas through
expensive infrastructure continued. Eventually the costs could not be recovered and the pressure
of low pricing dis-incentivized further exploration
The government continued to subsidize these losses with the promise to pay SNGPL. However
provision of cheap gas to households was manageable back when domestically produced gas was
abundant to meet local consumption requirements, and non-residential consumers who were
paying higher rates were enough in numbers to cross-subsidize the domestic supply. With natural
gas supply depleting, production has significantly reduced and would keep on falling. There is no
serious hope on new discoveries. That is why the country has diverted to the imported LNG to
bridge the widening gap. With the non-residential customers moving to RLNG, the remaining
good customers are not enough to cross subsidize domestic Thus receivables started to build up
with SNGPL claiming to have to receive over Rs.100 billion from domestic gas consumers
ultimately unable to pay back their gas suppliers which is PSO. This is also clearly highlighted in
the financial statements of PSO where they are making record profits on paper, however have a
negative cash flow due to being caught in the gas circular debt. The Company is also actively
pursuing the Government of Pakistan to get budgetary allocation for release of past due price
differential claims.
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Future Outlook
At current spot international prices, only a tiny fraction (10-15%) could be recovered from the
consumers at prevailing domestic prices. The government cannot afford to replace the depleting
gas with the imported RLNG without increasing the prices. It would be a financial suicide to
provide imported RLNG at throwaway prices to domestic consumers, while bearing all the cost.
All this would only result in the increased risk to gas circular debt and the bankruptcy of SNGPL
both of which the government cannot afford. So the only way to avoid trouble is increase prices,
which we predict will be done in phases as the government lack enough political will to increase
the prices all at once.
Source:
➢ https://tribune.com.pk/story/2317566/pso-receivables-soar-to-rs262b
➢ https://www.thenews.com.pk/amp/909334-top-omc-in-economic-mess-pso-s-receivables-surge-to-
rs398-billion
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➢ https://www.investing.com/analysis/pso-pakistans-circular-debt-crisis-has-run-its-largest-fuel-
retailer-dry-200303636
Deregulation of Gas sector
With country wide depleting gas reserves, production has significantly reduced and the
government has started to rely more on imported RLNG. However the huge difference between
the cost of gas and the price at which it is supplied, coupled with the inability of the government
to increase the prices has resulted in the huge growth of gas circular debt. The government
cannot sustain this structure any longer and the gas sector is bound to be deregulated as hinted by
the federal information minister Fawad Chaudhry with license being issued to 10 companies for
supplying gas to the people after its import.
Future Outlook
With this deregulation, there will be a boost in the economic activity as new players will enter
the market. They will sell at a price feasible to them which means the gas prices in the country
will increase ultimately reducing the circular debt and receivables of PSO. Moreover with the
existing pipeline network, SNGPL will be the major transporter of the gas to the end consumer
which is likely to increase their sales and thus giving them the ability to pay back PSO. So the
forecast would be that the deregulation of the gas sector is likely help SNGPL in paying back
PSO, thus reducing its trade debt.
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Source:
➢ https://www.businesstribune.com.pk/economy-news/government-initiates-deregulation-of-gas-
sector/
Capacity Payments
At the moment, Pakistan’s energy sector is a total mess. The main reason for this is the
negligence in the previous contracts done with the Independent Power Producers (IPPs). Under
those contracts the agreement was such that the cost of production was 20-25% more, guarantee
was given by the government of Pakistan to pay the IPPs in full, the contracts were front loaded,
and they were done on take or pay basis. All of this meant that the entire risk is on the
government of Pakistan and close to none on the IPPs. This was done with the prediction that in
the future consumption will increase. However the opposite happened with the generation being
a lot more and the consumption less resulting in a 40% gap between consumption and
generation.
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After suffering from decades of electricity shortages, now Pakistan is suffering from too much
generation which is an unexpected dilemma. Owing to higher electricity generation, the capacity
payments will also go up. The prime minister reported that
“Even if we do not use electricity in winter, the capacity payment would have to be made and all
this happened because of short-term planning and corruption”.
At another conference he said,
“The problem is that there is a huge gap in power consumption between winter and summer as
power consumption from around 24,000MW in summer drops to 8,000 or 9,000MW in winter,
and the country would still be making capacity payment against the entire generation, and this
was happening because of short-term planning,”
Due to close to no measures being taken, capacity payments have swelled 53% from 2018 to
2021.
Future Outlook
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Given the current scenario, capacity payments have continued to increase and are expected to
touch a high of Rs1.6 trillion in 2023 as can be seen in the graph above. However the
government has taken steps to reduce the capacity payment and ultimately the circular debt.
Under negotiations with the IPPs the government has been able to save Rs.120 billion every year
along with some cancellations of contracts. Moreover experts are of the view that the
government would have to offer incentives to industries and other consumers to consume more
electricity in a bid to reduce the burden of capacity payments.
We predict that in the future the government will be able to settle the capacity payments as more
reforms and negotiations are taking place. With incentives on board or industries to reduce the
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burden, gradually the payments will be settled and ultimately major IPPs like HUBCO, KAPCO
and GENCO will pay back PSO after recovering their payments.
Source:
➢ HUBCO Annual Report, 2021
➢ https://tribune.com.pk/story/2296006/power-consumers-to-pay-rs11tr
➢ https://www.thenews.com.pk/print/923506-new-terms-with-ipps-to-help-govt-save-rs120-billion-
every-year
➢ https://www.thenews.com.pk/print/784220-revised-power-tariff-all-47-ipps-sign-master-
agreements
➢ https://www.brecorder.com/news/40057588/capacity-payment-charges-will-soar-to-rs15trn-by-
2023
Indicative Generation Capacity Expansion Plan 2021-30 (IGCEP)
Pakistan has one of the biggest potentials for hydroelectricity generation in the world, with a
generation potential of almost 50,000 MW. Keeping in mind that the IPPs uses non-renewable
sources of fuel, oil and coal which are also very expensive NEPRA has approved the first ever
Indicative Generation Capacity Expansion Plan 2021-30 (IGCEP-2021) under provisions of the
National Transmission & Despatch Company (NTDC) grid code, and envisions increasing
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PAKISTAN STATE OIL
renewable energy share in total mix to 60 percent. IFCEP would substitute these non-renewable
sources of energy with indigenous resources including hydel, local coal, bagasse, wind and solar
on least cost basis.
The NTDC officials said that we should not worry about availability of power as the plan will be
revised each year in accordance with ground progress of projects and demand and supply
position which would also ensure that there is no chance of any sudden jerk in supply and
demand.
Future Outlook
IGCEP (2021-30) would not only help in solving the energy crisis in Pakistan but would also
reduce the government’s reliance on the IPPs and help in paying them back which would
ultimately help PSO in recovering its receivables. Moreover this would also reduce the
possibility of an increase in the trade debt of PSO as the project aims at producing electricity
through renewable sources of energy. However the NTDC officials argued that this would only
be possible if the government does not give commitments to more projects over and above the
requirement, as payments which is already a problem will only worsen.
Source:
➢ https://www.thenews.com.pk/print/895082-nepra-approves-igcep-2021-30-envisions-re-share-of-
60-percent
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PAKISTAN STATE OIL
Weak Governance of WAPDA
The current energy crisis has been a critical socio economic issue in Pakistan and is rooted in the
country’s poor governance. The electricity shortages are mainly due to widespread inefficiency
and corruption in the Water and Power Development Authority (WAPDA) and the KESC with
the decision-makers unable to do anything about it. The multiple problems include, poor supply-
demand management, kunda-system or power thefts, costly input and the rising recurring costs
Many public and private power producers have to shut down their power plants due to
suspension of fuel supply because of outstanding dues of power producers to the PSO.
Future Outlook
Effective management, check and balance in the transmission and distribution system, starting of
new projects and public awareness is the need of the hour to tackle this crisis. Pakistan has some
impressive assets in the energy sector. A number of new projects have also been started and there
has been a great surge in the generation of electricity within the country. However this has
resulted in the rise of other problems but there have been advantages as well. As for the future,
there is enough capacity to provide for the demand, the only thing required is that we have to
create an enabling environment to provide energy fast relief to the nation.
Source:
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PAKISTAN STATE OIL
➢ https://www.dawn.com/news/710729/poor-governance-deepens-energy-crisis
Line losses
The economy as a whole suffers from unreliable and poor quality of electricity provision. Of the
many factors contributing, one of them is the high transmission and distribution losses. Under
CPEC agreements, a large amount of generation capacity was added without upgrading
transmission and distribution. Due to this the transmission and distribution losses for almost all
the companies is more than 15% while the recovery revenue is not enough. The visible evidence
of electricity theft in major cities only makes the matters worse.
In November 2019, KE initiated the ambitious Project Sarbulandi in six of the twelve high loss
IBCs to improve their performance. Several innovative were introduced and complementary
programme features, such as counselling of local influentials to gain their support, gaining
confidence of people to meter the unmetered, community engagement and facilitation for
winning the trust of customers.
Future Outlook
During Covid-19, Project Sarbulandi remained a huge success as it was able to improve the loss
to recovery ratio by a significant amount, reducing the electricity theft as well. True potential of
Project Sarbulandi is yet to be explored and with more such wide scale initiatives, we predict that
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PAKISTAN STATE OIL
in the future line losses will be reduced as the recovery will increase, coupled with projects to
improve the transmission lines. This will help the IPPs in making profit thus paying back PSO.
Source:
Late payment surcharge
During the year late payment surcharge was made by HUBCO and KAPCO on account of
delaying payments. This was accounted for in the payment of Rs.13.4 billion by the power sector
to PSO. The amount received against the late payment surcharge from HUBCO and KAPCO
contributed materially in easing the financial strain on the company’s cost of funds for the year.
Future Outlook
Since the power sector has gradually started to pay off, we predict that in the coming year they
will increase their payments to PSO without delaying them any further. This can also be
supported by the past data.
Source:
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PAKISTAN STATE OIL
Methods chosen
Methods used
Naïve (15 years)
Page | 390
PAKISTAN STATE OIL
1.4E+09
1.2E+09
1E+09
800000000
600000000
400000000
200000000
0
2006 2008 2010 2012 2014 2016 2018 2020 2022
Excel Forecasting
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PAKISTAN STATE OIL
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PAKISTAN STATE OIL
1.4E+09
1.2E+09
1E+09
800000000
600000000
400000000
200000000
0
2005 2010 2015 2020 2025 2030
Horizontal Analysis
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PAKISTAN STATE OIL
Loans and Advances
Breakdown:
Vertical
Loans and Advances 2021 Analysis
Secured
Loans and advances to executives and employees
Current portion of long-term loans and advances, including
Rs. 83,632 (2020: Rs.72,293) to executives 196,686 56.47%
Short-term loans and advances 129,815 37.27%
326,501 93.74%
Unsecured
Advance to suppliers 19,932 5.72%
Advance for Company-owned filling stations 1,863 0.53%
21,795 6.26%
348,296 100.00%
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PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Loans and Advances -11.45% 10.97% -79.63% 2.43% -1.17% -11.20%
2021 2020 2019 2018 2017 2016
Loans and Advances 0.09% 0.12% 0.09% 0.48% 0.48% 0.55%
Forecasted Values
After analyzing all the data, we predict that the account will decrease at an increasing rate
between 10-15% for the next 5 years. This prediction can also be supported with the trendline
graph below.
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PAKISTAN STATE OIL
400.00%
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(50.00%)
(100.00%)
(150.00%)
Company Analysis
Factors Effects
Loans and advances to executives and Increase
employees increased
Increase in Short Term loans and advances Increase
Advance to suppliers decreased Decrease
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PAKISTAN STATE OIL
decrease.
Loans and advances

2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Loans
and Advances of PSO year by year from 2016 to 2020.
Year 2021:
• Advance to suppliers decreased by 86.65%.
• Advance for Company-owned filling stations decreased by 52.9%.
Source:
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PAKISTAN STATE OIL
Year 2020:
• Advance to suppliers increased by 258.2%.
• Loans and advances to executives and employees increased by 31.8%.
Source:
Year 2019:
• Decrease in Short Term loans and advances by 47.6%
Source:
Year 2018:
• Loans and advances to executives and employees increased by 31.8%.
• Increase in Short Term loans and advances by 20.4%
Source:
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PAKISTAN STATE OIL
Year 2017:
• Loans and advances to executives and employees decreased by 4.41%
• Decrease in Short Term loans and advances by 2.3%
Source:
Year 2016:
• Advance for Company-owned filling stations decreased by 96.85%.
Source:
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PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Reduction in Long Term Loans and Advances Decrease
Reduction in advances to foreign suppliers Decrease
Losses due to the pandemic reduce the availability of loans and advances Decrease
in order to avail the latest data ate HTL, APL, BPL and PSO. The total values of loans and
advances of all five years of the companies are given below.
Total Short Term Loans and Advances of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 1,896,038 1,919,400 390,909 433,797 384,136
HTL 125,795,530 80,222,041 53,856,012 151,181,999 89,718,454
APL 257,642 785947 927,887 72,198 454,682
BPL 75,209 120,714 59,615 53,084 72,027
TOTAL 128,024,419 83,048,102 55,234,423 151,741,078 90,629,299
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PAKISTAN STATE OIL
Total Market Share of all Companies in 5 Years w.r.t Total Short Term Loans and
Advances
Total Market
Companies Share
PSO 0.99%
HTL 98.45%
APL 0.49%
BPL 0.07%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Short Term Loans and Advances
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PAKISTAN STATE OIL
Total Market Share

120.00%
98.45%
100.00%
80.00%
60.00%
40.00%
20.00%
0.99% 0.49% 0.07%

0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of short term
loans and advances in their accounts. PSO is in the second place.
PSO’s Short Term Loans and Advances Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 1.48% 2.31% 0.71% 0.29% 0.42%
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PAKISTAN STATE OIL
Graph Indicating PSO’s Short Term Loans and Advances Share in the Industry w.r.t
Years

2.50%
2.31%
2.00%
1.50% 1.48%
1.00%
0.71%
0.50%
0.42%
0.29%
0.00%
2017 2018 2019 2020 2021
Analysis: the market share of PSO in terms of short term loans and advances was the highest in
2018. However, it has fallen drastically after that. In 2021, it increased again. That is mainly
because HTL’s market share dropped considerably for this account in 2021. But for PSO, the fall
in 2021 for this account was not that drastic.
Yearly Change/Growth in Short Term Loans and Advances of PSO
Page | 403
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
PSO Yearly Growth 0.00% 1.23% -79.63% 10.97% -11.45%
Graph Indicating Change/Growth in Short Term Loans and Advances of PSO
PSO Yearly STL&A Growth

20.00%
10.00% 10.97%
0.00% 0.00% 1.23%

2017 2018 2019 2020 2021
-10.00% -11.45%
-20.00%
-30.00%
-40.00%
-50.00%
-60.00%
-70.00%
-80.00% -79.63%
-90.00%
Analysis: It can be analyzed that the highest loans and advances were given out in 2020. These
dropped in 2021. The fall was drastic in 2019 for PSO’s short term loans and advances.
Growth/Change in the Industry’s Short Term Loans and Advances Overtime

Page | 404
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth 27.92% -35.13% -33.49% 174.72% -40.27%
Graph Indicating Growth/Change in the Industry’s Short Term Loans and Advances
Overtime

200.00%
174.72%
150.00%
100.00%
50.00%
27.92%
0.00%
2017 2018 2019 2020 2021
-35.13% -33.49%
-40.27%
-50.00%
-100.00%
Analysis: The industry has also experienced a downwards trend in its loans and advances from
2017-2019. In 2020 it was the highest as all the OMCs gave out maximum number of loans and
Page | 405
PAKISTAN STATE OIL
advances to its employees. In 2021 it dropped considerably. This aligns well with the long term
loans and advances account as well which had similar changes to it.
Factors affecting Short Term Loans and Advances
Direct Impact of Long Term Loans and Advances on its Current Portion
In the analysis of long term loans and advances, it was already established that they are expected
to fall. That account already had a decreasing trend and that would impact its current portion as
well. The OMCs do not give out much loans and advances to their employees. They have
retirement and other service benefits for the employees. The loans and advances are only for
unforeseen circumstance such as the pandemic due to which in 2020, the companies offered
more loans to the employees.
Future Outlook
The account is expected to fall in the future because it already had minimal growth levels. The
current portion increased in 2020 as its long term account increased. Otherwise, it is expected to
fall in the near future as the OMCs need more money for investments instead.
Source:
Page | 406
PAKISTAN STATE OIL
➢ http://www.diva-portal.org/smash/get/diva2:429667/fulltext01
Losses during Pandemic Lead to Lower Availability of Funds for Loans and Advances
When in 2019, lockdowns were imposed and the companies were making losses, they did not
have many funds available for the employees to give them loans and advances. However, in late
2020’s the lockdown was lifted and economic activity started again. This led to them having
more funds available for the employees.
Future Outlook
The OMCs would be there in time of need for their employees; however, otherwise this
particular account will decrease as it only increased due to the pandemic.
Source:
➢ https://www.pacra.com/sector_research/OMCsPACRAResearchNov21.pdf
➢ https://cabinet.gov.pk/SiteImage/Misc/files/EC_Report.pdf
Page | 407
PAKISTAN STATE OIL
➢ https://www.unido.org/sites/default/files/files/2021-
03/UNIDO%20COVID19%20Assessment_Pakistan_FINAL.pdf
Decrease in Advances given to Suppliers as Cheaper LNG was Imported by OMCs
The OMCs showed heavy reliance on the import of LNG which is a lot cheaper than oil. This
made their raw material cheaper and led to lower advances being paid to the suppliers as well.
Up to seven million tonnes of LNG was imported last year. A major chunk of this comes from
Qatar Energy the producer with which Pakistan has long term contracts as well as suppliers like
the Italian multinational oil and gas company ENI and the Singapore-based Gunvor. Some more
is bought from the same suppliers at the spot rate when the gas runs out. Not surprisingly, the
LNG being imported has brought little relief for its people, with an increasing number of urban
homes resorting to using LPG cylinders in the kitchen and to fire the water geysers, with the
industries, especially in Karachi, turning to diesel, over the last several years.
Future Outlook:
It is evident that with the presence of cheaper oil and the fact that Saudi Arabia is making
policies to provide oil to Pakistan and with the facilitation of the CPFTA, they would have to pay
lower advances to suppliers as lower costs will be incurred by them.
Source:
Page | 408
PAKISTAN STATE OIL
➢ https://www.aljazeera.com/economy/2021/9/28/pakistans-dependence-on-natural-gas-is-
turning-into-a-nightmare
➢ https://www.thenews.com.pk/print/937557-pm-slashes-petrol-diesel-prices-by-rs10-litre-
power-tariff-rs5-unit
Page | 409
PAKISTAN STATE OIL
Methods chosen
Methods used
Page | 410
PAKISTAN STATE OIL
400.00%
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2010
2014
2018
2022
2026
2007
2008
2009
2011
2012
2013
2015
2016
2017
2019
2020
2021
2023
2024
2025
(50.00%)
(100.00%)
(150.00%)
Page | 411
PAKISTAN STATE OIL
Short term deposits and
prepayments
Breakdown:
Short Term Deposits and Prepayments 2021 Vertical Analysis
Deposits - interest free 20,605 9.28%
Duty and development surcharge 53,006 23.88%
Deposit against court orders 73,611 33.16%
Prepayments 148,348 66.84%
221,959 100.00%
Page | 412
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Short-Term Deposits and -90.01% -19.48% -3.55% -42.47% 116.64% 40.37%
Prepayments
2021 2020 2019 2018 2017 2016
Short-Term Deposits and 0.06% 0.69% 0.71% 0.83% 1.47% 0.78%
Prepayments
Forecasted Values
We predict that the account will continue to fall, in line with the historical data, for the next 5
years between a range of 20-30%. This can be supported with the graph below.
Page | 413
PAKISTAN STATE OIL
Change
200.00%
150.00%
100.00%
50.00%
0.00%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(50.00%)
(100.00%)
(150.00%)
Company Analysis
Factors Effects
Decrease in Duty and development surcharge Decrease
Decrease in Rentals (Prepayments) Decrease
decrease.
Page | 414
PAKISTAN STATE OIL
Short-Term Deposits and Prepayments

7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Short-
Term Deposits and Prepayments of PSO year by year from 2016 to 2020.
Year 2021:
• Decrease in Duty and development surcharge by 99.01%.
• Decrease in Prepayments by 64.6%.
Source:
Year 2020:
Page | 415
PAKISTAN STATE OIL
Source:
Year 2019:
Source:
Year 2018:
• Decrease in Rentals (Prepayments) by 32.2%
Source:
Year 2017:

Page | 416
PAKISTAN STATE OIL
• Increase in Duty and development surcharge by 125.1%.
Source:
Year 2016:
• Increase in Duty and development surcharge by 125.2%.
Source:
Page | 417
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Fall in duty and development surcharge of OMCs Decrease
Iraq freezes crude oil prepayment deal Decrease
in order to avail the latest data ate HTL, APL, BPL and PSO. The total values of short term
deposits and prepayments of all five years of the companies are given below.
Total Short Term Deposits and Prepayments of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 5,788,052 3,329,991 3,211,845 2,586,292 258,402
HTL 24,413,272 61,026,609 60,831,795 31,144,473 19,316,915
APL 910,353 1,641,485 890,788 4,797,007 1,560,408
BPL 5,966 11,601 5,545 2,298 99,920
TOTAL 31,117,643 66,009,686 64,939,973 38,530,070 21,235,645
Total Market Share of all Companies in 5 Years w.r.t Total Short Term Deposits and
Prepayments
Page | 418
PAKISTAN STATE OIL
Total Market
Companies Share
PSO 6.84%
HTL 88.69%
APL 4.42%
BPL 0.06%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Short Term Deposits and Prepayments
Page | 419
PAKISTAN STATE OIL
Total Market Share

100.00%
88.69%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00% 6.84%
4.42%
0.06%
0.00%
PSO HTL APL BPL
deposits and prepayments in their accounts. PSO is in the second place.
PSO’s Short Term Deposits and Prepayments Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 18.60% 5.04% 4.95% 6.71% 1.22%
Page | 420
PAKISTAN STATE OIL
Graph Indicating PSO’s Short Term Deposits and Prepayments Share in the Industry w.r.t
Years

20.00%
18.60%
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.71%
6.00%
5.04% 4.95%
4.00%
2.00%
1.22%
0.00%
2017 2018 2019 2020 2021
Analysis: the market share of PSO in terms of short term deposits and prepayments has
experienced a decreasing trend throughout the years. These only increased in 2020. However, it
fell further in 2021. The decrease in PSO’s short term deposit and prepayments was lesser than
the industry’s decrease in this account.
Yearly Change/Growth in Short Term Deposits and Prepayments of PSO
Page | 421
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
PSO Yearly PPE
Growth 116.64% 24.64% -3.55% -19.48% -90.01%
Graph Indicating Change/Growth in Short Term Deposits and Prepayments of PSO
PSO Yearly STD&P Growth

150.00%
116.64%
100.00%
50.00%
24.64%
0.00% -3.55%
2017 2018 2019 2020 2021
-19.48%
-50.00%
-90.01%
-100.00%
-150.00%
Analysis: It can be analyzed that the highest short term deposits of the company were in 2017.
Since then, they have been falling and there is a decreasing trend. In 2021, the growth was the
Page | 422
PAKISTAN STATE OIL
lowest and had a negative trend. This means that these deposits and prepayments have been
decreasing since 2017.
Growth/Change in the Industry’s Short Term Deposits and Prepayments Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth 45.26% 112.13% -1.62% -40.67% -44.89%
Graph Indicating Growth/Change in the Industry’s Short Term Deposits and Prepayments
Overtime

120.00%
112.13%
100.00%
80.00%
60.00%
45.26%
40.00%
20.00%
0.00% -1.62%
2017 2018 2019 2020 2021
-20.00%
-40.00% -40.67% -44.89%

-60.00%
Page | 423
PAKISTAN STATE OIL
Analysis: The industry has also experienced a downwards trend in its short term deposits and
prepayments. This is majorly because all the OMCs experienced this trend. In 2020, APL had an
increase in this account but all other accounts faced a downwards trend.
Factors effecting Short Term Deposits
Iraq Freezes its Crude Oil Prepayment Deal, Affecting OMCs in Pakistan
Iraq has decided to freeze its first crude oil prepayment deal, which had aimed to boost its
finances, because oil prices are rising. The proposed change follows a decision by Iraq, OPEC’s
second-biggest producer, to cut its oil exports to India this year to comply with OPEC quotas just
as Indian refiners ramp up output to meet a demand uplift as the world’s third-largest crude
importer emerges from the COVID-19 pandemic.
Future Outlook
A fall in prepayments would reduce this account in the future as well. The international oil prices
are expected to increase in the future due to which Iraq would be reluctant to offer the
prepayment scheme to its customers such as Pakistani OMCs
Sources:
➢ https://www.orfonline.org/research/energy-news-monitor-volume-xvii-issue-40/
Page | 424
PAKISTAN STATE OIL
➢ https://profit.pakistantoday.com.pk/2022/02/01/ocac-for-enhanced-trade-finance-
facilities-for-omcs-refineries/
Fall in Duty and Development Surcharges paid by OMCs
In 2021, there was a drastic fall in the duty and development surcharge because of the tax free
imports that were taking place from China under the CPFTA. This allowed the companies to
import oil at cheaper rates and fewer deposits were required. Moreover, there was a relief
provided by the government on the import of crude oil as that was shifted to petrol and diesel
instead. Crude oil became less expensive in this way and fewer deposits were required by the
OMCs in Pakistan.
Future Outlook
Government is in the favor of promoting the OMCs in Pakistan and several measures have been
taken by the government to facilitate easy operation of the OMCs. So, deposits and prepayments
are expected to fall in the future
Source:
➢ https://www.livemint.com/economy/better-margins-to-aid-omcs-in-second-half-
11639071172561.html
Page | 425
PAKISTAN STATE OIL
➢ https://www.moneycontrol.com/news/economy/policy/if-oil-remains-above-110bbl-
burden-will-be-shared-by-govt-omcs-and-consumers-cea-8350621.html
➢ https://www.moneycontrol.com/news/business/economy/constant-rate-hikes-may-not-be-
needed-if-crude-oil-prices-stabilise-at-current-level-8350351.html
Page | 426
PAKISTAN STATE OIL
Methods chosen
Methods used
Page | 427
PAKISTAN STATE OIL
Other Receivable
Breakdown:
Vertical
Other Receivables 2021 Analysis
Due from GoP, a related party, on account of:
Price differential claims (PDC)
- on imports (net of related liabilities) of Motor gasoline 1,350,961 6.33%
- on High-Speed Diesel (HSD) 602,603 2.82%
- on Ethanol E-10 fuel 27,917 0.13%
- on account of supply of Furnace Oil to K-Electric
Limited (KEL) at Natural Gas prices 3,908,581 18.32%
- GENCO receivables 3,407,357 15.97%
9,297,419 43.58%
Unfavorable exchange differences on FE-25 borrowings
due from GoP - a related party
Page | 428
PAKISTAN STATE OIL
Excise, Petroleum Development Levy (PDL), custom duty
and
regulatory duty - due from related party 259,793 1.22%
9,557,212 44.80%
7,954,293 37.28%
Handling and hospitality charges 729,644 3.42%
Receivable from refineries 2,928,136 13.72%
Insurance and other claims 234,827 1.10%
Provision for impairment- considered doubtful -90,201 -0.42%
144,626 0.68%
Workers' Profit Participation Fund 145,397 0.68%
Inland Freight Equalization Margin (IFEM) including freight
equalization receivable from GoP (related party) 2,648,016 12.41%
Provision for impairment -46,000 -0.22%
2,602,016 12.20%
Others
Page | 429
PAKISTAN STATE OIL
- Considered good 6,830,623 32.02%
- Considered doubtful 1,484,981 6.96%
8,315,604 38.98%
6,830,623 32.02%
21,334,735 100.00%
2021 2020 2019 2018 2017 2016
Other Receivables -10.35% -58.10% 72.02% 44.02% -12.25% 33.63%
2021 2020 2019 2018 2017 2016
Other Receivables 5.15% 6.34% 12.52% 8.20% 5.84% 7.63%
Forecasted Values
Page | 430
PAKISTAN STATE OIL
Although the other receivable for the company can be seen decreasing for the past 2 years, the
economic factors and industrial factors suggest that the other receivables for the company will be
increasing in the future mainly on account of the PDC. We predict that the account will increase
between 20-25%. This can be supported with the graph below.
60,000,000.00
50,000,000.00
40,000,000.00
30,000,000.00
20,000,000.00
10,000,000.00
0.00
2012
2025
2007
2008
2009
2010
2011
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Series1 Series2
Company Analysis
Factors Effects
Increase in sales tax receivables Increase
Increase in Inland Freight Equalization Margin Increase
Page | 431
PAKISTAN STATE OIL
Loss receivable on FE loans Decrease
Decrease in the Excise, Petroleum Development Decrease
Levy
Other Receivables
60000000
50000000
40000000
30000000
20000000
10000000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease of the other
receivables account of PSO year by year from 2021 to 2016.
Year 2021:
Page | 432
PAKISTAN STATE OIL
When we take a look at the other receivables account in the year 2021, a decrease of 10.3% is
seen due to the following reason;
• Subsidy receivables remained static: The subsidy receivables from the government of
Pakistan remained the same through year 2020-2021. As at June 30, 2021, the Group’s
receivable from Government of Pakistan and customers amounted to Rs. 235,254 million
which included trade debts receivables of Rs. 183,896 million
• Excise, Petroleum Development Levy (PDL), custom duty and regulatory duty was
due: It had not been paid to PSO due to which it remained static.
• Increase in sales tax receivables
• Claims Receivables remain constant.
• Increase in Inland Freight Equalization Margin (IFEM): Due from the government of
Punjab.
Source:
Year 2020:
Page | 433
PAKISTAN STATE OIL
• Subsidy receivables remained static: The subsidy receivables from the government of
Pakistan remained the same through year 2020-2021.
• Decrease in the Excise, Petroleum Development Levy (PDL), custom duty and
regulatory duty.
• Claims Receivables remain constant.
• Increase in Inland Freight Equalization Margin (IFEM): Due from the government of
Punjab.
• Recovery of exchange loss receivable on FE loans: Net unfavorable exchange
difference of Rs. 1,799 million, net of recoveries during the year of Rs. 27,890 million,
arising on foreign currency borrowings (FE-25), obtained under the directives of Ministry
of Finance, which was to be settled in accordance with the instructions.
Sources:
Year 2019:
When we take a look at the other receivables account in the year 2019, an increase of 72.02% is
Page | 434
PAKISTAN STATE OIL
➢ Exchange loss receivable booked on FE loans amounting to Rs. 30.2 bn: A net
unfavorable exchange difference of Rs.30,244 million arising on foreign currency
borrowings (FE-25), obtained under the directives of Ministry of Finance. About Rs48bn
are payable to the PSO by the Pakistan International Airlines (PIA) and the federal
government on account of price differential claims and exchange rate loss.
➢ Decrease in the Excise, Petroleum Development Levy (PDL), custom duty and
regulatory duty
➢ Increase in sales tax receivables
➢ Increase in Inland Freight Equalization Margin (IFEM): Due from the government of
Punjab.
Sources:
Year 2018:
When we take a look at the other receivables account in the year 2019, an increase of 44.02% is
• Exchange loss receivable booked on FE loans amounting to Rs. 9.7 bn
Page | 435
PAKISTAN STATE OIL
regulatory duty
• Decrease in sales tax receivables
• Decrease in Inland Freight Equalization Margin (IFEM): Due from the government
of Punjab.
Source:
Year 2017:
• Increase in the Excise, Petroleum Development Levy (PDL), custom duty and
regulatory duty
• Decrease in sales tax receivables
• Decrease in Inland Freight Equalization Margin (IFEM): Due from the government
of Punjab.
Source:
Page | 436
PAKISTAN STATE OIL
Year 2016:
When we take a look at the other receivables account in the year 2018, An increase of 33.63% by
Rs. 6.7 bn is seen due to the following reason;
regulatory duty
• Increase in sales tax receivables
• Increase in Inland Freight Equalization Margin (IFEM): Due from the government
of Punjab.
Source:
Page | 437
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Increase in price differential claims of OMCs Increase
Increase in supplies to Karachi Electric of Furnace Oil at Natural Gas Prices Increase
Increase in receivables of regulatory duty of OMCs Increase
Receivables of OMCs from Refineries Increase Increase
Increase in Insurance Claims on Inventory Losses Increase
in order to avail the latest data ate HTL, APL, BPL and PSO. The total values of other
receivables of all five years of the companies are given below.
Total Other Receivables of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 22,925,566 33,017,635 56,797,908 23,797,120 21,334,735
HTL 243,868,294 109,129,419 32,546,523 34,306,841 141,381,054
APL 2,572,236 2,526,541 3,080,607 4,443,495 5,246,840
BPL 41,326 33,475 83,400 19,459 41,726
Page | 438
PAKISTAN STATE OIL
TOTAL 269,407,422 144,707,070 92,508,438 62,566,915 168,004,355
Total Market Share of all Companies in 5 Years w.r.t Total Other Receivables
PSO 21.42%
HTL 76.13%
APL 2.42%
BPL 0.03%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Other Receivables
Page | 439
PAKISTAN STATE OIL
Total Market Share

Total Market Share
76.13%
21.42%
2.42%
0.03%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of other
receivables in their accounts. PSO is in the second place.
PSO’s Other Receivables Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 8.51% 22.82% 61.40% 38.03% 12.70%
Page | 440
PAKISTAN STATE OIL
Graph Indicating PSO’s Other Receivables Share in the Industry w.r.t Years

70.00%
60.00% 61.40%
50.00%
40.00%
38.03%
30.00%
22.82%
20.00%
12.70%
10.00%
8.51%
0.00%
2017 2018 2019 2020 2021
Analysis: the market share of PSO in terms of other receivables has had an increasing trend till
2019. However, the market share was the highest in 2019 but dropped significantly after that.
Yearly Change/Growth in Other Receivables of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth -12.25% 44.02% 72.02% -58.10% -10.35%
Page | 441
PAKISTAN STATE OIL
Graph Indicating Change/Growth in Other Receivables of PSO
PSO Yearly Other Receivables Growth

80.00%
72.02%
60.00%
44.02%
40.00%
20.00%
0.00% -10.35%
2017 2018 2019 2020 2021
-12.25%
-20.00%
-40.00%
-60.00% -58.10%
-80.00%
Analysis: It can be analyzed that the highest other receivables for PSO were in 2019 because the
growth was drastic. However, it was followed by a sharp drop in 2020 and can be seen to
increase again in 2021.
Growth/Change in the Industry’s Other Receivables Overtime
Years 2017 2018 2019 2020 2021
Page | 442
PAKISTAN STATE OIL
Industry's Yearly
Growth 289.43% -46.29% -36.07% -32.37% 168.52%
Graph Indicating Growth/Change in the Industry’s Other Receivables Overtime

350.00%
300.00%
289.43%
250.00%
200.00%
168.52%
150.00%
100.00%
50.00%
0.00%
2017 2018 2019 2020 2021
-46.29% -36.07% -32.37%
-50.00%
-100.00%
Analysis: The industry has also experienced a downwards trend till 2018. However, in 2019 the
value started to increase as PSO’s market share increased and so did that of APL and BPL. The
growth was slow till 2020 but in 2021, the receivables can be seen to increase again.
Page | 443
PAKISTAN STATE OIL
Breakdown of Receivables of Different OMCs
➢ PSO - (2020-2021)
➢ HTL – (2020-2021)
Page | 444
PAKISTAN STATE OIL
➢ APL – (2020-2021)
➢ BPL – (2020-2021)
Page | 445
PAKISTAN STATE OIL
Factors affecting Other Receivable
Issue of Price Differential Pertains, Increasing Other Receivables of OMCs
Price differential claims of oil marketing companies OMCs and refineries in the amount of
approximately Rs32.07 billion were estimated for the month of March 2022 (including PDC of
earlier period from 1-4, November 2011 and this price differential is to be paid to the oil
marketing companies and refineries by the government as a subsidy. The Petroleum Division
further stated in the proposal that as OGRA has projected that owing to rising trend of oil prices
in the international market, the PDC for the first and second fortnights of April 2022 is Rs31.80
billion and Rs35.73 billion, respectively.
Future Outlook
Page | 446
PAKISTAN STATE OIL
International oil prices are going to rise in the future and the price differential claim would also
rise due to this. This would lead to increase in receivables for the PDC of OMCs.
Sources:
➢ https://www.brecorder.com/news/40168355/price-differential-claims-of-omcsrefineries-
rs6881bn-supplementary-grant-approved-by-ecc
➢ https://www.thenews.com.pk/print/937868-oil-sector-fears-price-differential-claims-to-
remain-unpaid
➢ https://www.thenews.com.pk/print/939427-rs20-bn-proposed-for-paying-price-
differential-to-omcs
➢ https://www.pakistantoday.com.pk/2022/04/19/ecc-approves-rs68-billion-grant-for-
disbursement-of-price-differential-claims-to-omcs/
Provision of Furnace Oil to K-Electric at Natural Gas Prices
The K-Electric Limited (KEL) Has Secured The Supply Of 25,000 Tonnes Of Furnace Oil To
Ensure Maximisation Of All Available Generation Capacity. The OMCs experienced a price
differential claim because of this as well as furnace oil is extremely expensive to produce but the
company gets it at cheaper a rate which is unfair to the OMCs because they face losses in the
form of other receivables because of this.
Page | 447
PAKISTAN STATE OIL
Future Outlook
The production of electricity is becoming more expensive day by day. The companies do not
have enough funding available to spend in the way of their payables. Due to this, the value of
other receivables is expected to only increase in the future because of this.
Source:
➢ https://technologytimes.pk/2021/06/26/k-electric-secures-25000-tonnes-of-furnace-oil-to-
maintain-supply/
➢ https://www.ke.com.pk/k-electrics-online-fuel-cost-adjustment-calculator-goes-live/
➢ https://tribune.com.pk/story/1700165/alternative-fuel-k-electric-expects-lower-tariff-lng-
use-plants
➢ https://profit.pakistantoday.com.pk/2022/02/07/petroleum-division-seeks-amendment-to-
petroleum-product-ordinance-to-supply-rlng-to-k-electric/
➢ https://tribune.com.pk/story/2355536/power-tariffs-to-go-up-for-a-month-across-country
Increase in Price Differential Claims of OMCs due to Increase in Regulatory Duty
The Economic Coordination Committee (ECC) of the Cabinet in its meeting dated March 07,
2018 considered the summary submitted by Petroleum Division on the subject of regulatory duty
on crude oil and petroleum products and approved reimbursement of claims of OMCs on account
of non-recovery of regulatory duty.
Page | 448
PAKISTAN STATE OIL
Future Outlook
In the short run, this would also increase the other receivables of the OMCs but in the long run,
these will be received by the OMCs.
Sources:
➢ https://profit.pakistantoday.com.pk/2018/10/17/fbr-increases-regulatory-duty-on-570-
imported-items-by-5-to-10pc/
Losses faced by Refineries generate Receivables in OMCs Accounts
As discussed earlier, the refineries in Pakistan are not operating at full capacity and that is
mainly because of the production of out of demand products such as furnace oil. Due to this, they
kept going on strikes and lowered their production and OMCs used to rely on imports for a short
term solution. The refineries or the holding companies had to pay the OMCs and they were
unable to do so. This includes amount due from Pak-Arab Refinery Limited - (related party) in
respect of sharing of crude oil, freight and other charges and National Refinery Limited in
respect of pipeline charges. Due to the short-term nature of other receivables, their carrying
amount is considered to be the same as their fair value.
Page | 449
PAKISTAN STATE OIL
Future Outlook
This issue will pertain until the refineries are given incentives and motives to produce the
products which are in demand. If the refineries keep holding furnace oil, they will face liquidity
issues in the future, leading to an increase in this account.
Sources:
➢ https://www.pacra.com/summary_report/RR_809_9130_09-Jun-21.pdf
➢ https://www.thenews.com.pk/print/946309-refineries-refuse-output-boost-citing-cash-
crunch
➢ http://lahoreschoolofeconomics.edu.pk/EconomicsJournal/Journals/Volume%2015/Issue
%20SP/04%20Syed%20Sajid%20EDITED%20TTC%2011-10-10.pdf
OMCs seek Insurance Claims for Inventory Losses
The value of the receivables also increased of OMCs when they were seeking insurance claims
on the account of destruction of pipelines, bridges etc. They also experienced inventory losses in
2020 due to the pandemic and the fact that the government did not allow the companies to raise
the prices. Oil Marketing Companies (OMCs) take comprehensive Insurance Policy under
‘Public Liability Policy for Oil Industries’ to provide speedy relief to the affected persons in case
Page | 450
PAKISTAN STATE OIL
of LPG related accidents. It covers all LPG consumers registered with OMCs. Public Liability
Insurance Policy taken by OMCs covers losses arising out of accidents where LPG is the primary
cause of fire and not for cases where the primary cause of fire is other sources/reason wherein
LPG cylinders gets engulfed and subsequently burst. It includes insurance claim on account of
replacement cost for damaged components of the pile bridge and estimated inventory losses of
the Subsidiary Company on account of unusual heavy rain in Karachi in August 2020, which is
accepted by the insurance company and subsequently an amount of Rs. 50 million has been
received by the Subsidiary Company.
Future Outlook
The OMCs can face unforeseen circumstance every now and then. Other receivables account will
increase in the future because of this no matter what happens.
Sources:
➢ https://www.mylpg.in/docs/Public_Liability_Insurance_policies_for_accidents_involvin_
LPG.pdf
➢ https://www.financialexpress.com/money/insurance/insurance-policy-for-gas-cylinder-
blast-check-coverage-process-to-file-claim-other-details/2132939/
Page | 451
PAKISTAN STATE OIL
Economic analysis
Factor Effect
Inland Freight Equalization Margin Decrease
Price Differential Claims Decrease
Taking a look at the historical data for the company, the other receivables have been inconsistent
when we compare them with sales. However for the past 2 years they have been decreasing
which can be accounted to a couple of economic reasons which range from IFEM to price
differential claims. This decrease in the other receivables has also been the reason to offset the
increase in the total current assets of the company, among other factors. All the economic factors
for such a decrease have been analyzed below.
Source:
Inland Freight equalization margin
The inland freight equalization margin (IFEM) is the cost of inland movement incurred by: a
refinery for transportation of crude oil from the source to the refinery; and. an oil marketing
company for transportation of the finished product from the supply point to various depots
Page | 452
PAKISTAN STATE OIL
around the country. With this duty the government makes sure that the prices of petroleum
products around the country in uniform i.e. the same price is being charged in Sindh and Punjab.
PSO being the largest OMC in Pakistan had receivables outstanding from the government in the
form on IFEM. The government realizing that the importance of paying back OMCs settled this
amount and paid pack almost 50% of the amount it owed to PSO which reduced the other
receivables of the company.
Future Outlook
Moving forward we expect that the government will keep settling the claims made by the OMCs
and will not delay them any further which implies that the other receivables for the company will
decrease in the future, as it has been consistent with the historical data.
Source:
➢ https://www.thenews.com.pk/print/374085-inland-freight-equalisation-margin-new-omcs-
manipulating-mechanism-at-the-cost-of-others
➢ https://profit.pakistantoday.com.pk/tag/inland-freight-equalization-margin-ifem/
Price Differential Claims
Page | 453
PAKISTAN STATE OIL
After announcing a freeze on the petrol prices until the next budget, in the latest meeting of the
ministry of energy, it was also decided that the government would settle the price differential
claims of PSO and would transfer the state oil company Rs.11.73 billion. A letter was also sent
to the Oil Companies Advisory Council (OCAC) and the Petroleum division confirming the
above mentioned where the petroleum division emphasized that these payments would be
sufficient enough to cover the price differential claims for the month of March, 2022 thus
reducing the other receivables of the company.
Future Outlook
According to the petroleum division the government will arrange the required amount of the
price differential claims that will be made available well ahead of time when claims for the
relevant fortnight are submitted to the Oil and Gas Regulatory Authority (OGRA). The
government states that it is aware of the significance of timely payment of PDC and so the
claims are being processed on top priority basis thus reducing the other receivables in the future.
However it must be taken into account that the financial position of the government of Pakistan
is not very strong as Pakistan is a developing country thus settling such huge amounts of claims
on a timely basis can be troublesome as was reported by OGRA that it fell short of Rs.1.87
billion for the month of March 2022.
Source:
Page | 454
PAKISTAN STATE OIL
➢ https://tribune.com.pk/story/2351294/govt-transfers-rs20b-to-pso
➢ https://www.brecorder.com/news/40170573/payment-of-pdc-for-march-ogra-sees-
shortfall-of-rs187bn
➢ https://www.thenews.com.pk/print/952776-rs40bn-released-for-oil-subsidy-payment
➢ https://profit.pakistantoday.com.pk/2022/03/07/fortnightly-reimbursement-of-pdc-to-oil-
sector-on-the-cards/
➢ https://profit.pakistantoday.com.pk/2022/03/15/ecc-to-approve-pdc-on-sales-of-
petroleum-products/
Page | 455
PAKISTAN STATE OIL
Methods chosen
Methods used
Page | 456
PAKISTAN STATE OIL
80.00%
60.00%
40.00%
20.00%
0.00%
2015
2019
2023
2007
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2020
2021
2022
2024
2025
2026
(20.00%)
(40.00%)
(60.00%)
(80.00%)
Page | 457
PAKISTAN STATE OIL
60,000,000.00
50,000,000.00
40,000,000.00
30,000,000.00
20,000,000.00
10,000,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Series1 Series2
Page | 458
PAKISTAN STATE OIL
Taxation – net
Page | 459
PAKISTAN STATE OIL
Forecasted Values
As of now no notes were given in the financial statements for this account which made it
difficult for us to predict it. However, looking at the industry pattern as well as historical trend,
we assume that the account will decrease at an increasing rate within a range of 32-35%. This
was also supported with the help of statistical forecasting and can be seen in the graph below.
Page | 460
PAKISTAN STATE OIL
Change
160
140
120
100
80
60
40
20
0
-20
-40
-60
Page | 461
PAKISTAN STATE OIL
General Analysis
in order to avail the latest data ate HTL, APL, BPL and PSO. The total values of taxation of all
five years of the companies are given below.
Total taxation of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 8,472,290 7,767,381 8,690,696 7,800,728 5,461,799
HTL 61,716,183 69,499,665 217,275,722 0 0
APL 0 0 0 0 0
BPL 5,012 9,311 13,652 8,627 106,990
TOTAL 70,193,485 77,276,357 225,980,070 7,809,355 5,568,789
Total Market Share of all Companies in 5 Years w.r.t Total Taxation
Total Market
Companies Share
PSO 9.87%
HTL 90.09%
Page | 462
PAKISTAN STATE OIL
APL 0.00%
BPL 0.04%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Taxation
Total Market Share

100.00%
90.09%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
9.87%
10.00%
0.00% 0.04%
0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of taxation in
their accounts. PSO is in the second place.
PSO’s Taxation Share in the Industry w.r.t Years
Page | 463
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
Share 12.07% 10.05% 3.85% 99.89% 98.08%
Graph Indicating PSO’s Taxation Share in the Industry w.r.t Years

120.00%
100.00% 99.89% 98.08%
80.00%
60.00%
40.00%
20.00%
12.07% 10.05%
3.85%
0.00%
2017 2018 2019 2020 2021
Analysis: the market share of PSO in terms of taxation as an asset fell till 2019 but increased
drastically in 2020. However, it fell again in 2021.
Page | 464
PAKISTAN STATE OIL
Yearly Change/Growth in Taxation of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly PPE
Growth 47.70% -8.32% 11.89% -10.24% -29.98%
Graph Indicating Change/Growth in Taxation of PSO

60.00%
50.00%
47.70%
40.00%
30.00%
20.00%
10.00% 11.89%
0.00%
2017 2018 2019 2020 2021
-10.00% -8.32% -10.24%
-20.00%
-30.00% -29.98%
-40.00%
Page | 465
PAKISTAN STATE OIL
Analysis: It can be analyzed that the highest level of taxation of PSO was in 2017. After that, it
has experienced a decreasing trend.
Growth/Change in the Industry’s Taxation Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth 1123.26% 10.09% 192.43% -96.54% -28.69%
Graph Indicating Growth/Change in the Industry’s Taxation Overtime

1200.00%
1123.26%
1000.00%
800.00%
600.00%
400.00%
200.00% 192.43%
0.00% 10.09%
-28.69%
2017 2018 2019 2020 2021
-96.54%
-200.00%
Page | 466
PAKISTAN STATE OIL
Analysis: The industry has also experienced a downwards trend when it comes to taxation as a
current asset for the OMCs.
Future Outlook
This account is expected to decrease in the future. As for now, no notes have been mentioned in
the financial statements of PSO regarding this particular account but taking into consideration
the graphs given above, this account is expected to decrease in the coming future and follow a
similar trend.
Page | 467
PAKISTAN STATE OIL
Cash & Bank Balance
Breakdown:
Cash and Bank Balance 2021 Vertical Analysis
Cash in hand 10,873 0.37%
Cash at banks in: 2,506,037 86.37%
current accounts 384,709 13.26%
saving accounts 2,890,746 99.63%
2,901,619 100.00%
Page | 468
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Cash and Bank Balance -51.23% 25.82% 4.54% 12.24% -27.98% 148.12%
2021 2020 2019 2018 2017 2016
Cash and Bank Balance 0.72% 1.63% 1.07% 1.15% 1.05% 1.68%
Forecasted Values
Since both the Sales and accounts receivables of the company are increasing, it can be assumed
that the majority proportion of the sales is done on credit. Taking this forward the cash and bank
balance of the company is likely to decrease between 20-30% for the next 5 years as shown
above. This can be supported with the graph below.
Page | 469
PAKISTAN STATE OIL
Change
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(50.00%)
(100.00%)
(150.00%)
Company Analysis
Factors Effects
Decrease in the current accounts Decrease
Increase in cash in hand Decrease
Increase in the savings accounts Decrease
Page | 470
PAKISTAN STATE OIL
Cash and Bank Balance

7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2021 2020 2019 2018 2017 2016
Factors that highly influence the cash and bank balance of a company may include the increase
or decrease of the cash in hand, capacity to pay back loans and the capacity to borrow etc.
Further we’ll be dissecting the factors and the causes of the increase and decrease of the cash and
bank balance of PSO year by year from 2021 to 2016.
Year 2021:
The cash and bank balance for 2021 decreased by 51.2% due to following reasons;
Page | 471
PAKISTAN STATE OIL
Cash and Bank Balance (2021-2020)

7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2021 2020
• Decrease in the current accounts: The cash in the current account dropped by a
significant 57%.
• Increase in cash in hand: There was a slight increase in the cash in hand which was
10.48%.
• Increase in the savings accounts: The cash in PSO’s savings account increased majorly
by 56%.
Source:
Year 2020:
The cash and bank balance for 2020 increased by 25.82% due to following reasons;
Page | 472
PAKISTAN STATE OIL

7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2020 2019
• Increase in the current accounts: The cash in the current account increased by a
significant 141%.
• Decrease in cash in hand: There was a slight decrease in the cash in hand which was
20.18%.
• Decrease in the savings accounts: The cash in PSO’s savings account decreased majorly
by 87.9%.
Source:
Year 2019:
The cash and bank balance for 2019 increased slightly by 4.5% due to following reasons;
Page | 473
PAKISTAN STATE OIL

4,900,000
4,850,000
4,800,000
4,750,000
4,700,000
4,650,000
4,600,000
4,550,000
4,500,000
2019 2018
• Decrease in the current accounts: The cash in the current account decreased by only
3%.
26.26%.
• Increase in the savings accounts: The cash in PSO’s savings account increased majorly
by 13.27%.
Source:
Year 2018:
Page | 474
PAKISTAN STATE OIL

4,700,000
4,600,000
4,500,000
4,400,000
4,300,000
4,200,000
4,100,000
4,000,000
3,900,000
3,800,000
2018 2017
• Increase in the current accounts: The cash in the current account increased by a
significant 27%.
1.96%.
• Decrease in the savings accounts: The cash in PSO’s savings account decreased by
0.8%.
Source:
Year 2017:
The cash and bank balance for 2017 decreased by 27.9% due to following reasons;
Page | 475
PAKISTAN STATE OIL

7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2017 2016
• Decrease in the current accounts: The cash in the current account dropped by a
significant 14%.
• Decrease in cash in hand: There was a slight decrease in the cash in hand which was
1.33%.
• Decrease in the savings accounts: The cash in PSO’s savings account increased greatly
by 9538.3%.
Source:
Year 2016:
Page | 476
PAKISTAN STATE OIL

7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2016 2015
• Decrease in the current accounts: The cash in the current account slightly dropped by
1%.
2.85%.
• Increase in the savings accounts: The cash in PSO’s savings account increased by
101.69%.
Source:
Page | 477
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
High interest rates/markup offered on saving accounts to OMCs Increase
Follows a Direct Relationship with Sales Account Increase
OMCs experience increase in receivables, affecting their current accounts Decrease
Deferred payables increase cash in hand Increase
Investments being done in future would lead to lower savings Decrease
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of cash and bank
balance all five years of the companies are given below.
Total Cash and Bank Balance of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 4,131,036 4,636,643 4,847,030 6,098,361 2,974,299
HTL 220,903,845 566,946,678 308,935,747 124,177,670 264,544,140
APL 10,933,386 4,198,160 2,920,168 3,482,386 9,831,007
BPL 113,156 112,179 175,069 266,636 93,623
Page | 478
PAKISTAN STATE OIL
TOTAL 236,081,423 575,893,660 316,878,014 134,025,053 277,443,069
Total Market Share of all Companies in 5 Years w.r.t Total Cash and Bank Balance
PSO 1.47%
HTL 96.44%
APL 2.04%
BPL 0.05%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Cash and Bank Balance
Page | 479
PAKISTAN STATE OIL
Total Market Share

120.00%
100.00% 96.44%
80.00%
60.00%
40.00%
20.00%
1.47% 2.04% 0.05%

0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of cash and bank
balance in their accounts. PSO is in the second place.
PSO’s Cash and Bank Balance Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 1.75% 0.81% 1.53% 4.55% 1.07%
Graph Indicating PSO’s Cash and Bank Balance Share in the Industry w.r.t Years
Page | 480
PAKISTAN STATE OIL

5.00%
4.50% 4.55%
4.00%
3.50%
3.00%
2.50%
2.00%
1.75%
1.50% 1.53%
1.00% 1.07%
0.81%
0.50%
0.00%
2017 2018 2019 2020 2021
Analysis: the market share of PSO in terms of cash and bank balance had an increasing trend
from 2018 till 2020. It fell considerably in 2021. This is majorly because of an increase in the
cash and bank balance of other OMCs and a decrease in this account of PSO.
Yearly Change/Growth in Cash and Bank Balance of PSO
Years 2017 2018 2019 2020 2021
Page | 481
PAKISTAN STATE OIL
PSO Yearly
Growth -98.49% 12.24% 4.54% 25.82% -51.23%
Graph Indicating Change/Growth in Cash and Bank Balance of PSO
PSO Yearly Cash & Bank Balance Growth

40.00%
25.82%
20.00%
12.24%
4.54%
0.00%
2017 2018 2019 2020 2021
-20.00%
-40.00%
-51.23%
-60.00%
-80.00%
-100.00% -98.49%
-120.00%
Analysis: It can be analyzed that the highest cash and bank balance of PSO was in 2020. This
account fell in 2019 and in 2021. It was the lowest in 2017 among all the years.
Page | 482
PAKISTAN STATE OIL
Growth/Change in the Industry’s Cash and Bank Balance Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth -49.87% 143.94% -44.98% -57.70% 107.01%
Graph Indicating Growth/Change in the Industry’s Cash and Bank Balance Overtime

200.00%
150.00%
143.94%
107.01%
100.00%
50.00%
0.00%
2017 2018 2019 2020 2021
-50.00% -49.87% -44.98%

-57.70%
-100.00%
Page | 483
PAKISTAN STATE OIL
Analysis: The industry in terms of this account experienced growth in 2018. After that, the
account fell for all the OMCs. It wasn’t until after 2020, when it grew again. From 2019-2020 all
the OMCs experienced lowest levels of cash and bank balance accounts.
Factors affecting Cash and Bank Balance
OMCs motivated to Keep Cash in Banks due to High Interest/Markup on Savings
Accounts
The interest on savings account was 3.8% to 10.7% in 2019. However, this increased in 2020 and
stood between 3.25% to 11.75%. The OMCs were inclined towards keeping the cash in the
savings account to take advantage of this particular aspect. However, in 2021, this fell to 3.25%
to 6.25% and the OMCs were again demotivated to keep high levels of cash in banks.
Future Outlook
This particular figure has increased to 10.75% and in the coming three months it is to reach
12.5% as well. This would lead to companies keeping more cash in banks which would lead to
an increase in this account.
Sources:
➢ Annual Report PSO
➢ https://www.soneribank.com/rates/deposit-rates/current-rates/
Page | 484
PAKISTAN STATE OIL
➢ https://savings.gov.pk/project/savings-account/
➢ https://www.sc.com/pk/save/basic-savings-account/
➢ https://www.thenews.com.pk/print/935950-sky-high-bank-profits
Direct Relationship between the Sales of OMCs and Cash Balances
With an increase in the sales, the cash in hand is usually expected to increase a swell. In the last
three years from 2017-2019 with an increase in sales, the cash position of PSO and other OMCs
could be seen to have increased as well. From 2020-2021, the cash fell however because of the
pandemic and high levels of receivables and some payments that were made on account of
deferred payables of the company.
Future Outlook
The cash and bank balance would increase when the sales of OMCs would increase
Sources:
Current Account Deposits of OMCs Reduce due to High Receivables
OMCs cannot afford to maintain their current accounts as they do not have enough cash due to
the piling up of receivables. The companies due to this tend to provide security deposits but they
are kept in key separate accounts. The receivables of the Pakistan State Oil (PSO) have gone up
Page | 485
PAKISTAN STATE OIL
to Rs 398 billion the highest ever in the entity’s history with a major chunk of Rs 192.539 billion
from the power sector. However, the Sui Northern owes Rs 161.025 billion to the PSO in the
head of RLNG and the PIA is required to pay Rs 21.979 billion for using jet fuel. The non-
recovery of Rs 398 billion receivables has triggered the rise in the cash flow situation, resulting
in financial miseries for the state-owned entity.
Future Outlook
The receivables of PSO are expected to increase as it is owned by the government and they
cannot avoid but become a target of circular debt and price differential claims. This would lead
to lower cash in hand for them and liquidity would worsen as well.
Sources:
➢ https://www.thenews.com.pk/print/909334-top-omc-in-economic-mess-pso-s-receivables-
surge-to-rs398-billion
➢ https://www.thenews.com.pk/print/950865-banks-shy-of-expending-trade-credit-for-oil-
imports
➢ https://www.business-standard.com/article/international/cash-strapped-pakistan-cuts-
power-to-households-on-fuel-shortage-122041801142_1.html
Deferred Payables and Few Payments from Receivables to Increase Cash in Hand
Page | 486
PAKISTAN STATE OIL
With rising CGS and trade payables, the payables of OMCs is expected to increase in the near
future. Due to this, PSO has some cash in hand left because it is deferring the payments. It has
also received some payments from SNGPL which can improve its liquidity position as well.
Sources:
➢ https://profit.pakistantoday.com.pk/2022/03/05/fuel-crisis-looms-as-banks-still-wary-of-
omcs/
Economic Analysis
Factor Effect
Higher Gross Margins Increase
Gas Circular Debt (High Accounts Decrease
Receivable)
Inflation (Higher Taxation) Decrease
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PAKISTAN STATE OIL
Cash and cash balance is probably one of the most important accounts any company has since it
determines the liquidity position of the company. To put this into perspective, this account is
more important that the net income of the company as even if the company is making record
high profits, if it doesn’t have the cash to pay off its debt, it can be a serious crisis. The same is
the case with PSO as it has been recording highest profits but its cash flow position is not very
good on paper. The cash in hand and the cash flow position has been inconsistent throughout the
years. As of the latest year which is 2021, the cash in hand of the company decreased as well as
the cash flow positon of the company which can have grave impact on the liquidity position of
the company. All the economic factors for such a change as well as what might happen in the
future have been analyzed below.
Source:
Higher gross margins
The higher gross margins were mainly due to better cost absorption by PSO. To understand this
better, in 2019 the cost of production was 97.23% of the total sales which increased to 99.38% in
2020, a record high figure for PSO in the past 15 years. However in 2021, this figure decreased
and came down to 95.32% which is the record low for the past 10 years. This shows that despite
the figure increasing numerically, the rate by which it increased as compared to sales is
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PAKISTAN STATE OIL
significantly low which means that the cost of production for the company has improved in 2021,
thus indicating that it is absorbing its fixed costs better as compared to the past 10 years. There
are many economic reasons for this which are listed below;
• International oil prices, Inflation and Currency Factor
• China Pakistan Free Trade Agreement
• White Oil pipeline (Partnership with PARCO & PEPCO)
• Agreement with Qatar Petroleum
• Contract with KPC
• Supply chain development
• Pakistan Railways
• Utilizing services of foreign companies
Higher gross margins in turn increase the profitability of the company, as the company recorded
its highest ever profit in 2021, which would in turn improve the cash position of the company.
Future Outlook
In the future we predict that the sales of the company will increase and so will the cost
absorption of the company as the rate by which cost of sales will increase with respect to sales
would be lower. This ultimately means that the profitability of the company will also increase
which would help in improving the cash position of the company in the cash flow statement.
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PAKISTAN STATE OIL
Sources:
➢ https://www.thenews.com.pk/print/934553-oil-refining-data-sought-to-decide-on-petrol-
imports
➢ https://www.parco.com.pk/our-business/transportation/pipeline-network/
➢ https://www.dawn.com/news/504960/pso-signs-contract-with-kpc-for-diesel
➢ https://profit.pakistantoday.com.pk/2021/09/02/pso-under-hot-water/
➢ https://tribune.com.pk/story/2318132/pm-seeks-report-on-pso-oil-transport
Gas Circular debt (High Accounts Receivable)
Of the few major defaulters of PSO, Sui Northern Gas Pipelines Limited (SNGPL) emerged as
one in the LNG sector, which is due to pay around Rs.161 billion to PSO. The link between PSO
and SNGPL is that PSO imports LNG from Qatar and other suppliers and supplies it to SNGPL
which onward sell it to the customers as per pricing mechanism given by the government of
Pakistan.
The elephant in the room is the disparity between cost of gas and consumer tariffs given by the
government of Pakistan. There is no debate on the fact that gas prices in Pakistan have been a
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PAKISTAN STATE OIL
long dichotomy. Cost of gas is far more than the prices at which these are supplied to the end
consumers. Moreover considering that the gas allocations and pricing decisions in Pakistan have
always been political, there have been a lot of debates on the inefficient consumer pricing
mechanism of natural gas.
The current cost of local natural gas is 700 per mmbtu while the cost for imported gas is 2400
per mmbtu. On the contrary the selling price for both local and imported gas stands at 350 per
mmbtu which means there is a loss of 350 for local and 2050 per mmbtu for imported gas.
Pakistan was lucky to have deep reserves of gas in Sui Baluchistan. Unfortunately, people
consider the low-price pipeline gas availability is a fundamental right, however, it’s a luxury. But
because of the political decisions in Pakistan the luxury of providing cheap gas through
expensive infrastructure continued. Eventually the costs could not be recovered and the pressure
of low pricing dis-incentivized further exploration
The government continued to subsidize these losses with the promise to pay SNGPL. However
provision of cheap gas to households was manageable back when domestically produced gas was
abundant to meet the local consumption requirements, and non-residential consumers who were
paying higher rates were enough in numbers to cross-subsidize the domestic supply. With natural
gas supply depleting, production has significantly reduced and would keep on falling. There is no
serious hope on new discoveries. That is why the country has diverted to the imported LNG to
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PAKISTAN STATE OIL
bridge the widening gap. With the non-residential customers moving to RLNG, the remaining
good customers are not enough to cross subsidize domestic Thus receivables started to build up
with SNGPL claiming to have to receive over Rs.100 billion from domestic gas consumers
ultimately unable to pay back their gas suppliers which is PSO. This is also clearly highlighted in
the financial statements of PSO where they are making record profits on paper, however have a
negative cash flow due to being caught in the gas circular debt. The Company is also actively
pursuing the Government of Pakistan to get budgetary allocation for release of past due price
differential claims.
Future Outlook
At current spot international prices, only a tiny fraction (10-15%) could be recovered from the
consumers at prevailing domestic prices. The government cannot afford to replace the depleting
gas with the imported RLNG without increasing the prices. It would be a financial suicide to
provide imported RLNG at throwaway prices to domestic consumers, while bearing all the cost.
All this would only result in the increased risk to gas circular debt and the bankruptcy of SNGPL
both of which the government cannot afford. So the only way to avoid trouble is increase prices,
which we predict will be done in phases as the government lack enough political will to increase
the prices all at once. However at the moment the government has fixed petrol and gas prices
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PAKISTAN STATE OIL
until the next budget which implies that the accounts receivable of the company will only swore,
which would in turn worsen the cash in hand of the company thus decreasing it in the future.
Source:
➢ https://tribune.com.pk/story/2317566/pso-receivables-soar-to-rs262b
➢ https://www.thenews.com.pk/amp/909334-top-omc-in-economic-mess-pso-s-receivables-
➢ https://www.investing.com/analysis/pso-pakistans-circular-debt-crisis-has-run-its-
largest-fuel-retailer-dry-200303636
International Oil prices & Inflation (Higher Taxation)
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PAKISTAN STATE OIL
This inflationary pressure and variances in the price of oil internationally has led to an increase
in the sales of the company in numeric terms which has ultimately increased the profit and thus
taxation.
Future Outlook
as has been predicted which would ultimately lead to higher profits and thus a higher tax being
Page | 494
PAKISTAN STATE OIL
paid.
Source:
march-1/
Page | 495
PAKISTAN STATE OIL
Methods chosen
Methods used
Page | 496
PAKISTAN STATE OIL
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
Cash and bank balance Naïve Forecast
Change
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2010
2014
2018
2022
2026
2007
2008
2009
2011
2012
2013
2015
2016
2017
2019
2020
2021
2023
2024
2025
(50.00%)
(100.00%)
(150.00%)
Page | 497
PAKISTAN STATE OIL
Page | 498
PAKISTAN STATE OIL
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Cash and Bank Balnce Forecasted Cash and bank balance
Page | 499
PAKISTAN STATE OIL
________________________-
________________________________________________________
Page | 500
PAKISTAN STATE OIL
Equity
Page | 501
PAKISTAN STATE OIL
Share Capital
Page | 502
PAKISTAN STATE OIL
Forecasted Value
Since the account didn’t change in the previous years, we predict that it will stay the same in thee
future as well
Page | 503
PAKISTAN STATE OIL
Industry Analysis
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of share capital all
Total Share Capital of all Companies in 5 Years
Companie
s 2017 2018 2019 2020 2021
PSO 2,716,860 3,260,232 3,912,278 4,694,734 4,694,734
1,160,040,00 1,160,040,00 1,160,040,00 1,160,040,00
HTL 0 1,160,040,000 0 0 0
APL 829,440 829,440 995,328 995,328 995,328
BPL 224,888 224,888 224,888 224,888 224,888
1,163,811,18 1,165,172,49 1,165,954,95 1,165,954,95
TOTAL 8 1,164,354,560 4 0 0
Total Market Share of all Companies in 5 Years w.r.t Total Share Capital
Page | 504
PAKISTAN STATE OIL
Total Market
Companies Share
PSO 0.33%
HTL 99.57%
APL 0.08%
BPL 0.02%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Share Capital
Page | 505
PAKISTAN STATE OIL
Total Market Share

120.00%
99.57%
100.00%
80.00%
60.00%
40.00%
20.00%
0.33% 0.08% 0.02%

0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of share capital.
PSO is in the second place.
PSO’s Share Capital Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 0.23% 0.28% 0.34% 0.40% 0.40%
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PAKISTAN STATE OIL
Graph Indicating PSO’s Share Capital Share in the Industry w.r.t Years

0.45%
0.40% 0.40% 0.40%
0.35%
0.34%
0.30%
0.28%
0.25%
0.23%
0.20%
0.15%
0.10%
0.05%
0.00%
2017 2018 2019 2020 2021
Analysis: the market share of PSO in terms of share capital has increased between 2017 till
2019. However, it has not changed since the past two years.
Yearly Change/Growth in Share Capital of PSO
Years 2017 2018 2019 2020 2021
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PAKISTAN STATE OIL
PSO Yearly
Growth 0.00% 20.00% 20.00% 20.00% 0.00%
Graph Indicating Change/Growth in Share Capital of PSO
PSO YEARLY SHARE CAPITAL

GROWTH
25.00%
20.00% 20.00% 20.00% 20.00%
15.00%
10.00%
5.00%
0.00% 0.00% 0.00%

2017 2018 2019 2020 2021
Analysis: It can be analyzed that the share capital grew from 2017-2018. The growth was
constant till 2020 and there was zero growth after that.
Growth/Change in the Industry’s Share Capital Overtime
Years 2017 2018 2019 2020 2021
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PAKISTAN STATE OIL
Industry's Yearly
Growth 0.00% 0.05% 0.07% 0.07% 0.00%
Graph Indicating Growth/Change in the Industry’s Share Capital Overtime

0.08%
0.07% 0.07%
0.07%
0.06%
0.05%
0.05%
0.04%
0.03%
0.02%
0.01%
0.00% 0.00% 0.00%

2017 2018 2019 2020 2021
Analysis: The industry in terms of this account indicates that the share capital of other industries
had zero growth in it. However, that of PSO increased by 20% only and that change lead to a
change in industry’s share capital.
Future Outlook
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PAKISTAN STATE OIL
It can be assumed that for a short period of time, like other OMCs, PSO would also experience
zero growth in its share capital. However, the share capital would not reduce as we can see that
in all the years it either had an increasing growth rate or a zero growth rate.
Page | 510
PAKISTAN STATE OIL
Reserves
Reserves Breakdown:
Vertical
Reserves 2021 Analysis
Capital reserve
Surplus on vesting of net assets 3,373 0.00%
Special reserve 837,156 0.62%
Revenue reserves
Unrealized gain on remeasurement of FVOCI investment 5,485,817 4.05%
General reserve 25,282,373 18.65%
Un-appropriated profit 103,918,603 76.68%
134,686,793 99.38%
135,527,322 100.00%
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PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Reserves 25.64% -9.30% 10.95% 7.05% 12.68% 11.65%
2021 2020 2019 2018 2017 2016
Reserves 32.74% 28.75% 26.22% 26.63% 25.52% 25.96%
Forecasted Values
After analyzing all the factors it was predicted that the sales for the company will increase every
year. Moreover due to many measures being taken, PSO started absorbing its fixed costs better
as it could be seen in the vertical analysis and it is only expected to further improve its
performance. Reserves are majorly impacted by the net income which is forecasted to increase
due to higher sales and better cost absorption among other factors like lower finance cost.
Furthermore if we look at the historical data, reserves as a percentage of sales are increasing
every year. With sales increasing by 12.5% every year, we forecast that the reserves will increase
by a significant more percentage, thus forecasting it to grow between 35-42% every year.
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PAKISTAN STATE OIL
Chart Title
200,000,000.00
150,000,000.00
100,000,000.00
50,000,000.00
0.00
2005 2010 2015 2020 2025 2030
Resrerves Forecasted Reserves
Page | 513
PAKISTAN STATE OIL
Company Analysis
from years 2016 to 2021, the calculated average we get is 9.78% due to the increase and decrease
in some years.
Factors that highly influence the reserves of a company may include the policy related to imports
and exports, present oil and gas reserves, petroleum exploration etc. Further we’ll be dissecting
the factors and the causes of the increase and decrease of the reserves of PSO year by year from
2021 to 2016.
Year 2021:
In the year 2021, the revenue reserves as well as the capital reserves increased, due to profit
earned during the year on account vs loss in last year. Further reasons are given below:
• Increase in Revenue of Rs 1.4 trillion: PSO announced a record-breaking gross revenue
of Rs 1.4 trillion and highest ever profit after tax of Rs 29.1 billion for the financial year
2020-21 (FY21) against a loss after tax of Rs 6.5 billion in the preceding year. The net
profit translated into a healthy earning per share of Rs 62.07 vs. loss per share of Rs
13.77 in FY20.
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PAKISTAN STATE OIL
• Dividends also increased by Rs. 15 per share (150%): The dividend for the financial
year stands at Rs 15 per share (150 percent). Pakistan Refinery Limited, a subsidiary of
PSO, also reported a profit after tax of Rs 0.94 billion during the year compared to a loss
of Rs 7.6 billion in the previous year. On a consolidated basis, the group achieved a profit
after tax of Rs 29.6 billion in FY21 compared to loss after tax of Rs 14.8 billion in FY20.
• Profits made primarily due to inventory gains: In the year 2021, PSO’s profits soared
mainly due to high inventory which was also due to the increase in the international oil
prices.
• Transfer of profits from the subsidiary company to Special Reserves: On March 27,
2013, the Government of Pakistan (GoP) issued a policy framework for up-gradation and
expansion of refinery projects that says that till the completion of the projects, refineries
will not be allowed to offset losses and they will be required to install Diesel Hydro
Desulphurization (DHDS) plant by June 2017. For the purpose the Subsidiary Company
transferred profit amounting to Rs. 837 million.
• Addition of New Retail outlets across Pakistan: PSO Added 71 New Vision retail
outlets to its network making a grand total of 3,501 sites as of June 30, 2021.
• Installation of EV chargers in Islamabad: Installed Electric Vehicle charger at
Islamabad in support of the government's ‘Clean and Green Pakistan’ initiative.
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PAKISTAN STATE OIL
• Addition of new and improved rehabilitation storages across Pakistan: Added 174
thousand tons of new and rehabilitated storages.
Source:
➢ https://tribune.com.pk/story/2336589/psos-receivables-swell-to-rs425-billion
Year 2020:
In the year 2020, the revenue reserves as well as the capital reserves decreased drastically,
factors that catered to such decrease are given below:
• PSO incurred heavy inventory losses: A decline in the inventory of PSO versus the
similar period last year was seen in the year 2021. Majority of these inventory losses
were sustained as a result of lower local ex-refinery prices than the international prices in
the fiscal year.
• Decrease in revenue due to the fall in volumes: PSO’s decline in earnings was also
facilitated by the decline in the company’s’ topline. Revenues for PSO slipped by 4
percent year-on-year during the year due to fall in volumes sold as well as the price crash.
Page | 516
PAKISTAN STATE OIL
The company’s overall volumes fell by around 10 percent, and the decline was led by
furnace oil sales.
• A slip in the earnings due to Covid-19 challenges and the Saudi-Russia oil price
war: The company reported a loss after taxation of Rs6.5 billion translating into a loss
per share of Rs13.8. There were unprecedented losses of Rs16.4 billion incurred during
Q4FY20 not only eroded the net profit of Rs3 billion earned during the first three
quarters but also resulted in a net loss for the complete fiscal year.
Source:
➢ https://www.brecorder.com/news/40029027/earning-rebound-for-pso
➢ https://www.brecorder.com/news/40015709/pso-fy20-scarred-by-inventory-losses
➢ https://tribune.com.pk/story/2262102/corporate-corner-pso-announces-results-for-fy20
Year 2019:
In the year 2019, there was no change seen in the capital reserves however revenue reserves did
increase due to the following reasons;
• Free reserves of the company were capitalized: A sum of Rs. 782,455,500 out of the
free reserves of the Company be capitalized and applied towards the issue of 78,245,550
Page | 517
PAKISTAN STATE OIL
ordinary shares of Rs. 10/- each and allotted as fully paid bonus shares to the Members
whose names appear in the Members Register on October 18, 2019.
• Higher Inventory losses were seen in 2019: This inventory loss came from high
inventory of FO, which could not be sold due to low power demand while the same led to
refineries lowering their selling prices, which further had an adverse effect on the
earnings of PSO by 16%.
• PSO’s COGS surged to a Rs.1.15 trillion: PSO’s share price inched down Rs0.26, or
0.17%, to Rs155.67 with trading in 6.96 million shares at the PSX. The profit or loss
account showed the cost of products sold surged 12.5% to Rs1.15 trillion in FY19
compared to Rs1.02 trillion last year FY18.
• Finance cost increased (74%) due to unstable interest rates and average borrowing
power: Operating costs remained stable; the finance cost increased significantly in the
rising interest rate environment. Also, the depreciating currency has resulted in exchange
losses for the company, which also resulted in the increase of the finance costs.
• Net income increased: Increased mainly due to increase in deferred tax asset due to
change in corporate tax rate.
Source:
Page | 518
PAKISTAN STATE OIL
➢ https://tribune.com.pk/story/2065243/psos-earnings-slip-2-29-rs15-1-billion
➢ https://www.brecorder.com/news/491993/
Year 2018:
For the year 2018, capital reserves remained stagnant whereas the revenue reserves increased as
compared to the previous year.
free reserves of the Company were capitalized and applied towards the issue of
65,204,625 ordinary shares of Rs. 10/- each and allotted as fully paid bonus shares to the
Members whose names appear on the Members Register on October 09, 2018.
• Revenues increased by 8.3%: Jump in revenues came despite higher petroleum prices,
high competition and low utilization of furnace oil. Market sources that the increase in
net sales came from increased lubricants and LPG sales as well as the inventory gains
accumulated from higher oil prices.
• Net Profits decreased due to the fall in other income: Despite the decrease in furnace
oil utilization that is the major cause of payables and receivables accumulation for the
company. Other income includes penal income which fell by over 56%.
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PAKISTAN STATE OIL
• Finance cost also decreased by 13.5% due to the average borrowing level: Due to
robust negotiations with banks to maintain the average borrowing level, and an increase
in the recovery of interest from the Power sector. Moreover, foreign exchange loss on
account of rupee devaluation.
• Net Income also decreased due to higher effective tax rate: Effective tax rates were
increased due to the decline in future corporate tax rate and high tax rates on LNG.
Source:
➢ https://www.brecorder.com/news/449689/
Year 2017:
As for the year 2017, there was no change in the capital reserves whereas revenue reserves
increased significantly;
free reserves of the Company be capitalized and applied towards the issue of 54,337,188
ordinary shares of Rs. 10/- each and allotted as fully paid bonus shares to the Members
whose names appear on the Members Register on October 13, 2017.
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PAKISTAN STATE OIL
• PSO’s revenues grew all due to increased sales volumes: PSO’s net revenues for FY17
surged by almost 30 percent year-on-year, and the growth came largely from improved
volumetric sales by the OMC particularly of petrol and diesel. Its growth in top line also
came from the RLNG business, which offsets the decrease in furnace oil volumetric
growth.
• COGS grew up to 28%: This also increased the gross profit and the gross margin due to
the increase in inventory gains booked on account of lower fuel costs in the low oil price
scenario.
• Finance cost decreased by 17%: Higher operating costs (6%) and lower other income
(16%) was offset by lower finance cost that came down by 17 percent. Hence the
earnings increased by 77%.
• Net income increased by 77% due to low tax rates on the LNG sector: LNG is subject
to higher rate of tax, deducted at import stage. But in 2017 it decreased due to bigger
contribution of the LNG segment. The effective tax rate of the Company has therefore
increased despite 1% reduction in corporate tax rate.
Source:
➢ https://www.brecorder.com/news/364031/pso-a-sturdy-performance-in-fy17
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PAKISTAN STATE OIL
Year 2016:
In the year 2016, the capital reserves stood constant whereas there was an increase in the revenue
reserves;
• Revenue fell by 19% due the dip in oil prices: Revenue decreased from Rs. 1.11
trillion in 2015 to Rs. 0.91 trillion, registering a decrease of 19%. The reason being the
price impact on account of overall dip in the oil prices during the year.
• PSO’s earnings declined: PSO had reported a notable decline in earnings in the third
quarter of FY16 due to higher inventory losses, while the top line slowed down on
account of lower margins on furnace oil and weaker petrol and diesel sales in the quarter.
• Net Income increased by 49.2%: Increase in net income from Rs. 6.9 billion in FY2015
to Rs. 10.3 billion in FY2016.
• Reduction in Finance cost by 35%: There was a reduction in Finance cost on account
of reduction in borrowing rates due to declining KIBOR and reliance on cheaper FE-25
borrowings.
Source:
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PAKISTAN STATE OIL
Industry Analysis
Out of the top three accounts selected for analysis, reserves made a high proportion of around
32%. PSO is a company which has to keep considerable reserves considering that it is the market
leader. These funds are used to pay future obligations. PSO has 2-3 types of reserves. The capital
reserves are made through capital earnings. It is used for long-term investment projects or any
unexpected event in the future such as high inflation levels. These reserves may be used to write
of capital losses. The revenue reserves are also known as retained earnings which are generated
through the operations of a business. It can be used for expansion or to pay dividends. The
reserves of four companies have been considered and their market share has been calculated.
Note: The growth in the reserves of PSO in the last five years are not due to the capital reserves
as they have amounted to 3,373,000 even before 2016 and in 2021, they are still standing at this
amount. So, only revenue reserves will be considered for the analysis. The general reserves have
also not increased or decreased in the last 5 years.
Total Reserves of the OMCs in the Last 5 Years:
Companies 2017 2018 2019 2020 2021 Total 5 years

PSO 100,132,742 107,192,243 118,934,765 107,869,046 135,527,322 569,656,118
HTL 2,584,265,837 2,732,681,018 2,066,744,479 1,997,625,503 1,990,443,156 11,371,759,993
APL 214,608 249,542 219,785 219,855 219,971 1,123,761
BPL 278,983 297423 304,228 464862 352148 1,697,644
Total 2,684,892,170 2,840,420,226 2,186,203,257 2,106,179,266 2,126,542,597 11,944,237,516
Page | 523
PAKISTAN STATE OIL
Analysis: We can see that the reserves of PSO have increased till 2019 and then decreased in
2020 but increased again in 2021. For HTL, the reserves increased till 2018 but fell after that till
2021. For APL, the reserves increased till 2018 and have been fall till then. The entire industry’s
reserves have increased till 2018 and have fell till 2020 but can be seen to increase again as
PSO’s reserves increase in the year 2021 and onwards.
Total Market Share of the OMCs in the Last 5 Years:
Total Market
Company Names Share
Hi-Tech Lubricants
Limited 95.21%
Total Industry AP 100.00%
Page | 524
PAKISTAN STATE OIL
Total Market Share
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%
Total market share if HTL is removed (Outlier):
Total Market
Company Names Share
Page | 525
PAKISTAN STATE OIL
Total Market Share
0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00%
Analysis: In terms of reserves, HTL, like any other account has the highest share as well. If we
do not consider this outlier, PSO would have the second highest portion of reserves in the OMC
industry. APL and BPL have very minimal reserves which can be seen in the table given above.
The table given above clearly shows the reserves of HTL and they stand in no comparison to the
minimal reserves of APL and BPL. PSO has some standing in front of HTL but it is not
considerable too.
Growth in the Total Reserves of the Industry:
Company Names Total Market Share
Page | 526
PAKISTAN STATE OIL

25.00%
20.00% 18.81%
15.00%
10.00%
5.00% 5.79%
0.00% -3.66% 0.97%
-5.00% 2017 2018 2019 2020 2021
-10.00%
-15.00%
-20.00%
-23.03%
-25.00%
-30.00%
Analysis: We can see that the industry has experienced a dip in its reserves. It has decreased till
2018 and in 2019 recorded the lost point. After 2019, the reserves started increasing again and
increased up till 2021 and are still increasing. This dip in 2019 was majorly because of lower
reserves being kept by HTL. This might be because of lower performance during the pandemic
or other factors which will be discussed later.
PSO’s Reserves Market Share Over the Years W.R.T. the Industry:
Company Names 2017 2018 2019 2020 2021
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PAKISTAN STATE OIL
Share 3.73% 3.77% 5.44% 5.12% 6.37%

7.00%
6.37%
6.00%
5.44%
5.00% 5.12%
4.00%
3.73% 3.77%
3.00%
2.00%
1.00%
0.00%
2017 2018 2019 2020 2021
Analysis: We can clearly see that there has been an increase in PSO’s share over the overs with
respect to the industry. Not a single year recorded any drop in the reserve’s growth. Every year
they have grown by 1-2%. According to these five years, the reserves were the highest in 2021.
The growth was slow between 2017-2018. It was higher in 2018-2019. In 2019-2020, it fell
which might be due to the pandemic but between 2020-2021 it was higher.
PSO’s Increase in Reserves Over the Years: Last 5 Years:
Company
Names 2017 2018 2019 2020 2021
Page | 528
PAKISTAN STATE OIL
PSO Yearly
Reserves Growth 12.68% 7.05% 10.95% -9.30% 25.64%
PSO Company's Yearly Reserves Growth

30.00%
25.64%
20.00%
12.68% 10.95%
10.00%
7.05%
0.00%
2017 2018 2019 2020 2021
-10.00% -9.30%
-20.00%
Analysis: We can see that out of the five years, the lowest levels of reserves were in 2020 for
PSO. There was negative growth and reserves were falling to a great extent. After a sharp fall in
2018, the reserves did increase by 10.95% but 2020 noticed a sharp dip. However, 2021
mitigated that by recording a peak almost thrice times higher than the dip in 2020. The factors
which lead to it will be discussed through secondary research.
Supporting Articles (Impact of Profit/Loss on Revenue Reserves):
Increase in profits due to higher demand of petrol and diesel by transportation Sector in
2017:
In 2017, the OMCs experienced a profit when the transportation sector demanded more petrol
and diesel. This increase in demand is due to rising population, urbanization and lack of public
Page | 529
PAKISTAN STATE OIL
transport in urban areas. Everyone has private vehicles. Moreover, the transportation of raw
material for different other sectors also increased due to increase demand of products due to the
factors mentioned above. All of this, lead to higher demand in 2017.
We can see how the transportation sector used high levels of diesel, petrol and CNG in 2017 in
the graph mentioned above. So, the companies in this industry made use of it and had high sales.
Higher sales brought higher profits which lead to higher unappropriated profits and hence higher
revenue reserves.
Future Outlook:
There were major variations in the profits and losses of the OMCs because by 2017, they did not
know that 2019 had a pandemic in store for them. So, making predictions in the basis of this
would not be fair as we have to account for several unforeseen factors e.g. another pandemic or
the Russia Ukraine War currently taking place.
Page | 530
PAKISTAN STATE OIL
Source:
➢ https://mpra.ub.uni-muenchen.de/103455/1/MPRA_paper_103455.pdf
Lower furnace oil sales in 2018 lead to lower profits for OMCs in Pakistan:
In 2018, the OMCs experienced a sharp dip in their sales due to the low demand of furnace oil
which fell by 19% in 2018. This also resulted in the inventory losses of furnace oil as the
reserves they kept were not being used. Now, because there was low demand, they had to either
offer the furnace oil which is extremely expensive to import, at lower rates to attract customers
or they would have to waste it completely. This resulted in lower profits for the OMCs as well.
Future Outlook:
If companies keep purchasing furnace oil then they would incur more losses. The customers of
these OMCs are moving towards green sources of energy and furnace oil is very expensive for
them and cannot be bought due to already pending receivables.
Source:
➢ https://profit.pakistantoday.com.pk/2018/11/07/omc-sales-volume-falls-amid-increasing-
competition/
Increase in interest rates in 2018 by 13.25% leads to higher finance cost for OMCs:
Page | 531
PAKISTAN STATE OIL
In 2018, the banks increased their interest rates and borrowing became more expensive for the
OMCs. This happened due to high inflation level in 2018. This in return lead to lower levels of
profits for the company due to higher finance costs. When the profits reduced, so did the
unappropriated profits. Due to this, we can see that from an industry’s point of view, the value of
reserves has decreased in 2018.
Future Outlook:
Keeping in mind the Hascol case, the banks would want to keep high interest rates, giving
minimal relief to the companies in this sector. If that happens this would adversely impact the
companies in this sector and their reserves would then eventually fall.
Source:
➢ https://psopk.com/files/corporate_briefing_session/Corporate%20briefing%20session281
019.pdf
Pandemic causes inventory losses and high CGS leading to losses in 2019 and 2020:
In 2019 when the pandemic took place, lockdowns were imposed which lead to inventory losses
as traveling and any mode of transportation was practically banned. This led to minimal demand
and the CGS increased due to this. When the CGS increased, this led to lower profits and hence
Page | 532
PAKISTAN STATE OIL
losses for the OMCs in 2019 and 2020. So, due to this, their unappropriated profits were lower in
2020 which can also be seen in the graphs above.
Future Outlook:
PSO and other OMCs have recorded high profits in 2021, this would mean that the
unappropriated profits would increase hence the revenue reserves would also increase which is a
positive sign for the companies.
Source:
➢ Director’s Report 2019
Increased economic activity in 2021 makes profits for OMCs in Pakistan:
In 2021, the OMCs of Pakistan experienced immense levels of profits after experiencing heavy
losses in 2020 due to the pandemic. This happened because the lockdowns were lifted, the
demand from the domestic consumers increased to a great extent. The economic activity was
really high and this is exactly what the OMCs took advantage of, making high profits. These
high profits lead to increase in the unappropriated profits for the companies leading to higher
revenue reserves as well.
Future Outlook:
Page | 533
PAKISTAN STATE OIL
PSO and other oil marketing companies are expected to make higher sales which have been
discussed in the analysis of the OMCs in the sales portion of this report. This means higher
profits and in return higher revenue reserves as well.
Source:
➢ https://propakistani.pk/2021/10/02/pakistans-oil-marketing-company-sales-grew-26-yoy-
in-september/
Lower dividends paid by OMCs in 2021 leaving more for reserves:
Many companies in the OMC sector paid lower dividends in 2021. PSO itself reduced the value
of its dividend per share making it Rs. 10 per share which was originally Rs. 15 per share. This
means that more profit would be left for the revenue reserves. This is exactly what happened. this
was mainly because PSO was recovering from the pandemic in 2020. In 2020, the company
failed to give out dividends which because a liability for the company as well. Due to this, we
can see an increase in the revenue reserves due to an increase in the unappropriated profits left.
Future Outlook:
In the future, the companies would want to increase their dividends as the shareholders are
currently not satisfied. This will increase because the companies are making a lot of profit so
shareholders would eventually want their portion of the total profit made by the company. This
Page | 534
PAKISTAN STATE OIL
would lead to lower revenue reserves for the company if it does not increase its unappropriated
profits by other means.
Source:
➢ https://psopk.com/en/investors/results-reporting/dividend-information
Higher taxes imposed in 2021 on OMCs might affect their profits:
In 2021, the taxes imposed on the OMCs increased. Majorly, the petroleum levy, custom duties
and the turnover taxes have increased for the OMCs. The government plans on making their
revenues through these sources in the future as well. Even though, in 2021, this increase was
offset by similar decrease in the finance cost and higher volumes of sales, but these would not
able to offset or mitigate the impact of higher taxes in the future.
Future Outlook:
If the government would keep playing with the tax rates in such a way and would keep
generating their revenues through the OMCs then in the near future, the OMCs would have
minimal profits left. This would then lead to lower reserves for the companies.
Source:
corporate-tax-rates
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PAKISTAN STATE OIL
PSO’s contract with Pakistan Railways in 2022 to Increase its Profits:
In 2022, PSO made a contract to supply its petroleum products to Pakistan Railways. This is a
major opportunity for them to increase their sales and also make higher profits in the coming
future which would then bring in higher levels of unappropriated profits and hence higher levels
of revenue reserves for the company. This would increase the overall reserves of the industry as
well and PSO might have a greater market share in terms of reserves among other OMCs.
Future Outlook:
Considering this, the profit of PSO is expected to increase due to an increase in the sales. That is,
if the Pakistan Railways does not become one of its defaulters, making most of the purchases on
credit and then delaying the payments.
Source:
➢ PSO’s Press Release 2022
Page | 536
PAKISTAN STATE OIL
Economic Analysis
Unappropriated profit for PSO during the fiscal year 2021 increased by 36%, the major portion
of which was accounted for due to an increase in the net income.
The higher net income is mainly due to higher gross margins, increase in other income as well as
a reduction in finance cost all of which will be analyzed below.
Source
Higher Gross Margins
Page | 537
PAKISTAN STATE OIL
Lower Interest Rate
Owing to desperate times during Covid-19, and taking cognizance of the negative fallout from
the Covid-19 pandemic for the economy, the state bank of Pakistan took some steps in order to
safeguard businesses and households. Among them was the reduction in the policy rates by 625
basis points to 7% from a huge amount of 13%.
Providing more details about the scheme, the central bank stated that it was introduced to provide
a stimulus to the economy in times of Covid-19. Owing to these lower markups, PSO was able to
reduce its finance cost Rs.3.2 billion or 25%, which was also positively reflected in its net
income
Future Outlook
Page | 538
PAKISTAN STATE OIL
Looking forward the economy has started to recover from the impact of Covid-19 with the
economic growth to be projected at 4-5% during 2022. Owing to this the state bank has increased
the interest rate after holding it at 7% for almost 15 months. The state bank also stated that as the
economy has started to recover, a greater emphasis is needed on ensuring the appropriate policy
mix to protect the longevity of growth, keep inflation expectations anchored, and slow the
growth in the current account deficit. This indicates that in the future the interest rate can be
expected to further increase which would ultimately also increase the finance cost for PSO. This
forecast has been highlighted in the graph below;
Sources
➢ https://tradingeconomics.com/pakistan/interest-rate
Page | 539
PAKISTAN STATE OIL
➢ https://tribune.com.pk/story/2321092/interest-rate-increased-to-725-after-a-15-month-gap
➢ https://tribune.com.pk/story/2253969/sbp-reduces-mark-up-on-two-schemes
Exchange gain
During the year, PSO booked staggering amounts of exchange gains on account of appreciation
of PKR against USD. These were done on the settlement of foreign currency transactions which
was the loan taken for the retirement of letter of credit (LCs) of crude oil. The exchange gain
added a huge amount to the net income of the company
Future Outlook
Looking forward PKR is not expected to appreciate and is likely to stay between 180 and 190.
Owing to this, there will be no exchange gains in the future which might reduce the other income
for PSO ultimately having an effect on its net profit. This forecast has been demonstrated in the
graph below;
Page | 540
PAKISTAN STATE OIL
Source:
Annual Report, 2021
➢ https://newztodays.com/pso-exchange-gains/
Delayed Payment Interest
to PSO. The interest/markup charged on these late payments was accounted for in the other
income, having a positive effect on the net income. The amount received against the late
payment surcharge from HUBCO and KAPCO contributed materially in easing the financial
strain on the company’s cost of funds for the year.
Page | 541
PAKISTAN STATE OIL
Future Outlook
will increase their payments to PSO without delaying them any further. This indicates that the
interest in the future can also be expected to increase thus having a positive effect on the net
income and thus the reserves. The prediction can also be supported by the past data.
Sources:
Page | 542
PAKISTAN STATE OIL
Method chosen
• Subjective analysis
Methods used
• Naïve (15 years)
Naïve (15 years)
Excel forecasting
Page | 543
PAKISTAN STATE OIL
Horizontal Analysis
Page | 544
PAKISTAN STATE OIL
Change
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2014
2007
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Page | 545
PAKISTAN STATE OIL
Non-Controlling Interest
Breakdown:
Vertical
Non-Controlling Interest 2021 Analysis
Non-current assets 20,673,268 961.15%
Current assets 20,320,752 944.76%
Non-current liabilities -824,614 -38.34%
Current liabilities -38,122,408 -1772.41%
Net assets 2,046,998 95.17%
Adjustments for consolidation: 9,260,067 430.52%
Fair value adjustment -11,149,288 -518.36%
Consistency of accounting policy -3,360,452 -156.24%
Share deposit money -837,156 -38.92%
Page | 546
PAKISTAN STATE OIL
Others 7,099,709 330.08%
1,012,880 47.09%
Adjusted net assets of the Subsidiary Company 3,059,878 142.26%
Share of NCI @ 36.44% (2020: 40%) 1,115,020 51.84%
Issue of right shares / Share deposit money of NCI 1,035,861 48.16%
2,150,881 100.00%
Page | 547
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Non-Controlling Interest 52.13% -74.75% 0.00% 0.00% 0.00% 0.00%
2021 2020 2019 2018 2017 2016
Non-Controlling Interest 0.52% 0.38% 1.23% 0.00% 0.00% 0.00%
Forecasted values
The account was added in 2019 hence not a lot of information is available on the account. So a
general company analysis of the account was done and hence it was forecasted accordingly. We
predict that the account will increase between 45-50% for the next 5 years.
Page | 548
PAKISTAN STATE OIL
COMPANY ANALYSIS
Factors Effects
Increase in Net Assets Increase
decrease.
Non-controlling interest
6000000
5000000
4000000
3000000
2000000
1000000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Non-
Controlling Interest of PSO year by year from 2016 to 2020.
Year 2021-2020:
Page | 549
PAKISTAN STATE OIL
Upon analyzing the horizontal statements for the non-controlling interest, there was a decrease of
74.7% and then in 2021, there was an increase of 52.13%,
• It increased it 2021 due to an increase in the Net Assets of 107.06%.
• It decreased in 2020 due to the decrease in Net Assets of 95.01%.
Source:
Page | 550
PAKISTAN STATE OIL
__________________________________________________________
________________________
Page | 551
PAKISTAN STATE OIL
Non-Current Liabilities
Page | 552
PAKISTAN STATE OIL
Retirement and other service
benefits
Breakdown:
Retirement and Other Service Benefits 2021 Vertical Analysis
Retirement and other service benefits - Net Liabilities
Holding Company
Gratuity
Medical benefits 6,796,866 -458.21%
Compensated absences 389,480 -26.26%
Page | 553
PAKISTAN STATE OIL
7,186,346 -484.47%
Subsidiary Company
Management Pension Scheme 266,940 -18.00%
Non-management Pension Scheme 97,568 -6.58%
Management Gratuity Scheme 13,043 -0.88%
7,563,897 -509.92%
Retirement benefits - Asset
Holding Company
Gratuity -339,297 22.87%
Pension -1,118,464 75.40%
Subsidiary Company
Non-management Gratuity Scheme -25,580 1.72%
-1,483,341 100.00%
Page | 554
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Retirement and Other
Service Benefits 4.52% -8.13% 52.51% -36.15% 29.76% -25.08%
2021 2020 2019 2018 2017 2016
Retirement and other
Service Benefits 1.83% 1.93% 1.74% 1.28% 2.06% 1.82%
Forecasted Values
The account is one of the minor accounts for PSO with a very small percentage in the vertical
analysis of the company. So, a general company analysis of the account was done and the
account was forecasted accordingly. According to the historical data we predict that the account
Page | 555
PAKISTAN STATE OIL
will increase within a range of 3-4% that too at a decreasing rate. The trend for increase can be
shown in the graph below.
140.00%
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
(20.00%)
(40.00%)
(60.00%)
Company Analysis
Factors Effects
Increase in the medical benefits Increase
Increase in the Non-Management Pension Increase
Scheme
Decrease in Gratuity and Pension Funds Decrease
Decrease in compensated absences Decrease
Page | 556
PAKISTAN STATE OIL
Retirement and Other Service Benefits

9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2021 2020 2019 2018 2017 2016
retirement and other service benefits of PSO year by year from 2021 to 2016.
Year 2021:
There was an increase in this account by 4.52%, due to the following reasons;
• Increase in the medical benefits: Increased by 6.5%.
• Increase in the Non-Management Pension Scheme: Increased by 9.45%.
Source:
• Annual Report (2021)
Page | 557
PAKISTAN STATE OIL
Year 2020:
• Decrease in Gratuity and Pension Funds: The company approved and fund pension
scheme for both management and non-management employees. The scheme provides
pension based on the employees last drawn salaries. Pension are payable for life. The
company also operates unfunded gratuity scheme for all its employees. There was a
decrease of 79.5% in the Pension Funds.
Source:
Year 2019:
There was an increase in this account by 52.51%, due to the following reasons;
• Increase in the Pension funds given to ex-employees: Increased by 101.4%
• Increase in Medical Benefits: Increased by 58.3%.
• Increase in compensated absences: Increased by 13.2%.
Source:
Page | 558
PAKISTAN STATE OIL
Year 2018:
There was a decrease in this account by 36.15%, due to the following reasons;
• Decrease in Gratuity: Decreased by 8.5%.
• Decrease in Medical Benefits: Decreased by 5.11%.
Source:
Year 2017:
There was a decrease in this account by 29.76%%, due to the following reasons;
• Decrease in compensated absences: Decreased by 14.94%.
Source:
Year 2016:
There was a decrease in this account by 25.08%, due to the following reasons;
• Decrease in Gratuity Funds: Decreased by 76.7%.
• Decrease in compensated absences: Decreased by 12.8%.
Source:
Page | 559
PAKISTAN STATE OIL
Page | 560
PAKISTAN STATE OIL
Long Term Borrowings
Breakdown:
Long Term Borrowing 2021 Vertical Analysis
Diminishing Musharika / long - term borrowing 4,100,000 1294.92%
Less: Current portion of Diminishing Musharika -3,900,000 -1326.87%
200,000 68.04%
Salary Refinancing 231,369 78.72%
Less: Current portion of Salary Refinancing -137,445 -46.76%
93,924 31.96%
293,924 100.00%
Page | 561
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Long Term Borrowing -93.03% -1.97% 0.00% 0.00% 0.00% 0.00%
2021 2020 2019 2018 2017 2016
Long Term Borrowing 0.07% 1.12% 0.95% 0.00% 0.00% 0.00%
Forecasted Value
This is also one of the minor accounts for PSO and the one which was added again in 2019, after
the borrowings were paid off in 2012. Although being a minor account, we considered that it is a
very important account for any company hence all three analysis for the account were done and
the forecasting was done accordingly. All the industrial and economic factors suggested that the
account will be decreasing in the future hence we decreased the account within a range of 10-
15%, at an increasing rate.
Page | 562
PAKISTAN STATE OIL
Company Analysis
Factors Effects
Decrease in Diminishing Musharika Decrease
Increase in Salary Refinancing Decrease
Long Term Borrowing

5000000
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Long-
Term Borrowing of PSO year by year from 2016 to 2020.
Year 2021:
Page | 563
PAKISTAN STATE OIL
• Decrease in Diminishing Musharika: by 4.65%. Musharakah is a joint partnership
arrangement in Islamic finance in which profits and losses are shared. Profits from
interest are not permitted in Islamic practice, necessitating the need for musharakah.
• Increase in Salary Refinancing: by 75.8%
Source:
➢ Annual Report
➢ https://www.investopedia.com/terms/m/musharakah
Year 2020-19:
• Decrease in Diminishing Musharika: by 8.51%. It was 4,300,000 in 2020 whereas it
was 4,700,000 in 2019.
Source:
➢ Annual Report
Page | 564
PAKISTAN STATE OIL
Industry Analysis
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value long term
borrowing of all five years of the companies are given below.
Total Long Term Borrowings of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 0 0 4,300,000 4,215,146 293,924
HTL 98,557,862 19,156,221 1,822,078 42,267,650 47,490,196
APL 627,240 0 0 120,323 61,418
BPL 0 0 0 0 0
TOTAL 99,185,102 19,156,221 6,122,078 46,603,119 47,845,538
Total Market Share of all Companies in 5 Years w.r.t Total Long Term Borrowings
PSO 4.02%
HTL 95.61%
APL 0.37%
Page | 565
PAKISTAN STATE OIL
BPL 0.00%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Long Term Borrowings
Total Market Share

120.00%
100.00% 95.61%
80.00%
60.00%
40.00%
20.00%
4.02%
0.37% 0.00%
0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of long term
borrowings in their accounts. PSO is in the second place.
PSO’s Long Term Borrowings Share in the Industry w.r.t Years
Page | 566
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
Share 0.00% 0.00% 70.24% 9.04% 0.61%
Graph Indicating PSO’s Cash and Bank Balance Share in the Industry w.r.t Years

80.00%
70.00% 70.24%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00% 9.04%
0.00% 0.00% 0.00% 0.61%

2017 2018 2019 2020 2021
Analysis: the market share of PSO in terms of long term borrowings was the highest in 2019. It
did not have any long term borrowing before that in 2017 and 2018. However, in 2019, their
share increased but has been falling ever since.
Page | 567
PAKISTAN STATE OIL
Yearly Change/Growth in Long Term Borrowings of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth 0.00% 0.00% 0.00% -1.97% -93.03%
Graph Indicating Change/Growth in Long Term Borrowings of PSO
PSO Yearly LTB Growth

0.00% 0.00% 0.00% 0.00% -1.97%
2017 2018 2019 2020 2021
-10.00%
-20.00%
-30.00%
-40.00%
-50.00%
-60.00%
-70.00%
-80.00%
-90.00%
-93.03%
-100.00%
Page | 568
PAKISTAN STATE OIL
Analysis: It can be analyzed that the growth after 2019 is negative in both 2020 and is the
absolute lowest in 2021.
Growth/Change in the Industry’s Long Term Borrowings Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly -
Growth -54.10% 80.69% -68.04% 661.23% 2.67%
Graph Indicating Growth/Change in the Industry’s Long Term Borrowings Overtime
Page | 569
PAKISTAN STATE OIL

700.00%
661.23%
600.00%
500.00%
400.00%
300.00%
200.00%
100.00%
0.00% 2.67%
2017 2018 2019 2020 2021
-54.10% -68.04%
-100.00% -80.69%
-200.00%
Analysis: The industry in terms of this account experienced a peak in 2020 and that was mainly
because HTL’s long term borrowings increased in that year. The companies reduced their
borrowings in 2021 as the industry’s long term borrowings can be seen to have fallen.
Factors Effects
Implementation of Salary Refinancing Scheme by State Bank Decrease
Page | 570
PAKISTAN STATE OIL
SBP to allow businesses to defer loan repayments for one year Increase
Trust deficit of banks with OMCs after Hascol case Decrease
Banks not ready to extend the credit limits for OMCs Decrease
Outstanding claims of suppliers and banks Decrease
Investment Projects of OMCs for the refineries Increase
Salary Refinancing Scheme by State Bank of Pakistan
On May 11, 2020, SBP further facilitated businesses with enhanced refinance limits to finance
up to 100% of wages and salaries of businesses with average 3- month wage bill of up to Rs500
million. Earlier, 100% financing was available up to a wage bill of Rs 200 million only.
Similarly, for businesses with 3-month wage bill exceeding Rs 500 million, State Bank will now
finance of up to 75% with maximum financing of Rs1 billion. Earlier, 75% financing was
available up to a maximum of Rs375 million and 50% up to a maximum of Rs 500 million.
Businesses that had earlier availed lower financing due to applicable limits can now avail
additional financing on the basis of revised criteria.
Future Outlook
This was done to facilitate the businesses during the pandemic. The new government and the
lower impact of the pandemic would lead to SBP revising these schemes. In the short run, long
Page | 571
PAKISTAN STATE OIL
term borrowings might increase due to this. However, in the long run, the schemes would
change.
Source:
➢ https://www.sbp.org.pk/COVID2/Rozgar.html#:~:text=On%20May%2011%2C%202020
%2C%20SBP,of%20Rs%20200%20million%20only
➢ https://www.sbp.org.pk/smefd/circulars/2020/C6.htm
SBP allowed Businesses to Defer Payments for One Year in 2020
The long term borrowings also increased because the OMCs were taking advantage of the
facilitation provided by SBP. The bank allowed companies to pay their outstanding loans to them
after a year. This allowed them to pay back the loans in 2021 which lead to lower long term
borrowings in 2021 but higher long term borrowings in 2020.
Future Outlook
This too is very short term in nature. The banks are completely against the OMCs nowadays,
making it impossible for them to have long term borrowings.
Source:
Page | 572
PAKISTAN STATE OIL
➢ https://www.sbp.org.pk/COVID2/Loans.html
➢ https://www.sbp.org.pk/bprd/2020/CL14.htm
➢ http://www.sbp.org.pk/bprd/pdf/FAQs-ReliefPackage-17-Apr-2020.pdf
Hascol Case Created a Trust Deficit for the Banks in case of the OMCs
After Hascol defaulted, the banks are rather reluctant to offer financing or any types of loans to
the OMCs. The banks are still trying to recover from the Hascol case. Despite the federal
government’s intervention, commercial banks remain reluctant to increase the credit limits of oil
marketing companies (OMCs) spurred by Hascol’s Rs54 billion default, which might trigger a
country-wide fuel shortage. The hesitance on part of commercial banks to increase the credit line
would certainly serve nothing, but expose the country to massive shortage of POL products,
particularly high speed diesel, which was in high demand for harvesting wheat in Punjab and
Sindh. Commercial Banks instead have asked for additional collateral far beyond the lending to
OMCs compared with other industries. Over the last five months, the purchasing power of
OMCs for PMG and HSD has declined by over 30 percent. The weakening of the rupee again
dollar also contributed to the increase in the products’ value.
Future Outlook
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PAKISTAN STATE OIL
The banks have completely refused to the government about extending credit limits to the
OMCs. They have not recovered from the Hascol case. Due to this, the long term borrowing
would become difficult and would decrease.
Sources:
➢ https://www.thenews.com.pk/print/941547-federal-govt-intervention-fails-to-win-omcs-a-
rise-in-credit-limits
➢ https://profit.pakistantoday.com.pk/2022/01/30/is-hascols-fate-finally-sealed/
➢ https://profit.pakistantoday.com.pk/2021/04/25/what-is-hascol-hiding/
Outstanding Claims of Banks and Suppliers to be settled to get more Borrowing
Many suppliers in the international market and the local refineries have complained against the
OMCs for not making prompt payments to them. This would lead to banks showing reluctance
towards providing credit to the OMCs as they believe the chance of default is really high with
the OMCs in Pakistan.
Future Outlook
This issue is not expected to resolve anytime soon due to which long term borrowings would
have to reduce in the future
Sources:
Page | 574
PAKISTAN STATE OIL
➢ https://lahore.comsats.edu.pk/cif/Documents/DiminishingMusharakah-Concept.
➢ https://www.finance.gov.pk/survey/chapters/05-Money%20and%20Credit08.pdf
➢ https://dps.psx.com.pk/download/document/155675.pdf
Future Investment Projects of OMCs for Refineries would require Funding
This has already been mentioned in the analysis of PPE and long term investments.
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PAKISTAN STATE OIL
Economic Analysis
Factor Effect
Payroll Refinance Facility by SBP Decrease
Higher Profitability Decrease
Payroll Refinance Facility by SBP
To combat the impact of COVID-19 and to help the businesses in payment of wages and salaries
to their workers and employees and thereby support continued employment in this challenging
environment, State Bank of Pakistan introduced a temporary refinance scheme and its Sharia
compliant version under the name payroll refinance facility. Under this the state bank provided
loans to companies including PSO so that there are no layoff of employees which increased the
long term borrowing for the company.
This loan is to be repaid in eight equal quarterly installments with an interest rate of 3%
Future Outlook
Since the economy has started to recover and PSO did make extraordinary profits during the year
2021, it is highly unlikely that PSO will borrow again under this scheme in the future which
means that the borrowings in the future are likely to decrease.
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PAKISTAN STATE OIL
Source:
➢ https://www.sbp.org.pk/COVID2/Rozgar.html
Higher Profitability
During the fiscal year 2021, PSO recorded all time highest sales and an all-time highest profit
after tax. The main reasons for this could be attributed to better cost absorption as well as the
increase in prices and demand of petroleum products.
An increase in the profits for the company ultimately implies that the taxation that it will be
paying on its profits will also be high which the case is for PSO. It could clearly be seen that the
record high profits for the company resulted in the increase in repayment of loans which
significantly reduced the amount of borrowings
Future Outlook
Looking forward the sales of the company are expected to increase and thus the profitability of
the company is also expected to increase as we predict better cost absorption by the company.
Thus assuming this, it is safe to say that the company will pay back its loans.
Source:
Page | 577
PAKISTAN STATE OIL
➢ https://www.dawn.com/news/1683025/tax-revenues
➢ https://tribune.com.pk/story/2354945/fbr-collects-rs486tr-in-taxes
Page | 578
PAKISTAN STATE OIL
Lease Liabilities
Breakdown:
Lease Liabilities 2021 Vertical Analysis
Balance at beginning of the year: 4,529,062 101.82%
Impact of initial application of IFRS 16 - -
Additions during the year 588,383 13.23%
Accretion of interest 698,518 15.70%
Lease contracts modified during the year 333,650 7.50%
Less: Disposal during the year -346 -0.01%
Less: Lease rentals paid -913,613 -20.54%
Balance at the end of year 5,235,654 117.71%
Less: Current portion shown under current liability -787,713 -17.71%
Non-Current Balance 4,447,941 100.00%
Page | 579
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Lease Liabilities -0.91% 0.00% 0.00% 0.00% 0.00% 0.00%
2021 2020 2019 2018 2017 2016
Lease Liabilities 1.07% 1.20% 0.00% 0.00% 0.00% 0.00%
Forecasted Value
Leased liability is another minor account of the company, however we conducted both the
company ad industry analysis of this account as it can have major impact on the financial
statements of the company. The account was added in 2020 hence not a lot of information is
Page | 580
PAKISTAN STATE OIL
available on the account. So, we predict that the account will decrease by a very minor amount
for a couple of years after which it will stay constant.
Page | 581
PAKISTAN STATE OIL
Company Analysis
Factors Effects
Increase in the lease contracts modified Decrease
decrease.
Lease Liabilities
5000000
4000000
3000000
2000000
1000000
0
2021 2020 2019 2018 2017 2016
Lease Liabilities of PSO year by year from 2016 to 2020.
Year 2021-20:
Page | 582
PAKISTAN STATE OIL
• Increase in the lease contracts modified during the year 2020: by 11%. On adoption
of IFRS 16, the Company has changed its accounting policy for operating leases which
are now recognized on the statement of financial position. The Company has accordingly
recognized lease liabilities amounting to Rs. 4,430 million.
Source:
Page | 583
PAKISTAN STATE OIL
Industry Analysis
in order to avail the latest data ate HTL, APL, BPL and PSO. The total values of lease liabilities
of all five years of the companies are given below.
Total Lease Liabilities of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 0 0 0 4,488,600 4,447,941
HTL 103,119,783 80,309,810 27,928,496 204,637,134 334,670,123
APL 0 0 0 6,274,485 3,978,932
BPL 3,940 938 2,177 17,511 9,942
TOTAL 103,123,723 80,310,748 27,930,673 215,417,730 343,106,938
Total Market Share of all Companies in 5 Years w.r.t Total Lease Liabilities
Total Market
Companies Share
PSO 1.16%
HTL 97.50%
Page | 584
PAKISTAN STATE OIL
APL 1.33%
BPL 0.00%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Lease Liabilities
Total Market Share

120.00%
100.00% 97.50%
80.00%
60.00%
40.00%
20.00%
1.16% 1.33% 0.00%

0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest proportion of lease
liabilities in their accounts. PSO is in the second place.
Page | 585
PAKISTAN STATE OIL
PSO’s Lease Liabilities Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 0.00% 0.00% 0.00% 2.08% 1.30%
Graph Indicating PSO’s Lease Liabilities Share in the Industry w.r.t Years

2.50%
2.08%
2.00%
1.50%
1.30%
1.00%
0.50%
0.00% 0.00% 0.00% 0.00%

2017 2018 2019 2020 2021
Page | 586
PAKISTAN STATE OIL
Analysis: the market share of PSO in lease liabilities was zero till 2019 as there were no lease
liabilities. However, leasing started for them in 2020 and so did the market share increase. It
decreased after the pandemic.
Yearly Change/Growth in Lease Liabilities of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth 0.00% 0.00% 0.00% 0.00% -0.91%
Graph Indicating Change/Growth in Lease Liabilities of PSO
PSO Yearly Lease Liabilities Growth

0.00% 0.00% 0.00% 0.00% 0.00%
2017 2018 2019 2020 2021
-0.10%
-0.20%
-0.30%
-0.40%
-0.50%
-0.60%
-0.70%
-0.80%
-0.90% -0.91%
-1.00%
Page | 587
PAKISTAN STATE OIL
Analysis: It can be analyzed that the growth after 2020, the lease liabilities declined
considerably for PSO.
Growth/Change in the Industry’s Lease Liabilities Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth -37.53% -22.12% -65.22% 671.26% 59.28%
Graph Indicating Growth/Change in the Industry’s Lease Liabilities Overtime
Page | 588
PAKISTAN STATE OIL

800.00%
700.00%
671.26%
600.00%
500.00%
400.00%
300.00%
200.00%
100.00%
59.28%
0.00% -22.12%
-37.53%
2017 2018 2019 2020 2021
-65.22%
-100.00%
-200.00%
Analysis: The industry in terms of this account experienced a peak in 2020 and HTL and BPL
started increased their lease liabilities in this year.
Future Outlook
Lease Liabilities would either have zero growth or would decrease further in the forthcoming
future as leasing is something the company never really relied upon. Moreover, 2 years worth of
data is not enough to make decisions about lease liabilities of PSO. In 2020, there were lease
Page | 589
PAKISTAN STATE OIL
rentals for storage keeping as refineries refused to cooperate. This created lease rental liabilities
but in 2021, these dropped as well, lowering the lease liabilities.
Source:
Page | 590
PAKISTAN STATE OIL
Other Payable
Page | 591
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Other Payable -44.64% 0.00% 0.00% 0.00% 0.00% 0.00%
2021 2020 2019 2018 2017 2016
Other Payable 0.18% 0.36% 0.00% 0.00% 0.00% 0.00%
Forecasted Values
Other payable is one of the minor accounts of the company and the one which was added in
2020. Before that it was part of the trade payables account. So, a general company analysis of
this account has been done and according to that, the account has been decreased within a range
of 35-40% at a decreasing rate.
Page | 592
PAKISTAN STATE OIL
Company Analysis
Other Payable
5000000
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
2021 2020 2019 2018 2017 2016
other payables of PSO year by year from 2021 to 2016. Overall, The Other Payables decreased
by 44%. Other Payables are related to on account of import of LNG by the Holding Company.
As per the directions of Ministry of Finance, Economic Affairs Division outstanding wharfage
has to be paid in 10 equal installments without interest over a period of 10 years. The Holding
Page | 593
PAKISTAN STATE OIL
Company has recognized this liability at amortized cost at inception rate prevailing at the time of
determining the liability.
Source:
Page | 594
PAKISTAN STATE OIL
__________________________________________________________
________________________
Page | 595
PAKISTAN STATE OIL
Current Liabilities
Page | 596
PAKISTAN STATE OIL
Trade and Other Payable
Breakdown:
Trade and other Payables 2021 Vertical Analysis
Local creditors 25,601,168 15.27%
Foreign creditors 51,182,728 30.52%
76,783,896 45.79%
Security deposits 5,237,383 3.12%
Accrued expenses and other liabilities 72,498,735 43.23%
Payable to provident funds 9,174 0.01%
Due to OMCs and refineries 379,730 0.23%
Advances - unsecured
Page | 597
PAKISTAN STATE OIL
from customers 8,699,802 5.19%
against equipment 1,728 0.00%
8,701,530 5.19%
Taxes and other government dues
Excise, taxes and other duties 2,531,105 1.51%
Octroi 51,590 0.03%
Sales tax payable - due to related party - -
Income tax deducted at source 117,619 0.07%
2,700,314 1.61%
Workers' Welfare Fund 1,279,084 0.76%
Others 103,980 0.06%
167,693,826 100.00%
Page | 598
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Trade and other payables 12.28% -13.93% -2.34% 31.36% 6.08% -6.23%
2021 2020 2019 2018 2017 2016
Trade and other payables 43.81% 43.04% 41.37% 47.73% 37.27% 40.28%
Forecasted Values
Keeping in mind that the international oil prices, which play a major role in determine the trade
payables of the company, we forecast that trade and other payables are will increase between 10-
15% every year, with the pace gradually decreasing. This is also done keeping in mind that we
forecast that the cost of goods sold will also be increasing by a significant amount, although the
company will be absorbing its fixed costs better. This is also shown in the graph below
Page | 599
PAKISTAN STATE OIL
Change
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2015
2019
2023
2007
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2020
2021
2022
2024
2025
2026
(20.00%)
(40.00%)
Company Analysis
Factors that highly influence the trade and other payables of a company may include the increase
or decrease of the purchase of inventory etc. Further we’ll be dissecting the factors and the
causes of the increase and decrease of the trade and other payables of PSO year by year from
2021 to 2016.
Year 2021:
Trade and other payables have increased in FY21 primarily due to increase in trade payables on
account of rise in international oil prices.
Page | 600
PAKISTAN STATE OIL
• PSO due to pay oil refineries: The PSO has to pay Rs32.101 billion to oil refineries. It
owes Rs16.836 billion to Pak-Arab Refinery Company (Parco), Rs4.931 billion to
Pakistan Refinery Limited (PRL), Rs3.984 billion to National Refinery Limited (NRL),
Rs3.848 billion to Attock Refinery Limited (ARL), Rs1.100 billion to Byco, and Rs1.403
billion Enar.
• PSO’s deteriorating cashflow situation on account of non-recover of its dues: PSO
payables have soared to Rs177.459 billion because of the deteriorating cash flow
situation on account of non-recovery of its dues amounting to over Rs374 billion. The
PSO's inability to clear its outstanding liabilities have increased, which is why its
payables have also drastically increased to Rs148.366 billion under the head of letter of
credits with regards to payments to the KPC (Kuwait Petroleum Company).
• Increase in international oil prices: The price of petrol in 2021 was Rs123.30 per liter,
while cost of supply of Pakistan State Oil (PSO) increased to Rs95.41 liter. Increase in
price also effected the GST rate, which increased to Rs11.76 per liter from Rs11.28 per
liter in the first half of September.
Source:
Page | 601
PAKISTAN STATE OIL
Year 2020:
Trade and other payables have declined in FY20 primarily due to decrease in trade payables on
account of dip in oil prices and payables related to procurement of product.
• PSO’s dues to the oil refineries: PSO’s management said its circular debt touched an
alarming level in the year 2021 and that PSO had to pay Rs18 billion to the oil
refineries.
• Reduction in the prices of petroleum products: In the first half of the year Petrol was
sold at Rs.74.52 per liter. The government reduced prices of all petroleum products
except High-Speed Diesel (HSD) in order to partially pass on the impact of massive
international price reduction to the masses.
• Pakistan’s lack of strategic storages led to a missed opportunity: The global oil
prices had crashed which had provided an opportunity for oil importing countries like
Pakistan to import the commodity and store it for future use. Unfortunately, due to a
lack of strategic storages the country was unable to take advantage of the slump. In
Pakistan, oil marketing companies are bound to store petroleum products for 20 days.
But they had been unable to maintain stocks due to which the country had faced a diesel
shortage crisis.
Page | 602
PAKISTAN STATE OIL
Source:
➢ https://tribune.com.pk/story/2217984/pakistan-shelves-plan-offshore-storages
Year 2019:
Trade and other payables have declined as per vertical and horizontal analysis primarily due to
decrease in trade payables on account of lower volumes of Furnace oil.
• Furnace oil volumes decrease due to the major shift towards coal and LNG: Some of
the demand of petroleum products have been the changes in the energy mix particularly
shifting away from the furnace oil towards coal and LNG; and then the comeback of
furnace oil during COVID and post COVID times due to the systemic issues in the
refining system as well as the rise in demand from the power sector.
• PSO’s Payables due to foreign suppliers and local oil refineries: PSO’s payables to
local refineries dropped from Rs16bn to Rs13bn whiles its outstanding payments to
international suppliers fell from Rs43bn to Rs28bn as of March 1. Yet, the PSO’s total
international obligations stood at Rs44bn when compared to Rs57bn.
Source:
Page | 603
PAKISTAN STATE OIL
Year 2018:
Trade and other payables are the highest in the year 2018 as per vertical and horizontal analysis
primarily due to increase in trade payables on account of higher oil prices.
• Decrease in furnace oil volumes due to the shift to coal: Furnace oil volumes declined
by 29.6 percent year-on-year in 2018 owing to the supply situation and the government’s
strategy of switching priority of existing power plants from FO to RLNG/natural gas.
• PSO seeks Rs 65 billion from the power sector: Pakistan State Oil (PSO) has sought Rs
65 billion from Power Division to release its choked credit line and ensure furnace oil
supplies to the power sector. Whereas power sector's consolidated payables reached Rs
1.148 trillion of which Rs 582.86 billion loans are parked in the books of Power Holding
(Private) Limited (PHPL) whereas Rs 566 billion was in circular debt.
• Dues to be paid to foreign suppliers and oil refineries: Total payables of PSO
currently stood at Rs84bn including almost Rs70bn to foreign suppliers and about
Rs15bn to local refineries.
Source:
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PAKISTAN STATE OIL
Year 2017:
Trade and other payables have increased in 2017 as per horizontal analysis primarily due to
increase in trade payables on account of higher inventory levels and oil prices.
• Higher inventory due to lower fuel costs: The increase in gross profit and gross margin
could be due to inventory gains booked on account of lower fuel costs in the low oil price
scenario.
• PSO unable to meet the demands due to chocked credit lines: Power division was
seeking only 3,600 tonnes to buildup stocks at power plants despite their storage capacity
of 1.2 million tonnes. Pakistan State Oil (PSO) holds a storage capacity of more than
400,000 tonnes but they were unable to meet power sectors’ demand due to choked credit
lines.
Source:
Page | 605
PAKISTAN STATE OIL
Year 2016:
Trade and other payables have shown a declining trend in 2016 onwards mainly due to timely
payments to refineries coupled with impact of reduction in oil prices.
• PSO made timely payments to the local refineries: Due to this payment discipline, the
Company has not faced any default situation against its payment commitments during the
year 2016 under review contrary to last year 2015. Timely payments to local refineries
were made in order to ensure maximum availability of products from local sources
continuously affects the liquidity position, which remained under pressure and was
managed through short-term bank borrowings.
• Reduction in oil prices increased PSO’s sales volumes significantly: The Company’s
sale volume of Motor Gasoline grew by 26%, mainly due to decrease in price of gasoline
and subsequent increase in customer demand. Furthermore, HSD sales recorded an
increase of 0.7%, due to the increased upliftment by PIA and international airlines. FO
volumes declined by 4.3% due to lower upliftment by IPP’s primarily due to shifting
from FO to natural gas.
Source:
Page | 606
PAKISTAN STATE OIL
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PAKISTAN STATE OIL
Industry Analysis
Considering that PSO is a company with high proportions of trade debts, it is safe to assume that
their cash position would be such that, their purchases would mostly be on credit as well and the
level of trade payables would vary from time to time, depending on how much cash they have
received from their customers and how efficient their operating cycle is. For any company, their
trade payables are closely tied with their cost of goods sold. They tend to have a direct
relationship. Trade payables tend to impact the purchase portion of the cost of goods sold.
Total Trade Payables of all OMCs:
Companies 2017 2018 2019 2020 2021 Total 5 years

PSO 146,269,601 192,145,744 187,650,036 161,505,913 181,342,763 868,914,057
HTL 805,085,777 613,957,734 739,055,365 704,278,864 1,385,266,386 4,247,644,126
APL 21,098,679 26,138,159 26,633,386 27,561,324 31,179,480 132,611,028
BPL 140,537 179,524 91,492 138,922 108,382 658,857
TOTAL 972,594,594 832,421,161 953,430,279 893,485,023 1,597,897,011 5,249,828,068
Total Market Share of OMCs in Trade Payables:
Total Market
Company Names Share
Hi-Tech Lubricants
Limited 80.91%
Page | 608
PAKISTAN STATE OIL
Total Market Share
0.00% 20.00% 40.00% 60.00% 80.00% 100.00%
Total Market Share
Analysis: After Hi-Tech lubricants, PSO has the highest levels of trade payables in the market.
However, what we can notice is this that its share of trade payables (16.55%) is almost half the
share of its trade receivables (37.29%). The market share in terms of trade payables for APL and
BPL are not that considerable and stand in no comparison to PSO and HTL.
Total Growth in Industry’s Trade Payables:
Company Names 2017 2018 2019 2020 2021
Page | 609
PAKISTAN STATE OIL
Industry’s Yearly
Growth 31.95% -14.41% 14.54% -6.29% 78.84%

100.00%
80.00% 78.84%
60.00%
40.00%
31.95%
20.00%
14.54%
0.00% -6.29%
2017 2018 2019 2020 2021
-14.41%
-20.00%
Analysis: The overall industry experienced a fall in the trade payables in the year 2018 after a
high level of 31.95% in 2017. After that, in 2019 it increased again almost by the same level as it
decreased in 2018. In 2020, the trade payables decreased at a decreasing rate but saw a high
speak in the year 2021. This happened mainly because even though in 2018, the trade payables
of PSO, ATL and BPL increased, the payables of HTL dropped by a larger amount and the
overall growth in the industry’s payables dropped due to this. In 2019, this was offset by a
decrease in the payables of PSO but an increase in the payables of HTL. In the year 2020, the
trade payables of the major players, PSO and HTL fell considerably and even though the
Page | 610
PAKISTAN STATE OIL
payables of APL and BPL increased but they were not enough to off-set the changes of PSO and
HTL due to which the industry’s payables declined in 2020. The peak in industry payables in
2021 was mainly because of HTL which recorded the highest level of payables in the last five
years in 2021. There was also an increase in the payables of PSO but it stands in no comparison
to the increase in the payables of HTL. HTL had some free cash flow in hand which it used to
pay off their liabilities.
Change in Market Share throughout the years w.r.t. the Industry:
Company Names 2017 2018 2019 2020 2021
PSO Industry’s Yearly
Share 15.04% 23.08% 19.68% 18.08% 11.35%

25.00%
23.08%
20.00% 19.68%
18.08%
15.00% 15.04%
11.35%
10.00%
5.00%
0.00%
2017 2018 2019 2020 2021
Page | 611
PAKISTAN STATE OIL
Analysis: Payables were the highest in the year 2018 with respect to the industry. After and
increase in payables in 2018, PSO has experienced a relative decrease in the following 3 years.
The payables have reduced at a slow rate but the progress is still there. PSO had the highest trade
payables in 2018 among all five years as can be seen in the table given above. This tells us that
even though PSO experienced the highest payables in 2018, it stands in no comparison to HTL
as their decrease in payables was enough to reduce the entire industry’s level of trade payables. It
also had the lowest proportion in 2021 among all other companies in the industry.
PSO’s year wise increase in trade payables – Last 5 years:
Company Names 2017 2018 2019 2020 2021
PSO Company’s Yearly AP
Growth 6.08% 31.36% -2.34% -13.93% 12.28%
Page | 612
PAKISTAN STATE OIL
PSO Company's Yearly AP Growth

35.00%
30.00% 31.36%
25.00%
20.00%
15.00%
12.28%
10.00%
5.00% 6.08%
0.00%
-2.34%
-5.00% 2017 2018 2019 2020 2021
-10.00%
-15.00% -13.93%
-20.00%
Analysis: As mentioned earlier, that PSO had the highest levels of trade payables growth rate in
2018. However, the lowest level was noticed in 2020. This might mean that they were paying of
their credit on an urgent basis during the pandemic. However, just like the receivables, the
payables can also be seen to increase in 2021 for PSO. More insights can be developed through
the secondary research done below.
Supporting Articles:
Delays in payments from the customers lead to liquidity crises among OMCs:
In 2017, we can see from the graphs given above that the trade payables of the industry were
high. This was mainly because the OMCs and especially PSO were not receiving payments from
their customers which led to them not being able to pay their financial obligations. This led to
them not have enough money to pay off their current liabilities such as the trade and other
Page | 613
PAKISTAN STATE OIL
payables. These payments were to be received from the power sector, PIA, and the transportation
sector who have been major defaulters of the major OMCs such as PSO.
Future Outlook:
These defaulters have been eating up the subsidies that the government provide them with. In the
future, the government plans on reducing this subsidy. This means that the payments will be
delayed further leading to more liquidity crunches among the OMCs in the forthcoming future.
Source:
➢ https://profit.pakistantoday.com.pk/2017/01/30/delay-in-payments-exposes-pso-to-
liquidity-crunch/
➢ Audit report on the accounts of the petroleum division
International oil prices increase leading to higher trade payables:
In 2018, the government of Pakistan increased the prices of petroleum as a result of an increase
in the international oil prices. When the cost of their products increased, the inability to pay most
of the cost through cash also increased. Due to this, the OMCs of Pakistan incurred heavy trade
payables which can also be seen in the graphs given above that in all five years, the OMCs
experienced the highest growth in trade payables in 2018. Even though this impacted PSO, APL
and BPL, the trade payables of HTL were not impacted and they fell in 2018 which led to an
Page | 614
PAKISTAN STATE OIL
overall decrease in the industry’s trade payables. However, the 2018 increase in oil prices was
the major reason for increase in trade payables of other OMCs.
Future Outlook:
After 2018, the prices of petroleum products also increased in 2021. This means that more
account payables would have been incurred by the OMCs. If in the future, prices increase again,
the trade payables would increase as well.
Source:
➢ https://mettisglobal.news/government-to-raise-petroleum-prices-by-1st-may-2018/
Devaluation of Rupee leads to high cost for the OMCs in Pakistan:
In 2018, the Rupee devaluation of $1 to Rs.143 impacted the OMCs adversely. This meant that
the cost of their material e.g. crude oil rose. The price of crude oil went up to PKR 7400 in 2018.
This increase in cost of material lead to high levels of trade payables because this directly
impacted the purchasing power of the OMCs. They had to defer their payments or else they
would have experienced an immense shortage because the demand of the petroleum products
was also high in 2018.
Future Outlook:
Page | 615
PAKISTAN STATE OIL
We know that our currency has been experiencing devaluation since a long time. It is only safe to
assume that the trade payables are expected to increase in the forthcoming years as well keeping
in mind the current environment. The OMC industry needs to be mindful of that and need to
either lock their prices before hand or need to promote the domestic production.
Source:
➢ https://www.cnbc.com/2018/11/30/pakistani-rupee-plunges-in-likely-central-bank-
devaluation-traders.html
Saudi Arabia provides oil on deferred payments
In 2018, another reason for an increase in the trade payables was the provision of oil during an
oil crisis by Saudi Arabia. They provided $3.2 billion worth of oil to Pakistan but this was done
on deferred payments which then increased the trade payables of the OMCs. This was to
continue for three consecutive years and would end on May 2020. It was need of the hour for
OMCs as they were already experiencing liquidity crises due to the delayed payments from their
customers in Pakistan and internationally.
Future Outlook:
Page | 616
PAKISTAN STATE OIL
After 2018, the pandemic took place in 2019. There was very little need of oil and other
petroleum products because of the lockdowns imposed and the ban on travel. The economic
activity was quite low. The OMCs did not need that much of oil from Saudi Arabia till 2020.
When 2020 ended, so did the provision of oil on deferred payments. But, in reality the actual
demand started after 2020 when lockdowns were lifted. Currently, in the latest meeting, Saudi
Arabia has refused to provide oil to OMCs on deferred payments until they clear the previous
piled up trade payables.
Sources:
➢ https://m.economictimes.com/news/international/world-news/saudi-arabia-defers-to-
renew-pact-to-supply-oil-to-pakistan-on-deferred-
payments/amp_articleshow/77432529.cms
➢ https://mettisglobal.news/pakistan-to-get-petroleum-products-on-deferred-payment-from-
july-2019/
Lower imports / domestic buying of furnace oil improves liquidity conditions of OMCs:
In 2019, Pakistan experienced a fall in the demand of furnace oil. Furnace oil is one of the most
expensive petroleum products which the Pakistani OMCs import. When the energy production
sector and other major customers of the OMCs switched to more renewable sources such as
Page | 617
PAKISTAN STATE OIL
RLNG and coal for their production, the OMCs experienced a fall in the demand of furnace oil.
So, they did not import heavy volumes of FO in 2019 which is one of the reasons of as to why
the trade payables are lower in 2019.
Future Outlook:
The OMCs are switching towards using more renewable sources of energy in the future. The
trade payables are not expected to increase in the future due to the purchase of expensive furnace
oil.
Source:
➢ https://www.thenews.com.pk/print/452588-slowdown-weighs-heavy-petroleum-sales-
down-25pc-in-july-march
Lower trade payables recorded by OMCs due to the pandemic:
In 2019, there was low economic activity. The OMCs did not have to purchase much oil from
foreign countries due to which we can also so a dip in the trade payables of 2019. Everyone was
locked inside their homes due to the pandemic and forthcoming lockdowns. They did not even
require the $3.2 billion worth of oil from Saudi Arabia because of this as that would have
resulted in inventory losses as the prices were expected to fall to provide some relief to the
consumers in difficult times.
Page | 618
PAKISTAN STATE OIL
Future Outlook:
Now that the pandemic has ended, the economic activity has started again. The trade payables
are expected to increase because the demand of the oil products has become very basic and
necessary for survival. If another wave would hit Pakistan, only then would the trade payables
reduce.
Source:
➢ https://www.spglobal.com/commodity-insights/en/market-insights/latest-
news/oil/072420-oilgram-ap-pakistans-oil-demand-feels-covid-19-pain-set-to-
bounce-back
OMCs take advantage of tax-free imports from China:
In 2020, our neighboring country, China signed an agreement with Pakistan called the China
Pakistan Free Trade Association. Under this, tax free imports were established. PSO, Shell and
other OMCs in the industry took great advantage of this, allowing minimal to no impact of the
taxes on their trade payables which would otherwise had increased incase the import was not tax
free in nature.
Future Outlook:
Page | 619
PAKISTAN STATE OIL
Pakistan and China have been on good terms since quite some time. Considering the CPEC
project, the imports will be cheaper in nature from China and the OMCs can take advantage of
this product to a great extent, reducing their payables even further.
Source:
➢ https://www.aninews.in/news/world/asia/pak-oil-firms-make-huge-profits-through-
tax-free-imports20220124171342
Petroleum prices drop as the international oil prices drop leading to lower payables:
In 2020, to provide relief to the consumers during the pandemic, the petroleum prices were
matched with the international prices of oil. This was both good and bad for the OMCs. It was
good for them because they could import at lower rates and would not have to make more
payments on credit and could make cash payments. On the other hand, it was bad because that
would result in inventory losses as the same inventory would have to be sold at lower rates by
the OMCs.
Future Outlook:
The oil prices are only expected to increase in the future as even now the prices of petroleum
products are expected to increase till April 2022. So, the trade payables are expected to increase
in the future.
Page | 620
PAKISTAN STATE OIL
Source:
➢ https://www.thenews.com.pk/print/665965-petrol-price-reduces-by-rs7-06-kerosene-
rs11-88-ldo-by-rs9-37-litre
➢ https://www.investopedia.com/articles/investing/100615/will-oil-prices-go-2017.asp
International oil price experience growth higher than 2018 in 2021:
In 2021, the international oil prices experienced an extreme growth. If we look at the normal
demand and supply curve, the prices increased when the demand of oil increased as the
pandemic subsided and the supply was limited. So, the OMCs had to import oil at higher costs
leading to higher trade payables. This can be verified from the industry’s growth in trade
payables through the years. The highest trade payables were recorded in 2021. The major portion
was accounted by HTL. Even though PSO’s trade payables increased as well but HTL had the
major portion or chunk of it.
Future Outlook:
The petroleum product prices are only expected to increase as the government is not ready to
provide for the price differential claims that have been incurred before, this would tighten the
liquidity situation and the trade payables will not be paid off leading to an increase.
Source:
Page | 621
PAKISTAN STATE OIL
➢ https://www.bbc.com/news/business-58727437
Increase in the petroleum levy by the government in 2021:
In 2021, the government wanted to raise Rs.250-300 billion through the petroleum levy. If we
look at the trade and other payable portion of the OMCs mentioned above, they have payables in
terms of taxes and duties. This increase in petroleum levy would increase their payables further
because their liquidity situation is already constricted due to the inability of recovering the
deferred payments from their customers.
Future Outlook:
These additional taxes and burden on the OMCs is to continue in the future if the government is
unable to reach their target of federal revenue collected. OMCs make a huge chunk of the total
taxes collected. Currently, the OMCs are facing major issues and are deciding to leave the
Pakistani market, imposing more burden on PSO. The trade payables are expected to hence,
increase in the future.
Sources:
➢ https://www.thenews.com.pk/print/906446-govt-to-generate-up-to-rs250-300-bn-through-
petroleum-levy
Page | 622
PAKISTAN STATE OIL
➢ https://profit.pakistantoday.com.pk/2021/12/01/govt-increases-levy-gst-on-pol-products-
to-meet-imf-conditions/
Tax receipts from petroleum products further increase to 72%:
In 2022, in the month of February, the government of Pakistan imposed several additional taxes
on the OMCs such as the custom duties on import station and also on sales tax. So, indirect taxes
have been imposed which lead to higher costs for the OMCs and in return higher payables for the
companies in this industry as well.
Future Outlook:
We can analyze from this that the government would do anything to reach their targets of
maintaining federal revenues and budgets. The OMCs and the taxes levied on them are a major
source of revenue for the government. If in the future, the government needs more revenue, the
OMCs will be targeted, further increasing the trade payables.
Source:
➢ https://tribune.com.pk/story/2343247/tax-receipts-from-pol-items-jump-
72?amp=1#aoh=16481739356856&amp_ct=1648174233807&referrer=https%3A%2F
%2Fwww.google.com&amp_tf=From%20%251%24s
Page | 623
PAKISTAN STATE OIL
China Pakistan Free Trade Association proves to be ineffective:
In 2022, it is being noticed that it has been two years since the CPFTA is being practiced.
However, the OMCs only had advantage of it in the very beginning. Now, the benefit of duty
exemption is taken away from the OMCs till the product reaches them due to the high freight
costs and the premium charged on Pakistani buyers by the suppliers. OMCs are experiencing
high trade payables for these portions of trading with China.
Future Outlook:
Even though the CPFTA could lead to reductions in trade payables and improve the liquidity
situation of the companies in the OMC industry, but now, the pact does not seem of much use.
Maybe the CPEC project can cater to the freight cost charges and lead to lower costs and trade
payables. Ever so, the trade payables are expected to increase.
Source:
➢ https://profit.pakistantoday.com.pk/2022/01/09/chinese-petrol-drive-omc-profits/
Reduction in the profit margins of OMCs leads to liquidity crunches:
In 2022, the OICCI revised the profit margins of the OMCs and imposed more burden on them
by putting higher taxes. The OMCs are already finding it difficult to meet their financial
obligations. They are unable to cater to their trade payables which are the current liabilities let
Page | 624
PAKISTAN STATE OIL
alone the long-term liabilities. Lower profit margins would mean that the situation for OMCs
would worsen and the trade payables will be impacted negatively and would pile up.
Future Outlook:
Trade and other payables are expected to increase for the OMCs in the future because the
government does not plan on going easy on the OMCs especially after the Hascol case that was
experienced by the banks and the government.
Source:
➢ https://tribune.com.pk/story/2329024/oicci-seeks-revision-in-omcs-margins
Banks are reluctant to extent credit limits after Hascol case:
In 2022, when a committee sat to discuss an increase the credit limits offered by the banks to the
OMCs, several banks disagreed to the idea of it. They are hesitant because of how Hascol has
defaulted previously and they have not been able to receive their payments back. The officials
tried explaining that they cannot make this decision due to one bad fish in the sea. The banks,
however, are still reluctant to increase the credit limits. This would mean that OMCs are in a
tough situation as the international oil prices are rising and there is a high demand of petroleum
products in the country. The supply chain will be interrupted. Their trade payables are already
high. They need to cater to them first and pay them off.
Page | 625
PAKISTAN STATE OIL
Future Outlook:
If the OMCs do not pay off their current trade payables and other payables, the banks would
remain hesitant and the OMCs would not be able to make more credit sales or have deferred
payments in line of their supply chain. However, they are in no position of meeting their current
obligations because of all the factors that have been mentioned earlier.
Source:
➢ https://profit.pakistantoday.com.pk/2022/03/05/fuel-crisis-looms-as-banks-still-wary-
of-omcs/
Page | 626
PAKISTAN STATE OIL
Economic Analysis
International Oil prices, Inflation and Currency Factor
increase in oil prices leads to inflationary pressure which in turn increases budget deficit and puts
a downward pressure on the exchange rate, making imports more expensive. The government
has refrained from passing on the complete price increase to the consumers because it fears it
will exacerbate inflation and stifle economic activity which presents a significant challenge to
the government’s plans of ending its tenure with a strong growth phase.
This inflationary pressure and devaluation of the rupee, along with all other factors kept in mind
led to an increase in the cost of purchase of PSO as the country relies heavily on imported
RLNG.
Future Outlook
Page | 627
PAKISTAN STATE OIL
that the inflation in the country will increase as well as the rupee will depreciate to some extent.
Keeping in mind that the sales of the company is predicted to increase, the cost of purchase will
also be increasing which in turn would increase the trade and other payables for PSO. Although
costs will be better absorbed, the cost of purchase will still increase.
Source:
➢ Director’s report
Page | 628
PAKISTAN STATE OIL
➢ https://energyinformatics.springeropen.com/articles/10.1186/s42162-021-00166-
China Pakistan Free Trade Agreement
According to reports around 15 OMCs are reported to have imported over 2.4 billion litres of
petrol from China in 2 years earning a huge windfall because of the special agreement under
CPFTA. OMCs were allowed to import petrol from China without paying ten percent Custom
Duty, which is, otherwise, applied on the import of petrol from other countries.
PSO also took windfall benefit of petrol imports from China. It imported about 68 million litres
of petrol from China and claimed customs duty waiver against the FTA certificate as per
SRO.1640(1)/2019 S.No.10 and paid Rs64 million as ACD thus getting petrol at a low cost,
reducing the cost of production.
It is not clear yet as to how and why the petroleum imports were made part of the revised
CPFTA in 2019 when China is a net importer of oil as a top executive of a local refinery said,
“Granting this facility to OMCs under CPFTA makes no sense as China was also a net importer
of petrol”. However with this being said, all OMC’s including PSO have already enjoyed the low
cost benefit under this agreement as the import bill particularly of refined petroleum products,
has seen the largest chunk of 83pc increase in imports during the last fiscal year. Due to this all
Page | 629
PAKISTAN STATE OIL
OMC’s including PSO were able to enjoy low cost of purchase thus reducing their trade
payables.
Future Outlook
Looking forward we predict that PSO will further enjoy the cheaper imports through China
which will help in the reduction of its trade and other payables in the future.
Source:
➢ https://www.thenews.com.pk/print/934553-oil-refining-data-sought-to-decide-on-
petrol-imports
Delayed Payments by SNGPL
PSO has recently defaulted on payments to LNG supplier- Gunvor – and payments on various
POL products to some local refineries of PARCO (Pak-Arab Refinery Company), National
Refinery Limited (NRL) and ENAR due to severe liquidity crisis that has touched new heights
due to non-payment of dues of over Rs100 billion that Sui Northern has failed to pay to the entity
against the LNG supply.
SNGPL claims that it has payments due from the government and SSGC of almost Rs.50 billion,
which if cleared, SNGPL can clear all its dues to PSO.
Page | 630
PAKISTAN STATE OIL
Future Outlook
In the coming two years it is not expected that SNGPL will pay back PSO so the payables are
likely to rise. However due to the inability of the government to further sustain the subsidy in the
LNG sector, prices for gas are likely to increase which would help SNGPL in clearing its dues to
PSO. However the increase in price will be done in phases which means that the dues will also
be cleared gradually. So the trade payables for PSO are still expected to rise but this rise will be
offset by the gradual payments which are expected from SNGPL.
Sources
➢ https://www.thenews.com.pk/print/659014-pso-defaults-on-payments-to-lng-supplier-
local-refineries
Increase in Excise, taxes and other duties
To keep up with the conditions given by the IMF, the government of Pakistan increased the taxes
on petroleum products by a significant amount which lead to a 4.5% increase in the current
liabilities of PSO on account of increased trade and other payables. This included custom duties
Page | 631
PAKISTAN STATE OIL
on import station and also on sales tax. So, indirect taxes have been imposed which lead to
higher costs for PSO and in return higher payables for the companies in this industry as well.
Future Outlook
Looking forward the government will achieve its target for federal revenue and will have to keep
up with any conditions being put by the IMF. So keeping in mind the current situation of the
economy, it is likely that in the future, taxes will increase further as taxes by PSO account for
major chunk of the total taxes thus an increase in the trade and other payables can be forecasted.
Sources
➢ https://profit.pakistantoday.com.pk/2021/12/01/govt-increases-levy-gst-on-pol-products-
to-meet-imf-conditions/
➢ https://tribune.com.pk/story/2320877/taxes-on-imports-fuel-inflation
Strategic Partnership with PARCO & PEPCO
During the year 2021, it could be observed that the local purchases by PSO increased by a drastic
amount. This was in line with the strategic partnership with PARCO and PEPCO, which also
proved beneficial as a whole for the country as local production was encouraged.
Page | 632
PAKISTAN STATE OIL
PSO has entered into a strategic partnership with PARCO and PEPCO which aims to safeguard
the country's petroleum product supply chain and enable economical and environment friendly
transportation of fuel. Under the partnership PSO will uses the White Oil Pipeline, which is a
mega infrastructure expanding all the way from Port Qasim to Mahmood Kot for the
transportation of crude oil as well as diesel to the central regions of Pakistan which account for
almost 60% of the total Petroleum consumption in the country.
Future Outlook
With this partnership, PSO has managed to significantly reduce its costs which can clearly be
reflected in its cost of production. This also means that they have been able to eliminate the
effect of currency devaluation which increases the trade payable. Furthermore it is also expected
that the cost will continue to decline as more infrastructure is added, however the trade payables
will increase as the company has started to buy more from the local production thus accounting
for more percentage as a whole in the sales figure.
Source:
➢ https://www.brecorder.com/news/40089628/pso-enters-into-strategic-
partnership-with-parco-papco
Page | 633
PAKISTAN STATE OIL
Method chosen
• Subjective analysis
Methods used
• Naïve (15 years)
• Moving Average
Naïve (15 years)
Page | 634
PAKISTAN STATE OIL
Excel forecasting
Page | 635
PAKISTAN STATE OIL
Horizontal Analysis
Moving average
Page | 636
PAKISTAN STATE OIL
Change
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2015
2019
2023
2007
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2020
2021
2022
2024
2025
2026
(20.00%)
(40.00%)
Page | 637
PAKISTAN STATE OIL
Unclaimed Dividend
Page | 638
PAKISTAN STATE OIL
Forecasted values
A general analysis has been done for this account as it is a minor account and was added in 2017
to the financial statements of the company. According to the analysis, the account will increase
between 2-5% for the next 5 years, which is also supported by the historical data.
Page | 639
PAKISTAN STATE OIL
General Analysis
Factors Effects
Increase in dividends paid Increase
Decrease in Unpaid Dividend Increase
Increase in Profits Increase
It wasn’t until 2017, when this account came into being for PSO. The table given below provides
data of the unclaimed dividend of PSO throughout the years and also the growth of this account.
Years 2021 2020 2019 2018 2017 2016
PSO 1,393,280 1,374,930 1,761,628 3,443,218 2,784,318 0
Growth 1.33% -21.95% -48.84% 23.66% 0.00% 0.00%
Graph Indicating the Growth in Unclaimed Dividend throughout the Years
Page | 640
PAKISTAN STATE OIL

30.00%
23.66%
20.00%
10.00%
0.00% 0.00% 1.33%

2017 2018 2019 2020 2021
-10.00%
-20.00%
-21.95%
-30.00%
-40.00%
-50.00% -48.84%
-60.00%
Analysis: the unclaimed dividends only decreased in 2019. In all other subsequent years, the
unclaimed dividends have experienced an increase. This makes it safe to assume that in the
forthcoming years, this account would continue to increase. It was the absolute lowest in 2019.
Factors affecting Unclaimed dividend
Increase in Profits in 2021
In 2021, when the profits of PSO increased, they had more cash to give out to their shareholders.
This led to an increase in dividends paid in 2021 and hence an increase in the unclaimed
Page | 641
PAKISTAN STATE OIL
dividends as well. In the future, if the profits will increase as well, the unclaimed dividends can
be expected to increase again.
Increase in Dividend Paid in 2021
The account of unclaimed dividend of PSO increased in 2021 as a result of higher dividends
being paid in that year. Unclaimed dividends are those dividends which have not been claimed
by the shareholders within 30 days of dividend declaration. This has a direct relationship with the
number of dividends paid. In 2019, the dividends paid by PSO fell due to which the value of
unclaimed dividends fell as well. Dividends paid in 2018 were the highest hence the highest
value of unclaimed dividends.
Decrease in Unpaid Dividend
The unpaid dividend has an inverse relationship with the unclaimed dividends. When the unpaid
dividends increase, the values of unclaimed dividends tend to decrease. However, in every year
when the unpaid dividends decreased, an increase in unclaimed dividends was noticed by PSO.
Source:
➢ https://www.thenews.com.pk/print/954116-pso-s-q3-net-profit-soars-273pc-to-rs32-58bn
Page | 642
PAKISTAN STATE OIL
Unpaid Dividend
Page | 643
PAKISTAN STATE OIL
Forecasted value
The company paid of all of its dividend in 20220 but it rose again in 2021. Since the company is
making profits and in accordance with the analysis of the account, we predict that the company
will pay off all of the dividends, reducing the account to nil.
Page | 644
PAKISTAN STATE OIL
General Analysis
Factors Effects
Non-resident shareholders not given dividends Increase
Changes made to withholding non-resident Decrease
payments
It has already been established that unpaid dividends tend to reduce the value of unclaimed
dividends. This is mainly because they are subtracted from the unclaimed dividend. Given below
are the unpaid dividends of PSO and the growth in this account.
Years 2021 2020 2019 2018 2017
Unpaid dividend 129,789 0 103,297 221,587 193,542
Growth 0.00% -100.00% -53.38% 14.49% 0.00%
Graph Showing Growth in Unpaid Dividends
Page | 645
PAKISTAN STATE OIL
PSO Yearly Unpaid dividend Growth

40.00%
20.00%
14.49%
0.00% 0.00% 0.00%
2017 2018 2019 2020 2021
-20.00%
-40.00%
-53.38%
-60.00%
-80.00%
-100.00% -100.00%
-120.00%
Non-resident Shareholders were not given Dividends
Dividend declared during the year represents part of interim dividend for the period ended
December 31, 2021 which remained unpaid to the Holding Company's non-resident
shareholders. The dividend repatriation requires approval from the State Bank of Pakistan which
has been obtained subsequently and the dividend has been remitted to the non-resident
shareholders.
Future Outlook
Page | 646
PAKISTAN STATE OIL
This account is mainly made for the non-resident shareholders of PSO. A reduction will be
noticed if the non-resident shareholders are paid on time. However, if they are not paid enough
dividends due to any reason, this account will increase.
Source:
Changes Made to Withholding Non-resident Payments
The period of 30 is on higher side and in certain cases, the non-resident recipient cannot be kept
to wait for this long and gets practically in possible. The KTBA suggested that the period of 30
days be curtailed to 15 days. As the commissioner would approve the dividends in 15 days, the
value of unpaid dividends would decrease.
Future Outlook
The account is expected to decrease in the forthcoming years because of the amendments that
have been made and the fact that the company is becoming more profitable with every passing
year.
Source:
➢ https://pkrevenue.com/changes-sought-in-withholding-on-non-resident-payment/
Page | 647
PAKISTAN STATE OIL
Provisions
Breakdown:
Provisions 2021 Vertical Analysis
Claim raised by regulatory authorities 490972 194.47%
Infrastructure development cess 252464 100.00%
743436 294.47%
Movement of provision during the year is as follows:
Balance at beginning of the year 490972 194.47%
Addition during the year 252464 100.00%
Balance at closing of the year 743436 294.47%
Page | 648
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Provisions 51.42% 0.00% 0.00% 0.00% - 0.00%
28.69%
2021 2020 2019 2018 2017 2016
Provisions 0.18% 0.13% 0.11% 0.12% 0.13% 0.20%
Forecasted Value
Provisions is another minor account for the company yet both industry and company analysis for
the account were done. It was found through this analysis that the account will decrease in the
future. We predict that this will be between 30-40%. The situation has also been illustrated in the
graph below.
Page | 649
PAKISTAN STATE OIL
800,000.00
700,000.00
600,000.00
500,000.00
400,000.00
300,000.00
200,000.00
100,000.00
0.00
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Provisions Forecasted Provisions
Company Analysis
decrease.
Provisions
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
2021 2020 2019 2018 2017 2016
Page | 650
PAKISTAN STATE OIL
Provisions of PSO year by year from 2016 to 2020.
Factors Effecting Provisions (2021-2016):
• Increased in 2021 due to claims raised by the regulatory authorities against the Company.
The outcome of these legal claims is not expected to give rise to material obligations
beyond those provided for.
• Stayed constant from 2018-2020.
• Increased in 2017, for the same reason mentioned above.
Page | 651
PAKISTAN STATE OIL
Industry Analysis
Factor Effect
Reduction in legal claims Decrease
Reduction in Infrastructure Development Cess Decrease
in order to avail the latest data ate HTL, APL, BPL and PSO. The total values of provisions of all
Total Provisions of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 490,972 490,972 490,972 490,972 743,436
HTL 0 0 0 0 10,919,484
APL 240,380 190,453 0 41,162 0
BPL 0 0 0 0 0
TOTAL 731,352 681,425 490,972 532,134 11,662,920
Total Market Share of all Companies in 5 Years w.r.t Total Provisions
Page | 652
PAKISTAN STATE OIL
PSO 19.20%
HTL 77.45%
APL 3.35%
BPL 0.00%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Provisions
Total Market Share

90.00%
80.00% 77.45%
70.00%
60.00%
50.00%
40.00%
30.00%
19.20%
20.00%
10.00%
3.35%
0.00%
0.00%
PSO HTL APL BPL
Page | 653
PAKISTAN STATE OIL
Analysis: The graph given above indicates that HTL has the highest proportion of provisions in
their accounts. PSO is in the second place.
PSO’s Provisions Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 67.13% 72.05% 100.00% 92.26% 6.37%
Graph Indicating PSO’s Provisions Share in the Industry w.r.t Years

120.00%
100.00% 100.00%
92.26%
80.00%
72.05%
67.13%
60.00%
40.00%
20.00%
6.37%
0.00%
2017 2018 2019 2020 2021
Page | 654
PAKISTAN STATE OIL
Analysis: the market share of PSO in terms of provisions was the absolute highest till 2019. It
had an increasing trend in the previous three years. However, the market share fell in 2020 and is
the lowest in 2021 among all years.
Yearly Change/Growth in Provisions of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth -28.69% 0.00% 0.00% 0.00% 51.42%
Graph Indicating Change/Growth in Provisions of PSO
Page | 655
PAKISTAN STATE OIL
PSO Yearly Provisions Growth

60.00%
50.00% 51.42%
40.00%
30.00%
20.00%
10.00%
0.00% 0.00% 0.00% 0.00%

2017 2018 2019 2020 2021
-10.00%
-20.00%
-30.00% -28.69%
-40.00%
Analysis: positive growth can be noticed twice only, between 2017-2018 and from 2020-2021 in
case of PSO’s provisions. There was no growth in this account for three years in between.
Growth/Change in the Industry’s Provisions Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth -9.00% -6.83% -27.95% 8.38% 2091.73%
Graph Indicating Growth/Change in the Industry’s Provisions Overtime

Page | 656
PAKISTAN STATE OIL

2500.00%
2091.73%
2000.00%
1500.00%
1000.00%
500.00%
0.00% -9.00% -6.83% -27.95% 8.38%

2017 2018 2019 2020 2021
-500.00%
Analysis: The industry in terms of provisions faced a drop in 2019. However, currently, the
provisions of the industry are increasing. This is majorly because HTL did not have provisions in
their accounts before that but surpassed all the provisions in 2021. BPL on the other hand has no
provisions in their account.
Factors affecting Provisions
Reduction in Infrastructure Development Cess
Page | 657
PAKISTAN STATE OIL
The government wants to provide relief to common man. Basic import duty and infrastructure
and development cess on OMCs have been brought down to offer better petrol prices to
consumers. It was 10% previously but now it is said to be 0%. Previously the government aimed
to collect around Rs.588 billion revenues through this “cess”. This is why the cess was levied in
2021 and increased the provisions of the companies.
Future Outlook
The new government is all about promoting businesses, they would work on eliminating this cess
even further leading to lower provisions for the companies in the OMC industry
Source:
➢ https://www.businesstoday.in/latest/economy/story/will-safeguard-interests-of-common-
man-govt-on-fuel-prices-326099-2022-03-15
➢ https://tribune.com.pk/story/2241564/govt-aims-collect-rs588b-revenue-oil-gas
Future Outlook
An increase in the provisions was experienced by PSO as a result of certain legal claims. There
was no growth in the provisions before that. The legal claims were regarding the education
qualification of the CEO of PSO. The ruling was settled in the favor of PSO and further rulings
Page | 658
PAKISTAN STATE OIL
are set to be in their favor as well. This means that in the near future, the provisions for legal
claims would decrease.
Source:
➢ Interim Report PSO
➢ https://psopk.com/files/media/clearification/pesponsechannel%2092v8oct22,2018-
converted.pdf
Page | 659
PAKISTAN STATE OIL
Change
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00% 2015
2019
2023
2007
2008
2009
2010
2011
2012
2013
2014
2016
2017
2018
2020
2021
2022
2024
2025
2026
(10.00%)
(20.00%)
(30.00%)
(40.00%)
Page | 660
PAKISTAN STATE OIL
800,000.00
700,000.00
600,000.00
500,000.00
400,000.00
300,000.00
200,000.00
100,000.00
0.00
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Provisions Forecasted Provisions
Page | 661
PAKISTAN STATE OIL
Current Portion of Lease
Liability
Breakdown:
Lease Liabilities 2021 Vertical Analysis
Balance at beginning of the year: 4,529,062 101.82%
Impact of initial application of IFRS 16 - -
Additions during the year 588,383 13.23%
Accretion of interest 698,518 15.70%
Lease contracts modified during the year 333,650 7.50%
Less: Disposal during the year -346 -0.01%
Less: Lease rentals paid -913,613 -20.54%
Balance at the end of year 5,235,654 117.71%
Page | 662
PAKISTAN STATE OIL
Less: Current portion shown under current liability -787,713 -17.71%
Non-Current Balance 4,447,941 100.00%
Page | 663
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Current Portion of Lease 1846.80% -99.97% 0.00% 0.00% 0.00% 0.00%
Liabilities
2021 2020 2019 2018 2017 2016
Current Portion of Lease 0.19% 0.01% 26.83% 0.00% 0.00% 0.00%
Liabilities
Forecasted values
The account is very abnormal to the eye s during 2020 the company paid off almost the entire
amount from this. However, in 2021 the amount rose by a staggering 1000%. Despite that we
Page | 664
PAKISTAN STATE OIL
predict that the amount will be decreasing in the future, the reasons for which have already been
discussed.
Page | 665
PAKISTAN STATE OIL
Company Analysis
decrease.
Current Portion of Lease Liabilities

140000000
120000000
100000000
80000000
60000000
40000000
20000000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Lease
Liabilities of PSO year by year from 2016 to 2020. From the year 2019 to 2021, there has been a
huge increase. But in 2018, this account dropper by 99.9%.
Page | 666
PAKISTAN STATE OIL
Industry Analysis
Factor Effect
Reduction in Long Term Lease Liabilities Decrease
in order to avail the latest data ate HTL, APL, BPL and PSO. The total values of current portion
of lease liabilities of all five years of the companies are given below.
Total Current Portion of Lease Liabilities of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 0 0 121,678,909 40,462 787,713
HTL 64,446,804 179,059,861 77,436,745 90,201,122 162,697,568
APL 0 0 0 43,046 190,500
BPL 254,439 254,439 254,439 254,439 254,439
TOTAL 64,701,243 179,314,300 199,370,093 90,539,069 163,930,220
Total Market Share of all Companies in 5 Years w.r.t Total Current Portion of Lease
Liabilities
Page | 667
PAKISTAN STATE OIL
PSO 17.55%
HTL 82.23%
APL 0.03%
BPL 0.18%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Current Portion of Lease Liabilities
Total Market Share

90.00%
82.23%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00% 17.55%
10.00%
0.03% 0.18%
0.00%
PSO HTL APL BPL
Page | 668
PAKISTAN STATE OIL
Analysis: The graph given above indicates that HTL has the highest proportion of current
portion of lease liabilities in their accounts. PSO is in the second place.
PSO’s Current Portion of Lease Liabilities Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 0.00% 0.00% 61.03% 0.04% 0.48%
Graph Indicating PSO’s Current Portion of Lease Liabilities Share in the Industry w.r.t
Years

70.00%
60.00% 61.03%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00% 0.00% 0.00% 0.04% 0.48%

2017 2018 2019 2020 2021
Page | 669
PAKISTAN STATE OIL
Analysis: the market share of PSO in terms of current portion of lease liabilities, it was the
highest in 2019 as the market share of HTL dropped in that year. In other years, the share is
minimal as compared to HTL.
Yearly Change/Growth in Current Portion of Lease Liabilities of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly
Growth 0.00% 0.00% 0.00% -99.97% 1846.80%
Graph Indicating Change/Growth in Current Portion of Lease Liabilities of PSO
Page | 670
PAKISTAN STATE OIL
PSO Yearly Current Portion of Lease Liabilities Growth

2000.00%
1846.80%
1500.00%
1000.00%
500.00%
0.00% 0.00% 0.00% 0.00%

2017 2018 2019 -99.97%
2020 2021
-500.00%
Analysis: this account did not grow until 2020 and even in 2020, the growth was negative. The
growth started in 2021 for PSO.
Growth/Change in the Industry’s Current Portion of Lease Liabilities Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth 6.65% 177.14% 11.18% -54.59% 81.06%
Page | 671
PAKISTAN STATE OIL
Graph Indicating Growth/Change in the Industry’s Current Portion of Lease Liabilities
Overtime

200.00%
177.14%
150.00%
100.00%
81.06%
50.00%
6.65% 11.18%
0.00%
2017 2018 2019 2020 2021
-50.00% -54.59%
-100.00%
Analysis: The industry in terms of current portion of lease liabilities indicates that the growth
was the highest in 2018. After that, this account experienced a major drop. In 2021, it increased
again as the lease liabilities of most of the OMCs increased.
Future Outlook
This account is directly related to the long term lease liability account. Considering that, that
account is expected to decrease in the future. It is only fair to establish that the current portion of
that account is also expected to decrease in the future.
Page | 672
PAKISTAN STATE OIL
Source:
Page | 673
PAKISTAN STATE OIL
Accrued Markup/Interest
Page | 674
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Accrued Interest/Markeup -67.90% 16.66% 62.21% -37.10% 56.08% -6.37%
2021 2020 2019 2018 2017 2016
Accrued Interest/Markeup 0.09% 0.12% 0.09% 0.48% 0.48% 0.55%
Forecasted Value
Although it is a minor account, yet it can have a major impact on the financial statements of the
company so all three analysis for this account have been done. According to the analysis done
and after considering all industrial and economic factors, we predict that the account will
increase between 15-20%, supported by the graph below.
Page | 675
PAKISTAN STATE OIL
1,600,000.00
1,400,000.00
1,200,000.00
1,000,000.00
800,000.00
600,000.00
400,000.00
200,000.00
0.00
2012
2025
2007
2008
2009
2010
2011
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Accrued Interest Forecasted Accrued Interest
Company Analysis
decrease.
Accrued Interest / Mark-up

1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
2021 2020 2019 2018 2017 2016
Page | 676
PAKISTAN STATE OIL
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Accrued
Interest/Markeup of PSO year by year from 2016 to 2020.
Year 2021:
• As at June 30, 2021, accrued interest / mark-up on short-term borrowings and finances
under mark-up arrangement amounted to Rs. 483,949 (2020: Rs.1,507,806), which
includes Rs. 41,578 (2020: Rs. 247,760) due to National Bank of Pakistan, a related
party.
Source:
Year 2020:
under mark-up arrangement amounted to Rs. 1,507,806 (2019: Rs.1,292,443), which
includes Rs. 247,760 (2019: Rs. 362,457) due to National Bank of Pakistan, a related
party.
Source:
Page | 677
PAKISTAN STATE OIL
Year 2019:
under mark-up arrangement amounted to Rs. 1,017,317 (2018: Rs.796,795), which
includes Rs 351,970 (2018: Rs. 235,807) due to National Bank of Pakistan.
Source:
Year 2018:
• As at June 30, 2018, accrued mark-up on short-term borrowings and finances under
mark-up arrangement amounted to Rs.796,795 (2017: Rs.1,266,793).
Source:
Year 2017:
Page | 678
PAKISTAN STATE OIL
• As at June 30, 2017 accrued mark-up on short-term borrowings and finances under mark-
up arrangement amounted to Rs. 1,266,793 (2016: Rs. 811,639).
Source:
Year 2016:
• As at June 30, 2016 accrued mark-up on short-term local borrowings amounted to Rs.
811,639 (2015: Rs. 866,894).
Source:
Page | 679
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Direct Impact of Short Term Borrowings Increase
Increase in working capital to help in paying accrued interest Increase
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of accrued interest
all five years of the companies are given below.
Total Accrued Interest of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 1,266,793 796,795 1,292,443 1,507,806 483,949
HTL 27,891,018 29,696,233 81,921,213 22,102,743 9,756,777
APL 0 0 0 0 0
BPL 35,209 60,295 60,295 97,029 119,392
TOTAL 29,193,020 30,553,323 83,273,951 23,707,578 10,360,118
Total Market Share of all Companies in 5 Years w.r.t Total Accrued Interest
Page | 680
PAKISTAN STATE OIL
PSO 3.02%
HTL 96.77%
APL 0.00%
BPL 0.21%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Accrued Interest
Total Market Share

120.00%
100.00% 96.77%
80.00%
60.00%
40.00%
20.00%
3.02% 0.21%
0.00%
0.00%
PSO HTL APL BPL
Page | 681
PAKISTAN STATE OIL
Analysis: The graph given above indicates that HTL has the highest proportion of accrued
interest in their liability accounts. PSO is in the second place.
PSO’s Accrued Interest Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 4.34% 2.61% 1.55% 6.36% 4.67%
Graph Indicating PSO’s Accrued Interest Share in the Industry w.r.t Years

7.00%
6.36%
6.00%
5.00%
4.67%
4.34%
4.00%
3.00%
2.61%
2.00%
1.55%
1.00%
0.00%
2017 2018 2019 2020 2021
Page | 682
PAKISTAN STATE OIL
Analysis: the market share of PSO in terms of accrued interest was such that it had a decreasing
trend till 2019 but increased in 2020. It fell again in 2021. HTL gained market share in these
years when PSO’s share was falling.
Yearly Change/Growth in Accrued Interest of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly
Growth 56.08% -1.83% 62.21% 16.66% -67.90%
Graph Indicating Change/Growth in Accrued Interest of PSO
Page | 683
PAKISTAN STATE OIL
PSO Yearly accrued interest Growth

80.00%
60.00% 62.21%
56.08%
40.00%
20.00%
16.66%
0.00% -1.83%
2017 2018 2019 2020 2021
-20.00%
-40.00%
-60.00%
-67.90%
-80.00%
Analysis: It can be analyzed that the highest growth was in 2020 but overall, this account has
experienced a decreasing trend.
Growth/Change in the Industry’s Accrued Interest Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth 81.17% 4.66% 172.55% -71.53% -56.30%
Page | 684
PAKISTAN STATE OIL
Graph Indicating Growth/Change in the Industry’s Accrued Interest Overtime

200.00%
172.55%
150.00%
100.00%
81.17%
50.00%
0.00% 4.66%
2017 2018 2019 2020 2021
-50.00%
-56.30%
-71.53%
-100.00%
Analysis: The industry in terms of this account has also experienced a decreasing trend in most
of the years except for 2019. The accrued interest on HTL was really high in this year and it
dropped drastically in 2020 which impacted the total share of the industry of this account for
other OMCs.
Factors affecting Accrued Interest
Future Outlook
Page | 685
PAKISTAN STATE OIL
If short term borrowings would increase under the financing through markup arrangements, then
it is important to understand that the short term borrowings increased due to lower markups on
financing. The accrued interest would decrease if short term borrowings are increasing for this
particular reason. Moreover, in the future, the liquidity situation is expected to improve for
OMCs. This would lead to them having a better standing at paying off the current liabilities that
they might have incurred such as accrued interest.
Sources:
➢ https://www.business-standard.com/article/economy-policy
➢ https://www.business-standard.com/article/markets/from-inventory-losses-to-higher-
interest-costs-analysts-cautious-on-omcs-119012700651_1.html
Page | 686
PAKISTAN STATE OIL
Economic Analysis
Factor Effect
Lower Interest Rates Increase
Looking at the historical data, the accrued interest for the company decreased by a significant
amount during the fiscal year 2021. This has been contrary to the previous years where the
account has been constantly increasing. All the economic reasons for such a change have been
analyzed below as well as what might be the effect of this in the future.
Source:
Lower Interest rates
Owing to desperate times during Covid-19, and taking cognizance of the negative fallout from the
Covid-19 pandemic for the economy, the state bank of Pakistan took some steps in order to safeguard
businesses and households. Among them was the reduction in the policy rates by 625 basis points to 7%
from a huge amount of 13%.
Page | 687
PAKISTAN STATE OIL
Providing more details about the scheme, the central bank stated that it was introduced to provide a
stimulus to the economy in times of Covid-19. Owing to these lower markups, PSO enjoyed lower
interest in its borrowings from banks which resulted in the decrease for its accrued interest
Future Outlook
economy has started to recover, a greater emphasis is needed on ensuring the appropriate policy mix to
protect the longevity of growth, keep inflation expectations anchored, and slow the growth in the current
account deficit. This indicates that in the future the interest rate can be expected to further increase which
would ultimately also increase the interest payments by PSO on its loan thus higher accrued
interest/markup. This forecast has been highlighted in the graph below;
Page | 688
PAKISTAN STATE OIL
Sources
➢ https://tribune.com.pk/story/2321092/interest-rate-increased-to-725-after-a-15-month-
gap
Page | 689
PAKISTAN STATE OIL
government came into power, there was record devaluation within the past 4 years as now the
dollar is trading at $1 for Rs.185. Owing to this the loans which PSO had taken in the form of
foreign currency also increased ultimately increasing the short term borrowing amount
numerically.
Future Outlook
least 18%, as reported by trading economics. This ultimately implies that the short term
borrowings would continue to increase as what PSO borrowed at a lower amount before is now
to be returned at a higher value. The forecast for currency devaluation against dollar is illustrated
in the graph below.
Page | 690
PAKISTAN STATE OIL
Source:
Page | 691
PAKISTAN STATE OIL
1,600,000.00
1,400,000.00
1,200,000.00
1,000,000.00
800,000.00
600,000.00
400,000.00
200,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
Accrued Interest Naïve Forecast
Page | 692
PAKISTAN STATE OIL
Change
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2010
2014
2018
2022
2026
2007
2008
2009
2011
2012
2013
2015
2016
2017
2019
2020
2021
2023
2024
2025
(50.00%)
(100.00%)
Page | 693
PAKISTAN STATE OIL
1,600,000.00
1,400,000.00
1,200,000.00
1,000,000.00
800,000.00
600,000.00
400,000.00
200,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Accrued Interest Forecasted Accrued Interest
Page | 694
PAKISTAN STATE OIL
Short term borrowings
Breakdown:
Short-term Borrowings 2021 Vertical Analysis
From National Bank of Pakistan - Related party
Short-term finances in foreign currency 16,941,787 23.01%
Finances under mark-up arrangements 490,353 0.67%
17,432,140 23.68%
From other than related party
Short-term finances
- local currency 17,721,004 24.07%
Page | 695
PAKISTAN STATE OIL
- foreign currency 20,561,912 27.93%
38,282,916 52.00%
Current portion of long - term borrowings 4,037,445 5.48%
Finances under mark-up arrangements 13,863,944 18.83%
73,616,445 100.00%
Horizontal Analysis: Average (-1.75%)
2021 2020 2019 2018 2017 2016
Short-term Borrowings -6.85% -35.05% 35.43% -31.15% 24.15% 2.98%
2021 2020 2019 2018 2017 2016
Short-term Borrowings 17.78% 21.06% 26.83% 22.32% 33.25% 30.71%
Forecasted values
Page | 696
PAKISTAN STATE OIL
Unlike long term borrowings, short term borrowings is one of the major accounts for the
company and hence holds great significance in our analysis. All three analysis of this account
were done and the forecasting done accordingly. According to the analysis done, the account will
be increasing in the future, despite it decreasing for the past 2 years, the reasons for which have
been discussed in detail. We predict it to increase between 10-15% at an increasing rate. This is
also shown in the graph below.
160,000,000.00
140,000,000.00
120,000,000.00
100,000,000.00
80,000,000.00
60,000,000.00
40,000,000.00
20,000,000.00
0.00
2011
2025
2007
2008
2009
2010
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
ST Borrowings Forecasted ST Borrowings
Company Analysis
Factors Effects
Reduced working Capital Decrease
Trade Debts made on account by the subsidiary Decrease
company
Page | 697
PAKISTAN STATE OIL
Recovery from the power sector Decrease
Borrowing from National Bank Pakistan Increase
Settlement of PIBS Increase
from years 2016 to 2021, the calculated average we get is -1.75% due to the sudden increase and
Short-Term Borrowings
140000000
120000000
100000000
80000000
60000000
40000000
20000000
0
2021 2020 2019 2018 2017 2016
Factors that highly influence the Short-term borrowings of a company may include the
increase or decrease of the repayment terms, the total cost of capital and the requirements of the
Page | 698
PAKISTAN STATE OIL
lender or investor. etc. Further we’ll be dissecting the factors and the causes of the increase and
decrease of the short-term borrowings of PSO year by year from 2021 to 2016.
Year 2021:
There was a decrease of 6.85% in 2021 as compared to the year 2020. The factors are
discussed below;
• Reduced working Capital: It decreased by 46.7%.
• Trade Debts made on account by the subsidiary company: This also include trade
debts on account of export sales made by the Subsidiary Company i.e., Pakistan Refinery
Limited (PRL) amounting to Rs. 989.8 million (2020: Rs. 484.8 million) secured by way
of Export Letters of Credit.
• Recovery from the power sector: The PSO has recovered Rs194.283 billion from the
power sector along with late payment surcharge income. The power sector was a key
defaulter of the PSO that is to pay Rs192.5 billion to the company on account of oil
supply.
Source:
Page | 699
PAKISTAN STATE OIL
Year 2020:
discussed below;
• Decline in trade debts mainly due to recoveries from power sector: Debtor’s turnover
has increased primarily due to decrease in trade debts by 10.4% on account of recoveries
from power sector.
• FE exchange loss recovery: Net unfavorable exchange difference of Rs. 1,799 million,
net of recoveries during the year of Rs. 27,890 million, arising on foreign currency
borrowings (FE-25), obtained under the directives of Ministry of Finance, which was to
be settled in accordance with the instructions.
• Borrowing decreased from other parties: Decreased by 36.2%.
Source:
Year 2019:
Page | 700
PAKISTAN STATE OIL
There was an increase of 35.43% in 2019 as compared to the year 2018. The factors are
discussed below;
• Borrowing from National Bank Pakistan increased: It increased by 44.3%.
• Pakistan State Oil (PSO) in dire straits with its receivables going beyond a record
Rs364bn: Receivables from the power sector alone had touched Rs265bn as of Jan 18
because of primary circular debt. In addition, a second-tier circular debt worth Rs51bn
has built up against the Sui Northern Gas Pipelines Limited (SNGPL) due to non-
payment of LNG supplies, affecting the entire gas sector
• Borrowing from other parties increased: It increased by 28.16%.
Source:
Year 2018:
discussed below;
• PSO’s customers fail to pay the amount they are due for: The PSO's total receivables
from the power sector alone stood at Rs 282 billion, while PIA and Sui Northern Gas
Page | 701
PAKISTAN STATE OIL
Pipelines Limited (SNGPL) owed Rs 26 billion and Rs 22 billion respectively to the oil
marketing company.
• Working Capital reduced to a great extent: It decreased by 75.28%.
• Borrowings from NBP decreased significantly: It decreased by 64.7%.
Source:
➢ https://www.brecorder.com/news/4625998/psos-receivables-reach-rs-330-billion-
20180814399303
Year 2017:
discussed below;
• Settlement of PIBS in July: This represents investment in Pakistan Investment Bonds
(PIBs) amounting to Rs. 45,906,112 made in June 2013 in accordance with plan duly
approved by the Economic Coordination Committee (ECC) -Government of Pakistan
(GoP) out of the proceeds received against partial settlement of circular debt issue then
prevailing in the energy sector. Investment Bond matured in 2016.
• The Power sector still remains a major defaulter: The total receivables from power
sector accumulated to Rs 196.5 billion including Rs 64.40 billion generated after the
Page | 702
PAKISTAN STATE OIL
inception of seven-day credit arrangements. The power sector remained a major
defaulter and multibillion rupees had been stuck in this sector following ban of use of
furnace oil. PSO had been supplying furnace oil to feed power plants but the
government abandoned use of this fuel in power plants and the PSO is now facing
liquidity crunch following refusal of power sector to clear multibillion rupees dues.
Source:
Year 2016:
discussed below;
• Late payments from the power sector: The government claimed of controlling energy
shortages and improving recoveries, a staggering Rs250 billion has been added to the
outstanding dues of the Pakistan State Oil (PSO) since June 2013. The PSO’s
management had repeatedly written to the ministries of water and power, petroleum and
finance about its difficult financial position that they were in and reached out for
proactive support.
Page | 703
PAKISTAN STATE OIL
Source:
Page | 704
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Increase in Working Capital Increase
OCAC to convince banks into providing short term loans Increase
Fall in markup rates of finances through markup arrangements Increase
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of short term
borrowings all five years of the companies are given below.
Total Short Term Borrowings of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 130,498,503 89,846,517 121,678,909 79,032,665 73,616,445
HTL 1,235,959,909 1,325,250,528 2,243,170,808 766,262,927 461,180,637
APL 0 0 0 0 0
BPL 254,439 254,439 254,439 254,439 254,439
TOTAL 1,366,712,851 1,415,351,484 2,365,104,156 845,550,031 535,051,521
Total Market Share of all Companies in 5 Years w.r.t Total Short Term Borrowings
Page | 705
PAKISTAN STATE OIL
Total Market
Companies Share
PSO 7.58%
HTL 92.40%
APL 0.00%
BPL 0.02%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Short Term Borrowings
Total Market Share

100.00%
92.40%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00% 7.58%
0.00% 0.02%
0.00%
PSO HTL APL BPL
Page | 706
PAKISTAN STATE OIL
borrowings in their liability accounts. PSO is in the second place.
PSO’s Short Term Borrowings Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 9.55% 6.35% 5.14% 9.35% 13.76%
Graph Indicating PSO’s Short Term Borrowings Share in the Industry w.r.t Years

16.00%
14.00% 13.76%
12.00%
10.00%
9.55% 9.35%
8.00%
6.00% 6.35%
5.14%
4.00%
2.00%
0.00%
2017 2018 2019 2020 2021
Page | 707
PAKISTAN STATE OIL
Analysis: the market share of PSO in terms of short term borrowings is such that it has been
increasing since the past three years. The market share of HTL has been decreasing at the same
time in case of short term borrowings.
Yearly Change/Growth in Short Term Borrowings of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly PPE
Growth 24.15% -31.15% 35.43% -35.05% -6.85%
Graph Indicating Change/Growth in Short Term Borrowings of PSO
Page | 708
PAKISTAN STATE OIL

40.00%
35.43%
30.00%
24.15%
20.00%
10.00%
0.00%
2017 2018 2019 2020 2021
-6.85%
-10.00%
-20.00%
-30.00% -31.15%
-35.05%
-40.00%
Analysis: It can be analyzed that the highest growth was in 2020 but overall, every year with an
increase in short term borrowings is followed by a year with decrease in short term borrowings.
Growth/Change in the Industry’s Short Term Borrowings Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth 568.77% 3.56% 67.10% -64.25% -36.72%
Graph Indicating Growth/Change in the Industry’s Short Term Borrowings Overtime
Page | 709
PAKISTAN STATE OIL

700.00%
600.00%
568.77%
500.00%
400.00%
300.00%
200.00%
100.00%
67.10%
0.00% 3.56%
-36.72%
2017 2018 2019 2020 2021
-64.25%
-100.00%
Analysis: The industry in terms of this account has also experienced a decreasing trend between
2017-2018. Every year with an increase in this account was followed by a decrease in this
account. This has been happening since five years now.
Factors affecting short term borrowings
Increase in Working Capital to Increase Short Term Foreign Currency Financing
Page | 710
PAKISTAN STATE OIL
To understand this, the working capital of PSO and other companies must be taken into
consideration
Working Capital of OMCs
Company 2017 2018 2019 2020 2021
PSO 87,055,865 91,158,724 84,495,107 60,648,203 84,577,841
HTL 1,416,314,976 1,303,368,976 856,530,681 16,971,486 -92,786,071
APL 11,161,066 11,346,440 10,419,961 7,617,410 12,415,525
BPL -130,962 -148,055 -35,434 -157,706 -46,802
Total 1,472,119,435 1,322,478,465 799,087,134 -22,059,915 4,160,493
Market Share of Working Capital of OMCs
Burshane (LPG) Limited -0.01%
Total Industry WC 100.00%
Page | 711
PAKISTAN STATE OIL
Growth in PSO’s Working Capital
Years 2017 2018 2019 2020 2021
Pakistan State Oil 6% 7% 11% -275% 2033%
Graph Showing Working Capital Growth of PSO
Pakistan State Oil

2500%
2000% 2033%
1500%
1000%
500%
0% 6% 7% 11%
2017 2018 2019 2020 2021
-275%
-500%
Analysis: The graph given above shows that the working capital increased considerably in 2021
and that was because in 2021, short term borrowings through foreign currency was taken place to
facilitate the working capital. Working capital can be seen to have an increasing trend and the
Page | 712
PAKISTAN STATE OIL
impact of leverage is beneficial for it. Due to this, if PSO wants to increase its working capital,
short term borrowings would also increase.
Future Outlook
Short term borrowings are expected to increase with an increase in the need of strong working
capital for PSO and other OMCs.
Sources:
➢ Annual Report HTL
➢ Annual Report APL
➢ Annual Report BPL
➢ https://finbislesh.com/2020/04/25/short-term-foreign-currency-
financing/#:~:text=Short%20term%20foreign%20currency%20financing%20are%20con
nected%20with%20supporting%20trade,an%20important%20contribution%20to%20dev
elopment.
OCAC to Convince Banks to Reconsider Facilitating Short Term Financing to OMCs
OCAC, in a letter dated January 31, 2022 to the SBP Governor, has highlighted the enhanced
financing requirements of the oil marketing sector and the refineries as well, saying banks should
Page | 713
PAKISTAN STATE OIL
be instructed to support uninterrupted supply of oil products, which in turn augment the
country’s defence and strategic objectives. The OCAC also said that OMCs and refineries are the
backbone of the energy sector and the economy, any disruption in their business will result in
catastrophic impact on the entire energy supply chain of the country. The OCAC through this
letter has further requested the Governor SBP to resolve regulatory issues with respect to
Prudential Regulations of SBP for corporate customers which imposes certain restrictions on
banks for extending additional financing to companies. It was advised that the trust deficit can be
reduced by starting to offer short term financing first. Giving reasons for significant increase in
trade finance requirements of refineries and OMCs, OCAC said that sales of POL products in the
country have increased by 24per cent as compared to last year. Motor gasoline (Petrol), high
speed diesel (HSD) and furnace oil (FO) consumption is up by 14per cent, 27per cent and 38per
cent respectively.
Future Outlook
If banks agree to this, it would improve the liquidity of the OMCs as they would get short term
loans and other financing from the banks. The account would then increase.
Source:
➢ https://profit.pakistantoday.com.pk/2022/02/01/ocac-for-enhanced-trade-finance-
facilities-for-omcs-refineries/
Page | 714
PAKISTAN STATE OIL
➢ https://www.thenews.com.pk/print/950865-banks-shy-of-expending-trade-credit-for-oil-
imports
Markups on Short Term Financing Fell in 2017, 2019, 2021
This is one of the major reasons of as to why financing of short term increased in these three
years for PSO and other OMCs in the industry. It ranged between 10-15% in 2019, increased to
16% in 2020 and fell as low as 6% in 2021.
Future Outlook
If this pertains, short term borrowings would increase but at the same time, the OMCs would
need to have enough collateral available.
Sources:
Page | 715
PAKISTAN STATE OIL
Economic Analysis
Factor Effect
Interest Rates Increase
Higher Gross Margins Decrease
Short term borrowings is one of the major accounts for PSO accounting for almost 17% of the
total liabilities and equity for the company. For the past 2 years, the company enjoyed lower
short term borrowings which was mainly owed to lower interest rates as well as higher
profitability.
The company borrows a major proportion of its short term loans from foreign banks which
makes it vulnerable to economic factors such as devaluation of currency which can have a
significant impact on the account. All the factors which can affect the short term borrowings of
the company have been analyzed below.
Source:
Page | 716
PAKISTAN STATE OIL
government came into power, there was record devaluation within the past 4 years as now the
dollar is trading at $1 for Rs.185. Owing to this the loans which PSO had taken in the form of
foreign currency also increased ultimately increasing the short term borrowing amount
numerically.
Future Outlook
least 18%, as reported by trading economics. This ultimately implies that the short term
borrowings would continue to increase as what PSO borrowed at a lower amount before is now
to be returned at a higher value. The forecast for currency devaluation against dollar is illustrated
in the graph below.
Page | 717
PAKISTAN STATE OIL
Source:
Interest rates
Page | 718
PAKISTAN STATE OIL
stimulus to the economy in times of Covid-19. Owing to these lower markups, PSO enjoyed lower
interest in its short term borrowings from banks which resulted in the decrease for its aggregate short term
borrowings.
Future Outlook
would ultimately also increase the interest payments by PSO on its loan thus higher short term
borrowings. This forecast has been highlighted in the graph below;
Page | 719
PAKISTAN STATE OIL
Sources
gap
Higher gross margins
Page | 720
PAKISTAN STATE OIL
These higher gross margins meant that the profitability of the company increased due to which it
was able to pay back its short term borrowings by a significant amount, as also reflected in the
notes of the statement.
Future Outlook
In the future we predict that the sales of the company will increase and so will the cost
absorption of the company as the rate by which cost of sales will increase with respect to sales
Page | 721
PAKISTAN STATE OIL
would be lower. This ultimately means that the profitability of the company will also increase
which would help the company in paying back its short term borrowings.
Sources:
imports
https://tribune.com.pk/story/2318132/pm-seeks-report-on-pso-oil-transport
Page | 722
PAKISTAN STATE OIL
140,000,000.00
120,000,000.00
100,000,000.00
80,000,000.00
60,000,000.00
40,000,000.00
20,000,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
Short term borrowings Naïve Forecast
Page | 723
PAKISTAN STATE OIL
Change
500.00%
400.00%
300.00%
200.00%
100.00%
0.00%
2010
2014
2018
2022
2026
2007
2008
2009
2011
2012
2013
2015
2016
2017
2019
2020
2021
2023
2024
2025
(100.00%)
Page | 724
PAKISTAN STATE OIL
160,000,000.00
140,000,000.00
120,000,000.00
100,000,000.00
80,000,000.00
60,000,000.00
40,000,000.00
20,000,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
ST Borrowings Forecasted ST Borrowings
Page | 725
PAKISTAN STATE OIL
__________________________________________________________
________________________
Page | 726
PAKISTAN STATE OIL
SECTION X: INCOME
STATEMENT
Page | 727
PAKISTAN STATE OIL
Sales
Breakdown:
Sales 2021 Vertical Analysis
Gross sales 1,424,249,031 118.27%
Discount / allowances (473,553) -0.04%
Sales tax (197,836,660) -16.43%
Inland Freight Equalization Margin (IFEM) (21,691,443) -1.80%
(220,001,656) -18.27%
Net sales 1,204,247,375 100.00%
Page | 728
PAKISTAN STATE OIL
Horizontal Analysis:
2021 2020 2019 2018
PKR (000s) PKR (000s) PKR (000s) PKR (000s)
Sales 9.14% -5.43% 12.17% 20.36%
Vertical Analysis:
2021 2020 2019 2018
PKR (000s) PKR (000s) PKR (000s) PKR (000s)
Sales 100% 100% 100% 100%
Forecasting
After taking into account all the factors which include GDP forecast, future oil prices, currency
devaluation, market share as well as consumer changes in demand and technology among other
things, it is safe to assume that the sales for the company will grow at a rate between 12-13% for
Page | 729
PAKISTAN STATE OIL
the next 5 years. So, we are assuming that the sales for the company will grow at a constant rate
of 12.56% which is also in best fit with all the statistical methods used.
Page | 730
PAKISTAN STATE OIL
Company Analysis
When we take a look at the Horizontal Analysis of PSO, it can be clearly seen that the same have
significantly dropped from 2018 till 2020. We can see that the sales figure goes into a negative
sign (-5.43%) in 2020, however things are looking better when we look into the sales figure for
2021 which increased drastically to a 9.14%.
PSO gained huge profits after sales which was PKR 29.2 billion in 2021 as compared to PKR 6.5
billion back in 2020. This was the highest ever profit achieved by PSO in its entire history. The
reason of these profits was the increase in white oil and black oil sales volumes that increased by
16.6% and 53.2% respectively. As well as the reduction in the finance cost by PKR 3.2 billion
(24%). PSO’s introduction of Euro 5 standard petrol, diesel and HOBC drove volume. Moreover,
factors such as recovery of late payment surcharge and favorable price regime also contributed
towards the profits of PSO.
Talking about the year 2022, during the first quarter oil sales were above 5.8 million tons growing
by 24 percent and a growth in furnace oil (38%), HSD (36%), and MS (14%). Pakistan State Oil
(PSX: PSO) was the clear winner among all OMCs with volumetric growth of 34 percent year-on-
year - surpassing the industry growth and regaining market share. The volumetric growth came
from reviving consumption and demand of petroleum products.
Source:
Page | 731
PAKISTAN STATE OIL
The product wise performance that contributed towards the growth of sales are explained below;
Liquid Fuels
PSO’s sales volume grew by 21.9%, from 44.3% to 46.3% in 2021 resulting in the sales volume
of 9.2 million tons. The primary reason for this increase was by MoGas, HSD and FO.
• PSO launches Euro 5 standard feuls: PSO also launched the Euro 5 standards fuels
including High Octane 97, MoGas 92 RON and Hi-Cetane Diesel during the year of 2021,
which resulted in enhancing the customers confidence and trust in the company.
White Oils
The highest ever sales volume of 7.6 million tons was achieved by the company in this
segment.
Page | 732
PAKISTAN STATE OIL
• Retail segments boost white oil sales: The market share was 45.2% as of 2021. Most of
the sales of white oil was achieved through the retail segment.
MoGas
Just like White oil, MoGas is also being sold through the company’s retain fuel business. The
highest ever sales volume was achieved by PSO in the history of MoGas which was 3.5 million
tons in 2021.
• PSO upgrades to Hi-Octane Euro5 97: Hi-Octane Euro5 97 sales grew by 177.6% as
compared to 2020. Leading the sustainable energy revolution in the country, PSO also
became the first OMC to upgrade Pakistan's fuel standard from Euro 2 to Euro 5 and
launched Hi-Octane 97, Mogas and Hi-Cetane Diesel accordingly.
Page | 733
PAKISTAN STATE OIL
Source:
Hi-Cetane Euro 5 Diesel
The sales of this segment grew by 21.1% with a volume of 3.7 million tons in the year 2021. This
volume helped the company to regain its market share back to 47.2% from 45.8% from the last
year.
• PSO introduces Hi-Cetane Euro 5 Diesel (2020): Hi-Cetane Euro 5 Diesel was introduced
back in 2020, it reduces vehicle emissions and enhances engine life & efficiency by
protecting the engine's metallic parts. It also minimizes the negative impact on health while
enabling a cleaner environment for our future generations.
Page | 734
PAKISTAN STATE OIL
• Decrease in demand of diesel in the agricultural sector: The diesel consumption had also
dropped after the lockdown but has since picked up owing to wheat harvest.
Source:
Jet Fuels
PSO dominates the fuel industry when it comes to providing high quality jet fuels that contribute
to a market share of 94.5%.
• Covid restriction disrupts the jet fuel supply (2019,2020): However, during Covid-19
the aviation sector experienced many disruptions like lock downs and travel restrictions
Page | 735
PAKISTAN STATE OIL
which resulted in lower demand of jet fuels. In the year 2021, the industry faced a decline
of 32.4% as compared to the last year. On the other hand, PSO jet fuel’s closing volume
was at 331.5 thousand tons with a significant decrease of 32.2%.
Black Oil
Due to the national energy mix, the demand for black oil is decreasing day by day. The fuel
industry observed a growth of 36.3% over the last year due to the increase in demand from the
power sector.
• Government’s policy on adding indigenous renewable energy sources: As PSO was one
of the biggest suppliers in the market, it grew by 53.2% in 2021 as compared to the last year
with a volume of 1.7 million tons and a market share of 51.7%. Due to the increase in gas
fired power plants and the GoP’s focus on the addition of indigenous renewable energy
sources, the volumes are bound to drop in the new future.
Page | 736
PAKISTAN STATE OIL
Lubricants
As soon as many economic activities started, social mobility along with the agriculture sector
which prompted the demand for lubricants.
• Demands for lubricants increase due to agricultural industry: During the year of 2021
PSO continued to progress into several activations, which in return assisted in them reaching
volumes of 34 thousand tons alongside 11.3% of volumetric growth.
Liquefied Petroleum Gas
This specific sector grew by 7.3% over the last year with a sales volume of 1182 thousand tons.
• LPG Demands increase due to the winter season: Due to the cyclical demand from the
domestic segment during the winter season. There was a volumetric growth of 0.5% seen in
PSO, with volumes of 33 thousand tons.
Page | 737
PAKISTAN STATE OIL
Liquefied Natural Gas
Local production of natural gas has been declining, estimated at around 2.8 bcf/day.
• Qatar Agreement to provide LNG to PSO: This shortage can be linked to the imports. To
overcome this problem, PSO entered into an agreement with Qatar Petroleum under G2G
arrangement. The company then imported about 4.4 million tons of LNG in 2021. However,
PSO is coming up with new ways to increase its stakes in the LNG value chain.
Source:
Page | 738
PAKISTAN STATE OIL
Industry Analysis
The industry analysis would allow us to have a better understanding regarding the dynamics of
Pakistan State Oil in the Oil and Gas Operations industry. The industry analysis would give us
insights regarding the strengths, weaknesses, opportunities and threats that Pakistan State Oil
needs to consider. It would also allow us to interpret the standing of PSO in comparison to other
companies which belong to the same market. This would also give us information regarding the
market conditions hence, aiding in formulating better and more efficient strategies.
We can analyze the market share of PSO and other companies which fall under this industry. The
companies were taken from the Pakistan Stock Exchange Website. PSO’s competitors are:
1. HASCOL
2. Shell Limited
3. Sui Northern Gas Pipelines Limited
4. Sui Southern Gas Pipelines Limited
5. Attock Petroleum Limited
6. Burshane LPG Limited
7. Hi-tech Lubricants Limited
1. Market Share - Sales
Page | 739
PAKISTAN STATE OIL
We can first compare these companies on the basis of the market share, calculated using the
typical sales method. For this method, the total sales of the last 5 years of PSO were taken and
then divided by the overall sales of the industry. Three comparisons have been done. Firstly, we
have the years 2015-2019. It has all the companies in the OMC industry.
HASCOL 1.52%
Sui Northern Gas Pipeline Limited 4.30%
Sui Southern Gas Company Limited 1.91%
Shell Pakistan Limited 1.89%
Total Industry Sales 100.00%
Moreover, if we were to get a more recent picture, we can see the data of 2017-2021. The
companies which did not provide their annual reports were not included in this particular
calculation of market share.
Page | 740
PAKISTAN STATE OIL
Total Market
Company Names Share
Hi-tech lubricant limited is an outlier. If we try removing it, the following data will be obtained
for the year 2015 – 2019. The table below it gives market shares for 2017-2021.
HASCOL 7.24%
Page | 741
PAKISTAN STATE OIL
Total Market
Company Names Share
Here we can see that in these 5 years (2015-2019), PSO had the second largest market share of
9.67%. In these years, the market share has experienced heavy fluctuations which can be shown
in the graph that has been given below. The market share fell after 2015 and experienced
minimal level of growth till 2020. It was the highest among all years in 2020 and then it fell
again in 2021.
Page | 742
PAKISTAN STATE OIL
Pakistan State Oil (Market

Share-Sales)
14.00%
12.68%
12.00%
10.00% 9.55% 9.66%
9.12%
8.00% 8.01%
6.00%
4.00%
2.00%
0.00%
2015 2016 2017 2018 2019
2017-2021
Pakistan State Oil

18.00%
16.00% 16.12%
14.00%
12.00%
10.52% 10.93%
10.00% 10.07% 10.19%
8.00%
6.00%
4.00%
2.00%
0.00%
2017 2018 2019 2020 2021
Lower market share in 2015-2020 due to inefficiencies:
As discussed in the dawn news article, the demand varied to a great extent in case of petrol from
2015 till 2020. It happened because in 2019, after lockdowns were imposed, people were not
allowed to commute due to which they were not using their vehicles which resulted in lower
Page | 743
PAKISTAN STATE OIL
usage of petrol. Alongside that, the demand for petrol increased due to an increase in the demand
for two and three wheelers as well. Also, because Pakistan has an inefficient transport system,
people had no choice but to invest in motorbikes.
Covid-19 leads to a fall in air traffic hence, lower use of jet fuel:
In the beginning of Covid-19, the air traffic reduced considerably. Due to this the jet fuel taken
by the airlines fell considerably. Jet fuels make a large component of the total sales of any OMC.
Due to this, their sales fell hence the market share fell as well. However, when lockdowns were
finally lifted, in 2021, the sales began to increase again as the demand for jet fuels increased
again as more and more individuals were trying to get back to their countries.
Increase in the market share of PSO due to accumulation of inventory
Moreover, as discussed in the news international article that if we look into the future
projections, the sales of the company are expected to increase by 13% QoQ in 2022 due to 24%
increase in the inventory. This would lead to PSO obtaining a higher market share in the
following years as compared to other companies in the industry. The market share of the
company as mentioned in the article is increasing at a faster rate in terms of the liquid fuels as it
has a growth rate of 20.8% as mentioned in the article while the industry is growing at 12.3%
only. Their market share has been increasing and is expected to increase more due to motor
gasoline, high speed diesel and furnace oil majorly.
Page | 744
PAKISTAN STATE OIL
Tax free import of oil from China under the CPFTA
From 2020 till 2022, 2.416 billion liters of petrol was imported from China under this agreement
as discussed in the Dawn news article. The major oil and gas companies were exempted from
paying taxes on these imports due to which we can assess that they had sufficient levels of
inventory with them and this tells us that their market share through sales increased because of
this and also will keep increasing if this continues. This resulted in the companies earning heavy
levels of profits. PSO imported 68 billion liters of petrol from China. Shell Limited was the
biggest beneficiary in this particular case however. The OMCs did not let the benefit of
exemption from import duties to the consumers due to which heavy profits were incurred.
Considering this agreement is valid till 2024, we can expect increasing sales and increasing
profits hence increasing market share of PSO.
Promotion of locally produced furnace oil:
Furnace oil is just another product that comes under the oil and marketing companies. PSO’s
furnace oil makes a great chunk of PSO’s sales. The government of Pakistan noticed that the
OMCs were beginning to import heavy amounts of furnace oil and that the current plants were
not working at their full capacity. Due to this, they focused on the production of local furnace oil.
This has already led to an increase in the sales of the OMCs and is expected to increase in the
following years as well as the government has put trade embargos on the imports of furnace oil.
Page | 745
PAKISTAN STATE OIL
Pakistan currently has enough oil and gas reserves for the next 50 years
The former president of the chamber of commerce, Dr. Shahid Rasheed believes that Pakistan
has enough resources of oil and gas which will sustain for the next 50 years. This is majorly
because of the high levels of coal reserves that the country has. If the OMCs use these reserves,
they will not lack behind. If the local companies are given incentives to produce the energy
products using the coal reserves, the industry would be in a much better place because currently,
most of the petroleum products are imported and it is only bringing heavy amounts of debt and
loans on the country. Foreign companies which fell in this industry need to be brought back.
Increase in the demand for POL products in Pakistan
In a Dawn news article, it was specifically mentioned that the demand for POL (Petroleum Oil
Lubricants) products will increase considerably in Pakistan in the next 5 years. The OMCs in
Pakistan associate some chunk of their sales to this particular product as well. It is expected to
increase from 27 million tones to around 32 million tones. PSO has abundant levels of these
products due to which, we can expect high demand in the next couple of years and in return high
level of sales. When the sales will increase so will the market share of the company
comparatively. If need be, Pakistan has a long-term agreement with Kuwait for these products
and they can call in more inventory at any given period of time.
Hi-tech Lubricants Limited attaining high growth:
Page | 746
PAKISTAN STATE OIL
From the distribution of market share we can see that hi-tech lubricants have the highest levels of
market share and that is mainly because of their blending plant which gives them a competitive
advantage. Their growth is said to further increase in the future due to them increasing their
operational capacity and higher level of storage systems along with improving the efficiency of
their blending plant itself as well. Their net sales are increasing at a higher rate than other
companies in the OMC industry and PSO needs to look out for this one.
2. Market Share – Total Assets:
The next market share was calculated using the total assets. If we again take the 2015 till 2019
bracket, we will be able to accommodate most of the companies. However, we can also take the
data for 2017-2021. This would give us a more recent picture of the industry but the number of
companies adjusted in it are lower due to the unavailability of the annual reports of most
companies for the year 2020 and 2021. We can also consider Hi-tech lubricants to be an outlier.
2015 - 2019
HASCOL 1.11%
Page | 747
PAKISTAN STATE OIL
Total Industry Assets 100.00%
2017 – 2021
Total Market
Company Names Share
If the outlier, Hi-Tech, is omitted then the following table will be obtained for 2015-2019. The
table below it gives us the market shares for 2017-2021.
Page | 748
PAKISTAN STATE OIL
HASCOL 5.54%
Total Industry Assets 100.00%
Total Market
Company Names Share
Page | 749
PAKISTAN STATE OIL
Throughout the years, we can see from the graph given below how the market share of PSO has
changed as compared to other OMCs in the industry.

Share TA)
12.00%
10.00% 9.94% 9.97%
8.00%
6.00% 5.80% 5.72%

5.04%
4.00%
2.00%
0.00%
2015 2016 2017 2018 2019
2017-2021
Pakistan State Oil (Market Share

TA)
8.00%
6.74% 6.85% 6.92% 6.83%
6.00%
5.57%
4.00%
2.00%
0.00%
2017 2018 2019 2020 2021
Page | 750
PAKISTAN STATE OIL
We can observe a fall in the market share in terms of the total assets between 2015 and 2019.
However, slowly and gradually the total assets of the company started increasing. There were
many reasons for that but a few are listed below.
Increase in the current assets of PSO
In the industry, a lot of trading takes place between the companies. When it comes to PSO and
Sui Northern Gas Pipeline Limited, they owe Rs. 77.7 billion to PSO. The company is not that
efficient in terms of its account receivables turnover. However, the company aims to sort this
issue out as they can see how it is affecting its market share in terms of sales. However, the
account receivables are increasing the value of the total assets of PSO. Due to this their market
share in terms of total assets can be seen to be higher with passing years. The increase in the
inventory of PSO has already been discussed. It is increasing due to accumulation of petroleum
products in the month of January and also because of the tax-free import of the oil from China.
Saudi Oil Facility soon to provide oil supplies to Pakistan
Saudi Oil Facility was to provide $1.2 billion worth of oil supplies to Pakistan but the provision
was being delayed. However, recently Dawn news published an article saying that Saudi Oil
Facility is working on sending the shipment on the earliest basis to Pakistan. this would again
lead to more supply of oil products to Pakistan. The OMCs can utilize it. If the supply would
increase, the consumers can enjoy lower prices and hence the demand would increase as well.
Page | 751
PAKISTAN STATE OIL
the value of the total assets of the companies in this industry would increase due to more oil
reserves in their inventory levels.
3. Market Share – Net Income
In case of the net income, market share was calculated for 2015-2019 and again for 2017-2021 to
get more recent data entries. We can see that the net income of PSO stands at the second place
after the net income of HTL.
Total Market
Company Names Share
HASCOL -1.79%
Sui Southern Gas Company Limited -2.46%
Total Industry NI 100.00%
Page | 752
PAKISTAN STATE OIL
2017-2021
Total Market
Company Names Share
Total Industry NI 100.00%
We can see that after HTL which is also an outlier, PSO had the highest market share in terms of
net income be it 2015-2019 or 2017-2021. This tells us that even if we remove the outlier, PSO
would have the highest net income as compared to other competitors in the market. The graph
below will give a better understanding of the distribution of net income over the years.
Page | 753
PAKISTAN STATE OIL

Share NI)
4.00%
2.33% 2.71%
2.00% 2.13% 1.92%
0.00%
2015 2016 2017 2018 2019
-2.00%
-3.26%
-4.00%
2017-2021
Pakistan State Oil (Market Share

NI)
30.00%
27.35%
25.00%
20.00%
15.00%
10.00%
8.13%
5.00%
2.37% 2.69% -3.63%
0.00%
-5.00% 2017 2018 2019 2020 2021
-10.00%
We can see that the net income was not that commendable when it comes to PSO. Even though
they had the second highest net income in the industry after HTL
Fall in Net Incomes due to Covid-19
The market share dropped the lowest levels in 2019 due to high levels of Covid-19 lockdowns
and due to that, people were not allowed to commute to travel by air. Their sales dropped
Page | 754
PAKISTAN STATE OIL
considerably, their storage expenses increased as inventory was not being sold so they had high
ITO ratios and therefore lower net income was recorded in this year. This can be rechecked from
the annual report of 2019. Overall there was a heavy economic slump as well and the purchasing
power of individuals dropped considerably.
Increase in the domestic production of Euro-5 fuels
The OMCs evolving and now, Pakistan is aiming to making its own Euro-5 fuel and
discouraging the imports. Due to this, the profits of the most companies in this industry has
increased since 2020-2021 an is expected to increase further as well. There was a profit of Rs.
3.6 billion in case of PSO as compared to loss experienced of Rs. 2.4 billion in the previous
years. The future demands for being environmentally friendly. That is what the major companies
in this industry are aiming for. So, net incomes are supposed to increase the market share as well.
all of this will recover the profits that were previously lost by the major companies like PSO.
4. Market Share – Working Capital
This too was calculated for 2015-2019 and then again from 2017-2021 with all the available
annual reports to get recent data.
Total Market
Company Names Share
Page | 755
PAKISTAN STATE OIL
HASCOL -1.24%
Sui Northern Gas Pipeline
Limited -1.49%
Sui Southern Gas Company
Limited -3.47%
Shell Pakistan Limited -0.75%
2017-2021
Total Market
Company Names Share
Page | 756
PAKISTAN STATE OIL
For year to year growth in market share, the graphs given below will provide better insights.
Pakistan State Oil (Market Share WC)

16%
14% 14%
12%
11%
10%
8%
7%
6% 6%
4%
2% 2%
0%
2015 2016 2017 2018 2019
2017-2021
Page | 757
PAKISTAN STATE OIL
Pakistan State Oil Market Share (WC)

2500%
2000% 2033%
1500%
1000%
500%
0% 6% 7% 11%
2017 2018 2019 2020
-275% 2021
-500%
We can see that most of the companies had negative working capitals. They had more current
liabilities than current assets. Now, out of all the companies, PSO was one of those companies or
perhaps the only company which had positive working capitals in all years. The only negative
market share value it had was when the total industry’s working capital was negative due to
HTL’s working capital being negative. However, in PSO’s case, they have been trying to control
their current liabilities as according to their director’s report we can see that there is a
downwards trend for current liabilities and an upwards trend of current assets due to increasing
accounts receivables. However, if we analyze their market share, we can see that it was falling
considerably and started increasing after the pandemic started due to high current assets like
accounts receivables and the inventory.
5. Market Share – Cash Position
Page | 758
PAKISTAN STATE OIL
The cash position can tell us that in the OMC industry which company has a better cash position
and this would be helpful for many stakeholders.
2015-2019
Total
Market
Company Names Share
Pakistan State Oil -13.23%
HASCOL -1.92%
Sui Northern Gas Pipeline Limited -1.45%
Sui Southern Gas Company
Limited -2.79%
Shell Pakistan Limited -0.34%
Total Industry CACE 100.00%
Individual year growths can be seen in the graph below. From this we can see that in 2018 the
cash position was getting better but it worsened again in 2019 when PSO began to lose its market
Page | 759
PAKISTAN STATE OIL
share with respect to its standing in terms of cash in that period of time. This was because of high
levels of finance cost that was paid in that period due to taking high levels of long-term
borrowings and short-term borrowings as PSO mainly works through bank financing. The
interest rates were increasing in that period.

Share - Cash)
0
2015 2016 2017 2018 2019
-5,000,000
-7,924,869
-10,000,000
-15,000,000
-20,000,000 -21,015,683
-25,000,000
-30,000,000 -30,273,825
-35,000,000
-40,000,000 -39,584,225
-41,502,241
-45,000,000
2017-2021
Total Market
Company Names Share
Pakistan State Oil -6.72%
HTL 103.86%
Attock 2.80%
Page | 760
PAKISTAN STATE OIL
Burshane (LPG)
Limited 0.06%
Total Industry
CACE 100.00%
Pakistan State Oil (Market Share -

Cash)
0%
2017 -1%
2018 2019 2020 2021
-4% -4%
-5%
-10%
-15% -15%
-20%
-22%
-25%
We can see that the cash position of PSO was not too great. It has been incurring deficit in terms
of cash at the end of the year. PSO was perhaps the only company with negative cash balance at
the end.
Increase in the lending rates charged by commercial banks
Out of all the companies in the OMC industry, PSO is a company which is heavily dependent on
bank financing. When the rates increased, PSO started borrowing less long-term and short-term
Page | 761
PAKISTAN STATE OIL
debt. They were paying heavy finance cost in the beginning as compared to other companies.
They then controlled their liabilities. This is slowly and gradually leading to better cash
positions. Even though, PSO is still experiencing losses but in the next 5 years, the cash is
expected to increase by the expected growth rate. It did not affect other companies in this
industry due to lower reliance on bank financing of its competitors.
Source for 15 articles:
1. https://dps.psx.com.pk/
2. https://www.thenews.com.pk/print/929210-pakistan-may-import-500-000-tonnes-of-
petrol-next-month
3. https://www.dawn.com/news/1666786
4. https://www.thenews.com.pk/print/932876-pso-posts-highest-ever-half-yearly-profit-of-
rs32-189-billion
6. https://www.dawn.com/news/1666786/petrol-demand-hits-record-835m-tonnes-in-fy21
7. https://www.thenews.com.pk/print/927726-pakistan-has-enough-oil-gas-reserves-for-
next-50-years-ex-president-icci
8. https://profit.pakistantoday.com.pk/2022/01/09/chinese-petrol-drive-omc-profits/
Page | 762
PAKISTAN STATE OIL
10. https://www.brecorder.com/news/40119895
13. https://www.thenews.com.pk/print/909334-top-omc-in-economic-mess-pso-s-
receivables-surge-to-rs398-billion
14. https://profit.pakistantoday.com.pk/2021/09/06/financial-crisis-of-omcs-worsens/
15. https://tribune.com.pk/story/2330852/commercial-bank-lending-rate-spikes
Page | 763
PAKISTAN STATE OIL
Economic Analysis
During the last fiscal year, PSO performed above average of the industry as it bounced back
aimed Covid-19 and recorded all time highest sales revenue of over PKR 1.4 trillion. A number
of macroeconomic factors including uncertainty in the geopolitical environment, government
socioeconomic measures and technological changes among others contributed to the company’s
performance and are expected to leave an impact in the future as well. All of them have their
own importance so they will be looked at independently.
Government Policies
When we talk about the role pf government in oil and gas marketing companies, it plays a very
pivotal role especially in a developing country like Pakistan, which has such a high dependence
on imported oil.
During the fiscal year 2021, the government has envisioned to achieve a GDP growth of 4.4% in
the year 2022 and have taken several steps to supplement this vison. One such policy is the
reduction in the duty structure. The government reduced the duty and tax structure on vehicles
under 850 cc horsepower which is deemed to have a positive impact on the sales of the company
in the future. To top this The Automotive Industry Development & Export Plan (AIDEP) 2021-
2026 increased competition for automobiles in the market with car sales exhibiting a staggering
growth of 40.2%, which indicated both the revival of the economy as well as a prediction of an
Page | 764
PAKISTAN STATE OIL
increase in the sales volume of OMC’s specially PSO as it has the biggest market share in the
country.
Moreover, there was an increase in the demand for fuel and furnace oil due to an increase in
electricity demand, which was coupled with the shortage of natural gas for power generation and
dry-docking related issues. PSO requested the federal government for advising the domestic
refineries for maximum allocation to PSO so that power sector demand can be fulfilled,
informing that they managed to provide 100,000 metric tons of furnace oil to K-Electric against
its demand of 120,000 metric tons.
Keeping in view this situation, the Cabinet Committee on Energy under Minister for Planning
Asad Umar approved withdrawal of ban on import of furnace oil and PSO was given NOC to
import two firm cargoes and one optional cargo of furnace oil as reported by The News. The
chief executive of KE also confirmed this in the statement, “We are getting furnace oil from PSO
on day to day basis in order to meet the generation demands and to avoid any unwarranted
situation”.
The lift on the ban of import of furnace oil had a significant impact on the sales of the company
and it is expected to have a positive impact in the future as well.
Source:
https://www.thenews.com.pk/print/683166-pso-to-opt-for-gallop-import-of-furnace-oil
Page | 765
PAKISTAN STATE OIL
Director’s report
Global Impact
As in continuation with the previous years, virus mutations and accumulating death toll in
different parts of the world kept a high pressure on the energy market. However, an improvement
was seen as there was an increase in the vaccination efforts which translated to the resumption of
economic activity around the world thus leading to an increase in the demand for oil and gas by a
substantial amount. Due to this global growth is projected at 4.4%, with this projection
anticipated to further grow in the future.
Source:
Director’s report
Page | 766
PAKISTAN STATE OIL
led to an increase in the sales of PSO both numerically and volumetrically. Now looking forward
the international oil prices are forecasted to reduce as can be seen in the graph below which in
turn means that the inflation in the country as well as the rupee will also improve to some extent.
With this information, it can be predicted that numerically the sales of the company might
decrease. However, with all the other ventures and initiatives being taken, the volume of sales is
most likely to increase in the future which would offset the effect of numerical decrease in sales
thus overall having a positive increase in the sales figure of PSO.
Page | 767
PAKISTAN STATE OIL
Source
https://macropakistani.com/petrol-pricing/
https://tradingeconomics.com/commodity/crude-oil
https://energyinformatics.springeropen.com/articles/10.1186/s42162-021-00166-4
Director’s report
Technological Changes & Concerns about the Climate
the next 5-10 years. Moreover, the salient features of the policy include a phased transition of the
Page | 768
PAKISTAN STATE OIL
automotive industry to electric vehicles. This is not good news for PSO as a major chunk of its
sales comes from nonfuel products and services and this would forecast a negative impact on its
future sales. Moreover, in the global risks report by the world forum, the production of oil and
gas was listed as one of the top ten global risks to the environment and climate change. The
burning of oil and gas not only just meets our energy needs but also drives the current global
warming crisis as it produces large quantities of carbon dioxide when burned which is a major
greenhouse gas. According to the BBC news, “Reducing our dependence on fossil fuels is the
only fair and sustainable way to address to climate change emergency”. All of these have raised
concerns of environmentalists which is predicted to have a daunting effect on the sales of OMC’s
like PSO.
The management of the company is cognizant of this shift and is offering new value
propositions, shifting from its core business and offering differentiated and state of the art non-
fuel retail products and services to the customers. With this in mind, PSO launched the first ever
EV charger in Islamabad. Moreover, over the course of the previous year, they opened 71 retail
outlets, 30 C-Stores and 12 QSRs all over the country, focusing on its non-core business in order
to offset the effects of technological change as well as concerns about the climate. With these
steps the company visions to offset the negative impacts an even bring a positive effect on the
sales of the company in the future.
Page | 769
PAKISTAN STATE OIL
Source:
https://www.nrdc.org/stories/fossil-fuels-dirty-facts
https://www.bbc.com/news/uk-scotland-scotland-business-53051850
Director’s report
Aviation Sector
The aviation sector of Pakistan felt the most impacted. There were mass scale lockdowns, travel
restrictions and curtailed movement globally which resulted in a depressed demand for jet fuels.
However, the resumption of economic activity has spurred the demand for jet fuel. The Asia
Pacific reported that after the decrease of Covid-19 cases in Pakistan, there has been a surge in
air transportation as the number of flights passing over Pakistan airspace has reached more than
350 per day, with this figure only expected to grow as the Covid-19 cases reduce. Moreover, the
government of Pakistan has also taken some initiatives to promote tourism in the country which
is expected to bring several new players in the aviation sector. All of this is expected to bring an
increase in the demand for jet fuels, thus an increase in the sales of PSO which dominate the jet
fuel market with a market share of 94.5%.
Source:
http://www.xinhuanet.com/english/asiapacific/2020-09/09/c_139355115.htm
Page | 770
PAKISTAN STATE OIL
Director’s report
Page | 771
PAKISTAN STATE OIL
Method Chosen;
Methods used;
1. Naïve (5, 10 & 15 years)
2. Horizontal Analysis (5, 10 & 15 years)
3. Regression with GDP (5, 10 & 15 years)
4. Regression with Industry Sales (5 years)
5. Regression with PPE (5, 10 & 15 years)
6. Excel Forecast (5, 10 & 15 years)
7. EFN
8. Subjective Analysis
9.
Naïve method
Page | 772
PAKISTAN STATE OIL
Time=15 years
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
0
2006 2008 2010 2012 2014 2016 2018 2020 2022
Net Sales Naïve Forecast
MAPE=17.1%
The MAPE figure should ideally be within 10% so we would reject this method since the figure
is too high.
Page | 773
PAKISTAN STATE OIL
Time=10 years
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
0
2010 2012 2014 2016 2018 2020 2022
MAPE=16%
The MAPE figure should ideally be within 10% so we would reject this method since the figure
is too high.
Time=5 years
Page | 774
PAKISTAN STATE OIL
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
0
2016.5 2017 2017.5 2018 2018.5 2019 2019.5 2020 2020.5 2021 2021.5
MAPE=10.4%
After looking at 3 MAPE figures calculated from 3 different time series, it can be observed that
as the time in consideration decreased, the value of MAPE came closer to 10 which is the ideal
figure. With this in mind, we can say that the Naïve model can be accepted. However, with a
greater timeline into consideration, the MAPE value is very large which is not a good sign thus
we will reject this method.
Horizontal Analysis
Page | 775
PAKISTAN STATE OIL
Time=15 years
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
(10.00%)
(20.00%)
(30.00%)
Time=10 years
Page | 776
PAKISTAN STATE OIL
40.00%
30.00%
20.00%
10.00%
0.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
(10.00%)
(20.00%)
(30.00%)
Time=5 years
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2017 2018 2019 2020 2021
(5.00%)
(10.00%)
Page | 777
PAKISTAN STATE OIL
It can clearly be seen that the model is not linear and there are large fluctuations in the sales of
the company over the course of the last 15 years. Since the rate of change is not constant, we will
drop this method.
Regression with GDP
Time=15 years
Time=10 years
Page | 778
PAKISTAN STATE OIL
Time=5 years
Regression with Industry Sales
Time=5 years
Page | 779
PAKISTAN STATE OIL
Regression with PPE
Time= 15 years
Time=10 years
Page | 780
PAKISTAN STATE OIL
Time=5 years
Excel forecast
Time=15 years
Page | 781
PAKISTAN STATE OIL
Page | 782
PAKISTAN STATE OIL
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
0
2005 2010 2015 2020 2025 2030
Net Sales Forecasted Sales
Time= 10 years
Page | 783
PAKISTAN STATE OIL
1,800,000,000
1,600,000,000
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
0
2010 2012 2014 2016 2018 2020 2022 2024 2026
Time=5 years
Page | 784
PAKISTAN STATE OIL
1,800,000,000
1,600,000,000
1,400,000,000
1,200,000,000
1,000,000,000
800,000,000
600,000,000
400,000,000
200,000,000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Page | 785
PAKISTAN STATE OIL
Cost of Goods Sold
Breakdown:
Cost of Products sold 2021 Vertical Analysis
Opening stock 64,758,242 5.55%
Purchases made during the year 1,190,599,212 102.07%
1,255,357,454 107.62%
Closing stock (88,934,410) -7.62%
1,166,423,044 100.00%
Page | 786
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
COPS 4.68% (3.33%) 13.31% 20.96% 28.32% (26.37%)
2021 2020 2019 2018 2017 2016
COPS 95.32% 99.38% 97.23% 96.25% 96.25% 96.68%
Forecasted Values
Analysis
After looking at the company, horizontal and economic analysis we estimated that the cost of
production for PSO will increase gradually over the next 5 years between 6-9%. We based this
Page | 787
PAKISTAN STATE OIL
assumption on many reasons which included the prediction of increase in sales, efficient supply
chain management as well as its organizational restricting and agreements with other companies
among other factors. We also had to take into consideration that due to these factors, we expect
that the cost of production will increase by a less proportionate amount as compared to sales
indicating better absorption of fixed assets by PSO, with this only getting better with time.
Previously we grew sales at a constant rate of 12.5%. so based on these assumptions, we grew
cost of production by 8.5% in 2022, growing it by removing 0.5% with time, thus indicating that
with time PSO is absorbing costs even better as the sales growth rate is assumed to be constant.
Page | 788
PAKISTAN STATE OIL
Company Analysis
The biggest factor influencing the final cost of petrol in Pakistan is the international oil market.
Starting from early 2018, the devaluation of the rupee meant that the cost of a barrel of crude oil
started rising significantly for Pakistan, even as the price remained fairly stable in USD terms.
For instance, a barrel of crude oil priced at USD 67 in January 2018 cost PKR 7,400 while in
May 2021, the same USD price cost PKR 10,205.
Page | 789
PAKISTAN STATE OIL
Source:
Factors affecting the COGS (2021-2016)
1. Year 2021:
Comparing the horizontal analysis of cost of products sold during the year 2021 and 2020, we
see a major increase. There was a significant decrease in 2020 whereas we see a positive change
in 2021 this could be due to many reasons which will be discussed further in the report. The cost
of products sold includes cost incurred on manufacturing of lubricants amounting to
Rs.6,903,232 (2020: Rs. 5,765,550).
• Crude Oil Production had no change: The cost of crude oil was incurred by the
company as well as the manufacturing of lubricants. Both of the cost had no change when
compared to the previous year.
Page | 790
PAKISTAN STATE OIL
• Significant growth in the LPG Industry: The Liquefied Petroleum Gas (LPG) industry
is primarily driven by the domestic, transport and industrial sectors. This segment
witnessed a growth of 7.3% over last year with volumes of 1,182 thousand tons,
primarily driven by cyclical demand from domestic segment during winter season.
• Seasonal Demand for LNG increased: Due to the winter season the demand for
liquefied natural gas increases day to day by 5.5 bcf/day in the domestic sector. As the
local production of gas is being reduced, the estimated production eventually will be
around 2.8 bcf/day. However, this shortage will be catered to using the LNG import
agreement with Qatar.
• Black oil production expected to decrease due to government policies: Black Oil
production is expected to decline in the coming years due to the Government’s focus on
adding indigenous renewable energy sources.
• Aviation Industry Demands declines: During this year, jet fuel market share increased
from 94.3% to 94.5%. Whereas this particular industry witnessed a decline due to travel
restrictions. However, PSO continued to supply for the forces and 22 thousand liters of
jet fuel was supplied in 3 hours for Antonov An-225.
• PSO launches procurement through SAP Ariba: During the year PSO was able to
successfully launch its e-procurement program through SAP Ariba which not only
improved the efficiency of the procurement process but at the same time allowed access
Page | 791
PAKISTAN STATE OIL
to a greater vendor base, reduced turnaround time, enhanced transparency as well as
drastic reduction in the cost. This also enabled PSO to have access to a digital market
place where millions of buyers and suppliers interact in over 190 countries.
• Installation of newly equipped oil changing facilities: PSO lubricants witnessed an
overall growth of 11.3% as compared to the last year. PSO launched aggressive
marketing campaigns to improve availability and awareness of high tier lubricant brands
in the passenger car motor oil (PCMO) category while boosting the diesel engine oil
category. PSO has also installed newly equipped oil changing facilities at 57 retail outlets
across Pakistan.
• Vertical Integration to add sustainability: The company is exploring investment plans
for vertical integration and diversification of business portfolio to add sustainability.
Owing to well-perceived strategic initiatives, the company is well positioned to excel its
performance, both in volumetric and financial terms, year after year and would continue
to maximize its shareholders’ value.
Source:
➢ https://www.mordorintelligence.com/industry-reports/pakistan-lubricants-market
➢ https://www.thenews.com.pk/print/806119-pso-launches-procurement-through-sap-ariba
Page | 792
PAKISTAN STATE OIL
2. Year 2020:
The year 2020 was the most critical one for many industries. Due to the on-going pandemic most
of the fuel industry witnessed a decline. Talking about PSO, the cost of products sold also
declined majorly and went into a negative figure. Cost incurred by the Group on refining of
crude oil and manufacturing of lubricants amounting to Rs. 94,750,395 (2019: Rs. 72,086,042)
and Rs. 5,765,550 (2019: Rs. 4,849,565) respectively, there is an increase when compared to the
last year.
• Inventory Decline leads to losses: Due to significant downward inventory valuation,
OMC’s and refineries suffered loses and struggled to meet the demands.
• Massive strain on PSO’s Supply Chain: During the year, the daily average sales of
PSO outlets surged by 122% despite the massive strain on the Company's supply chain.
• Company Imports additional cargoes: The Company also imported 08 additional
cargoes of High-Speed Diesel and 02 additional cargoes of Motor gasoline to avert a
major fuel crisis in the country.
• Fall in international prices: Factors that resulted in net loss include abnormally high
inventory losses due to sharp fall in international oil prices, reduction in black oil sales
volume by 40.8% due to government policy of shifting to LNG and other alternative
fuels.
Page | 793
PAKISTAN STATE OIL
• Refining margins decreased: A decrease in refining margins, planned maintenance cost
and higher Finance cost on account of higher policy rate of 13.25% contributed
significantly in losses.
• Government Policy to switch from FO to RLNG: Due to Government’s decision to
impose ban on import of furnace oil and had a continued impact of switching the power
plants to RLNG which in turn decreased the demand and production.
Source:
3. Year 2019:
For PSO, there is a 9% increase in the Cost of products sold as compared to 2018. Cost incurred
by refining of crude oil and manufacturing of lubricants. The cost of manufacturing of lubricants
however decreased as compared to 2018.
• Domestic Production of crude oil decreases: The domestic production of crude oil
remained 24.6 million barrels during the period under review as compared to 21.8
million barrels in the same period of the fiscal year 2018.
• Decline of prices in International Markets: PSO’s performance faced a downfall
mainly due to the decline in pricing of Motor Gasoline (Petrol) in international markets,
Page | 794
PAKISTAN STATE OIL
depressed refining margins, unfavorable movements in exchange rate on imports and
higher interest rates.
• Depreciation of Pak Rupee: PSO also incurred exchange loss of approximately of Rs.
6 million, as the Pak Rupee depreciated by 35 % during the year 2019.
• Total Refinery Production to increase the fuel supply: PSO also maintained the
supply chain by importing 47% of total industry imports and uplifting 35% of total
refinery production in the country to ensure an uninterrupted fuel supply to its
customers.
• Inventory Losses due to international prices: There were also inventory losses due to
the rise in international prices, lower interest income from the power sector and an
increase in the finance cost.
• White oil volumes dropped due to smuggled products: Black oil volumes also
dropped due to the shift towards RLNG. White oils volumes declined due to smuggled
products and the decline in automobile sales.
Source:
Page | 795
PAKISTAN STATE OIL
➢ https://profit.pakistantoday.com.pk/2019/07/01/pakistans-crude-oil-production-increases-12-
8pc-imports-fall-15-38pc/
4. Year 2018:
From the Income Statement, it can be seen that the cost of products sold in the year 2018
increased by a percentage of 21%.
• Inventory losses due to international oil prices and trade: In the year 2018 OMC’s
reduced importing fuels due to an increase in international oil prices that made the trade
commercially unviable. PSO however remained firm in its resolve to exceed the
expectations of its customers and fuel Pakistan’s journey of growth and prosperity
despite incurring inventory losses.
• Lower Consumption by GENCOS: Furnace Oil (FO) sales went down by 9.4% in line
with reduction in industry volumes partly due to low consumption by GENCOS and
partly due to higher LNG utilization. The increase in FO prices in for year 2018, PSO
diligently managed to maintain uninterrupted supplies to the Power sector as per demand
to help reduce load-shedding in the country, and fulfilled its responsibilities as a
responsible National Company.
• Crude oil prices to stay consistent globally: The average crude oil price remained
around $63.21 per barrel in the global market during 2018.
Page | 796
PAKISTAN STATE OIL
• Reduced demand of Black Oil: The decline was witnessed primarily on account of the
drop in Black Oil demand due to the availability of RLNG/natural gas in the country and
the Government’s policy of operating existing power plants on RLNG/natural gas.
• LNG supplies dropped due to thin regulated margins: Despite having thin regulated
margin and significant delays in receipts against LNG supplies, PSO tried to bridge the
gap between the supply and demand of Natural Gas.
Source:
➢ https://psopk.com/en/media-center/email-newsletter/2017/aug-nov/pakistan-state-oil-
announces-fy2018-financial-results-reports-33.7-growth
5. Year 2017:
As compared to the previous year (2018), there was an increase of 28% in the cost of products
sold.
• Inventory Gains which lowered fuel costs: With cost of goods sold up by 28 percent,
PSO was able to keep gross margins also up in 2017. The increase in gross profit and
gross margin could be due to inventory gains booked on account of lower fuel costs in
the low oil price scenario.
Page | 797
PAKISTAN STATE OIL
• HSD, FO, Lubricants and Grease Import contract with Pakistan Railway: PSO
successfully secured the contract of supplying High Speed Diesel (HSD), Furnace Oil
(FO), Lubricants and Greases business for a five-year period to Pakistan Railways. The
High-Speed Diesel imported by PSO is the best quality HSD available in Pakistan with a
lowest Sulphur content, which is the most environment friendly and lowest emission
diesel fuel marketed in the country. Pakistan State Oil also has the most sophisticated
and state-of-the-art Lubricant Manufacturing Terminal (LMT) in Pakistan which
produces highest quality lubricants that are API compliant and certified.
• LNG businesses flourished: The LNG business continued with PSO for the whole year;
with 58 LNG vessels supplied during the year carrying 186,672,980 MMBTU, without
incurring any demurrage by managing a seamless supply chain operation.
• Revitalization and continuous product improvements: A key element in the
revitalization of the Lubricants business was continuous product improvement. The
Company successfully introduced an improved motorcycle oil Blaze 4T (3D
PROTECT), launched with a 360 media campaign and new packaging across the
country. This delivered approximately 40% growth in Blaze sales vs last year.
Source:
Page | 798
PAKISTAN STATE OIL
6. Year 2016:
The cost of goods sold for 2016 mainly include the manufacturing of lubricants which decreased
from Rs. 4,379,062 (2015) to Rs. 4,283,762.
• Cost Increase due to Customer Demands: The Company’s sale volume of Motor
Gasoline grew by 26% over Same Period Last Year (SPLY) mainly due to decrease in
price of gasoline and subsequent increase in customer demand.
• Upliftment by IPP’s of shifting from FO to natural gas: FO volumes declined by
4.3% due to lower upliftment by IPP’s primarily due to shifting from FO to natural gas.
Pakistan is deficient in FO, they are imported on spot tender basis to meet the shortage
however due to the oil industry strike in Kuwait, a force majeure was declared and PSO
floated tender to meet the demand of harvesting season and electricity generation.
• Decrease in Inventory Loss: This increase in revenue was mainly due to growth in
sales volume and margins of white oil products and decreased inventory losses.
• Decrease in OPEC prices: Decrease in black oil margins owing to reduction of 48% in
the OPEC price of crude oil per barrel had an adverse impact on profitability of the
Company.
Page | 799
PAKISTAN STATE OIL
• LNG Purchase Agreement with Qatar: Pakistan State Oil also signed the LNG Sale
Purchase Agreement (LSPA) with Qatar gas for import of liquefied natural gas (LNG)
of around $16 billion in 15 years at a relatively lower rate to aid the agricultural sector
of Pakistan.
• Inland freight, equalization, margin mismanagement challenges faced by PSO:
Despite the challenges being faced by PSO such as non-resolution of inland freight
equalization, margin mismanagement and the delay in the settlement pending since
2008 by the regulators, storage and port constraint solutions pending with the
government but still PSO continues to take the lead in the liquid fuel industry.
Source:
Factors that will affect PSO’s COGS in the future years:
As the values of the cost of products sold are in negative, the forecasted values from 2022-2026
come out to be negative too, which means that the closing stock is more valued at an above cost.
PSO is undertaking several investment plans to cater to the increasing demand for oil and gas
products. Government policies and support related to the exploration and production of oil and
gas are playing a major role in the industry and encouraging to boost Pakistan Oil and Gas
Page | 800
PAKISTAN STATE OIL
investments. Major imbalance in the industry’s supply-demand equilibrium, mainly due to
changes in other OMCs’ business strategies are in the run to take opportunities arising from oil
price fluctuations which significantly affect the supply chain management of the company, thus
causing strain on its profitability and supply chain. PSO however, is managing such pressures
through effective supply chain management, while increasing storage capacity which will help
the company in managing it better.
Source:
Page | 801
PAKISTAN STATE OIL
Industrial Analysis
When it comes to the industry analysis, the maximum number of companies were covered by
taking into consideration 6 years (2015-2020). The table given below clearly indicates that HTL
had the majority of share in terms of cost of products sold. At the second place we have PSO.
2015 – 2020 (Considering all companies)
Total Market
Company Names Share
HASCOL 1.84%
Sui Northern Gas Pipeline
Limited 5.86%
Total Industry CGS 100.00%
2017-2021 (For more recent data)
Page | 802
PAKISTAN STATE OIL
Total Market
Company Names Share
Hi-Tech Lubricants
Limited 84.77%
Total Industry CGS 100.00%
2015 – 2020 (Growth w.r.t. the industry)
Company
Names 2015 2016 2017 2018 2019 2020
Pakistan State
Oil 16% 11% 11% 11% 11% 16%
Page | 803
PAKISTAN STATE OIL
Pakistan State Oil ( Growth

w.r.t industry)
20%
16% 16%
15%
11% 11% 11%
10% 11%
5%
0%
2015 2016 2017 2018 2019 2020
2015 – 2021 (Growth w.r.t. to years)
Company
Names 2015 2016 2017 2018 2019 2020 2021
Pakistan State
Oil -22.65% -26.37% 28.32% 20.96% 13.31% -3.33% 4.68%
Pakistan State Oil

40.00%
30.00% 28.32%
20.00% 20.96%
13.31%
10.00%
4.68%
0.00%
-3.33%
2015 2016 2017 2018 2019 2020 2021
-10.00%
-20.00%
-22.65%
-26.37%
-30.00%
Page | 804
PAKISTAN STATE OIL
2017 – 2021 (Growth w.r.t. the industry)
Company Names 2017 2018 2019 2020 2021
Pakistan State Oil 13% 12% 12% 19% 11%
Pakistan State Oil (Growth w.r.t Industry))

25%
20%
19%
15%
13% 12% 12% 11%
10%
5%
0%
2017 2018 2019 2020 2021
2015 – 2020 (Growth in industry’s CGS)
Years 2015 2016 2017 2018 2019 2020
Total Industry
Growth 12% 14% 16% 20% 23% 15%
Page | 805
PAKISTAN STATE OIL
Total Industry's Growth

25%
23%
20% 20%
16%
15% 15%
14%
12%
10%
5%
0%
2015 2016 2017 2018 2019 2020
2017 – 2021 (Growth in the industry’s CGS)
Years 2017 2018 2019 2020 2021
Total Industry Growth 16% 21% 23% 14% 25%
Total Industry's Growth

30%
25% 25%
23%
20% 21%
16%
15% 14%
10%
5%
0%
2017 2018 2019 2020 2021
Page | 806
PAKISTAN STATE OIL
Now, we will be looking at all the factors which have caused these changes. We can see that the
growth in CGS was the lowest and sustainable from 2016 - 2019 industry wise for PSO. If we
look at it’s perspective from how much the CGS has grown with respect to the number of years
that have passed by, we can see that it was low from 2017 till 2019 but it has been increasing
since 2019. There are several reasons for that.
1. Collaboration with Power China for new refinery projects:
PSO’s market share with respect to the industry in terms of the CGS has increased because of its
collaboration with Power China. They partnership amounted to an estimate of $8 billion and it
was to ease out the production of crude oil. This increased their production capacity to up to
250,000 barrels per day. Keeping in mind the fact that at that time, the industry had five
refineries with a production capacity of 404,000 barrels per day, this collaboration helped in
improving the performance of the industry as well and aided in its growth over time.
Source:
➢ https://www.thenews.com.pk/print/303191-pso-in-talks-with-power-china-for-new-
refinery-project
2. Foreign investments in Oil and Gas industry of Pakistan
In 2019, Pakistan received a lot of investments in this particular industry because the government
wanted to promote investments in this sector. This was to ensure that there is availability and
Page | 807
PAKISTAN STATE OIL
sustainability when it comes to the supply of oil and gas. This would further increase the refining
of crude oil because when the investments were made, the production of furnace oil was reduced
in the refineries and higher production of crude oil was ensured. This means that the in the
following years, the cost of goods sold would also increase due to an increase in the refining of
crude oil. All of this led to a growth in CGS of different companies in this industry such as PSO.
Source:
➢ https://www.thenews.com.pk/print/430867-pakistan-seeks-investment-in-oil-and-gas-
sector
3. Revision of LNG policy, lifting the ban on imports of LNG in Pakistan
In 2020, Pakistan revised its LNG policy and allowed spot buying of LNG. This was because the
demand of LNG increased when lockdowns were uplifted in 2020. There was a need of LNG in
every household be it for cooking or for using it in commercial vehicles. When the LNG was
imported, it costed the companies in this industry a lot more due to all the tariffs and custom
duties. This was also one of the reasons of as to why the cost of goods sold increase for
companies in this industry from 2020.
Source:
➢ https://www.thenews.com.pk/print/694915-energy-ministry-begins-exercise-to-update-
lng-policy
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PAKISTAN STATE OIL
4. Purchase of the costliest LNG cargos in 2021 from Qatar Petroleum
As we can see that the growth in CGS increased for the entire industry in the year 2021 and
onwards. That was because most of the companies in this industry were producing LNG.
Considering that during winters, there could be a high chance of severe gas crisis. So, in order to
avoid that, on emergency basis, spot buying was done and in the history of Pakistan, the costliest
LNG cargo of $30.6 million was purchased by Pakistan. This obviously increased the cost of raw
material for all the companies in the industry due to which CGS of PSO also increased.
Source:
5. Pakistan’s oil industry suffered immense inventory losses in 2020 due to Covid-19
Due to the pandemic, several lockdowns were imposed. Travelling was close to minimal. Due to
this, there was low demand of fuel and energy products by both the consumer market and the
business market. Now, due to this, companies in this industry faced immense inventory losses as
they were unable to convert them into sales. Their stock in trade was increasing and expiring
without being put to use. Due to this, the cost of goods sold can be seen to increase in 2020 and
in the later years as well.
Source:
Page | 809
PAKISTAN STATE OIL
6. Discovery of Oil and Gas in Khyber Pakhtunkhwa in 2022
In the first month of 2022, the News International published an article informing us about the
latest discovery of oil and gas reserves which were made in KPK, one of the provinces of
Pakistan. This is going to prove beneficial for the companies in this industry because that means
they would have to rely less on the imports of these items. If these are domestically produced and
refined, this would result in lower cost of supplies for the industry and promote more supply.
This means that we can forecast the cost of goods sold of the companies in this industry,
including that of PSO to fall in the coming years.
Source:
➢ https://www.thenews.com.pk/print/922087-ogdcl-discovers-huge-oil-gas-reserves-in-kp
7. Reviving exploration and production activities in unexplored areas of Pakistan
More investments have been done for the E&P activities. This is because many areas of Pakistan
are still left unexplored even when they have heavy untapped reserves. This promotion and
revival would attract foreign investments. This would also then lead to lower imports. If imports
are low, then the prices of raw materials for the companies in the oil and gas industry would be
low. This would result in lower cost of goods sold and companies and buy more stock in trade.
From this, we can again predict that the cost of goods sold is expected to fall in the near future.
Source:
Page | 810
PAKISTAN STATE OIL
➢ https://www.thenews.com.pk/print/820827-pakistan-wants-to-revive-e-p-activities-in-
unexplored-areas
8. Tax concessions for LPG storage and production in Pakistan
This happened recently in 2021. Due to this, we can assume that the companies in the oil and gas
marketing and distribution industry would be able to buy LPG at lower costs. This would mean
that their cost of products sold would be low due to a fall in the prices of one of their raw
materials and the increase in the ease of storage as well. This would prove to be an incentive for
these companies. This was mainly done to facilitate the state-owned companies so that they can
easily compete with the private companies. Through this, we can assume that in 2022, the cost of
goods sold for these companies and especially for PSO, since it is a state-owned company, would
decline to some extent.
Source:
Page | 811
PAKISTAN STATE OIL
Economic Analysis
After looking at the past 3 years data, it can be seen that the cost of goods sold decreased by
3.33% from 2019-2020 while it increased by 4.68% from 2020-2021. Just by looking at this data,
it can be said that the cost of production for PSO has been the record highest numerically.
However this statement is far from truth. If we analyze these figures with respect to the sales of
the company, in 2019 the cost of production was 97.23% of the total sales which increased to
99.38% in 2020, a record high figure for PSO in the past 15 years. However in 2021, this figure
decreased and came down to 95.32% which is the record low for the past 10 years. This shows
that despite the figure increasing numerically, the rate by which it increased as compared to sales
is significantly low which means that the cost of production for the company has improved in
2021, thus indicating that it is absorbing its fixed costs better as compared to the past 10 years.
There are many economic reasons for this which will be looked at independently.
Page | 812
PAKISTAN STATE OIL
led to an increase in the sales of PSO both numerically and volumetrically. Now looking forward
the international oil prices are forecasted to reduce as can be seen in the graph below which in
turn means that the inflation in the country as well as the rupee will also improve to some extent.
With this information, it can be predicted that numerically the sales of the company might
decrease. However with all the other ventures and initiatives being taken, the volume of sales is
most likely to increase in the future which would offset the effect of numerical decrease in sales
thus overall having a positive increase in the sales figure of PSO.
Page | 813
PAKISTAN STATE OIL
Source:
➢ Director’s report (2021)
China Pakistan Free Trade Agreement
According to reports around 15 OMCs are reported to have imported over 2.4 billion litres of
petrol from China in 2 years earning a huge windfall because of the special agreement under
CPFTA. OMCs were allowed to import petrol from China without paying ten percent Custom
Duty, which is, otherwise, applied on the import of petrol from other countries.
Page | 814
PAKISTAN STATE OIL
PSO also took windfall benefit of petrol imports from China. It imported about 68 million litres
of petrol from China and claimed customs duty waiver against the FTA certificate as per
SRO.1640(1)/2019 S.No.10 and paid Rs64 million as ACD thus getting petrol at a low cost,
reducing the cost of production.
It is not clear yet as to how and why the petroleum imports were made part of the revised
CPFTA in 2019 when China is a net importer of oil as a top executive of a local refinery said,
“Granting this facility to OMCs under CPFTA makes no sense as China was also a net importer
of petrol”. However with this being said, all OMC’s including PSO have already enjoyed the low
cost benefit under this agreement as the import bill particularly of refined petroleum products,
has seen the largest chunk of 83pc increase in imports during the last fiscal year.
Source:
imports
White Oil Pipeline (Partnership with PARCO & PEPCO)
Page | 815
PAKISTAN STATE OIL
With this partnership, PSO has managed to significantly reduce its costs which can clearly be
reflected in its cost of production. Furthermore it is also expected that the cost will continue to
decline as more infrastructure is added.
Source:
Agreement with Qatar Petroleum
In accordance with the vision 2030, PSO came into an LNG agreement with Qatar Petroleum as
the Qatar’s ambassador to Pakistan said affirmed that Qatar will continue helping Pakistan to
meet its energy needs.
According to the agreement Qatar Energy entered into a long-term sale and purchase agreement
with the PSO for the supply of up to three million tons per annum of the LNG. The price at
which the agreement has been made is the lowest ever price which is expected to significantly
reduce the costs of PSO in the future. Moreover it must also be noted that the launch of the direct
Page | 816
PAKISTAN STATE OIL
shipping line between Karachi port and Hamad port in Doha has greatly helped increase trade
engagements between the two countries
Source:
➢ https://www.thenews.com.pk/print/918280-qatar-to-continue-helping-pakistan-to-meet-
its-energy-needs
Contract with KPC
10 years ago, PSO got into an agreement with KPC for diesel which is a government to
government agreement. The agreement gives PSO an edge in the pricing for diesel as compared
to other OMC’s in the country as this is a long term agreement so PSO has better pricing.
Historically this has helped PSO manage its costs and is looking forward it is expected to further
help the state run company reduce its costs for diesel.
Source:
Supply chain Development
Page | 817
PAKISTAN STATE OIL
During the year operational efficiency was increased through pipeline links at SKP, Mkot, MCK
and FSB. Moreover 135 KMTs and new rehab storages were added thus increasing the overall
transportation efficiency and cost effectiveness.
Source:
Pakistan Railways
In order to reduce the cost for transportation, the federal government directed PSO to use rail for
transportation rather than road. According to estimations, the transportation cost is expected to
be reduced by 26% via rail. The transportation cost rose by a great amount when the PPP
government shifted the entire petroleum supply chain to oil tankers. As a result the oil tanker
owners did not only charge high rates but reportedly blackmailed the government by calling
strikes on different occasions, resulting in the suspension of oil supply across the country thus
increasing the cost of production for OMC’s.
Thus the government took this initiative, enabling the OMC’s to reduce their cost of production
with PSO entering an agreement to transport 2 million tons of product per year through Pakistan
Railways with subject to demand placed.
Source:
Page | 818
PAKISTAN STATE OIL
➢ https://arynews.tv/cost-saving-govt-pso-fuel-rail/
Utilizing services of foreign Companies
Recently there have been complaints to the PM from the minister of railways and maritime
affairs over PSO not utilizing Pakistan railways for transportation. PM sought an explanation
from the minister for railways on why PSO has been utilizing the services of foreign shipping
companies which is resulting in the use of precious foreign exchange reserves of Pakistan.
PSO explained that it had to face challenges while using Pakistan Railway due to its limited
infrastructure. The company said that it poses a significant challenge as tank wagon loading
facility is only available at Mehmood Kot and unloading facilities are only available at
Chakpirana, Tarujaba and Sihala. Although product movement at these locations only represents
around 12% of PSO’s total diesel primary movement, however, the infrastructural constraints
restrict the quantum of diesel movement. Furthermore, they stated that the reason PSO is not
shifting to PNSC is that PNSC does not take in-transit quality responsibility for the product and
there are multiple past issues of delays.
So in order to keep the transportation costs at the minimum as well as abide by the agreement
with the Pakistan Railways, the company transports more than 80% of petroleum via foreign
companies which are much more efficient and cost effective.
Page | 819
PAKISTAN STATE OIL
Source:
➢ https://tribune.com.pk/story/2318132/pm-seeks-report-on-pso-oil-transport
Page | 820
PAKISTAN STATE OIL
Method Chosen
Methods Used
1. Naïve Forecast (5, 10 & 15 years)
2. Horizontal Analysis
3. Excel forecast function (5, 10 & 15 years)
4. Regression with Sales
5. Subjective Analysis
Naïve 15 years
Page | 821
PAKISTAN STATE OIL
1.4E+09
1.2E+09
1E+09
800000000
600000000
400000000
200000000
0
2006 2008 2010 2012 2014 2016 2018 2020 2022
Naïve 10 years
Page | 822
PAKISTAN STATE OIL
1.4E+09
1.2E+09
1E+09
800000000
600000000
400000000
200000000
0
2010 2012 2014 2016 2018 2020 2022
Naïve 5 years
Page | 823
PAKISTAN STATE OIL
1.4E+09
1.2E+09
1E+09
800000000
600000000
400000000
200000000
0
2016.5 2017 2017.5 2018 2018.5 2019 2019.5 2020 2020.5 2021 2021.5
Analysis
In all three timelines used, i.e., 5, 10 and 15 years, the value of MAPE is very high. Ideally it
should be within 10 so we will reject this method.
Horizontal Analysis
Page | 824
PAKISTAN STATE OIL
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
(10.00%)
(20.00%)
(30.00%)
Analysis
Historical analysis gives an idea about the trend which the CGS follows. This can be used to
compliment the growth rate found through subjective analysis, however the forecasted values
cannot be based solely on this.
Excel Forecasting 15 years
Page | 825
PAKISTAN STATE OIL
Page | 826
PAKISTAN STATE OIL
1.4E+09
1.2E+09
1E+09
800000000
600000000
400000000
200000000
0
2005 2010 2015 2020 2025 2030
Excel forecasting 10 years
Page | 827
PAKISTAN STATE OIL
1.8E+09
1.6E+09
1.4E+09
1.2E+09
1E+09
800000000
600000000
400000000
200000000
0
2010 2012 2014 2016 2018 2020 2022 2024 2026
Page | 828
PAKISTAN STATE OIL
Excel forecasting 5 years
1.8E+09
1.6E+09
1.4E+09
1.2E+09
1E+09
800000000
600000000
400000000
200000000
0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Analysis
Page | 829
PAKISTAN STATE OIL
Excel forecasting would have been used if the model was linear. However no trend or pattern can
be seen in the values above due to which the forecasted values through excel are also very
different in all three timelines used. So it is better to reject this method.
Regression with Sales
Page | 830
PAKISTAN STATE OIL
Other Income
Breakdown:
Other Income 2021 Vertical Analysis
Income from financial assets
Interest / mark-up received on delayed payments 12,663,513 65.22%
Interest / mark-up on saving accounts 185,243 0.95%
Discounting of wharfage liability 551,543 2.84%
Dividend income from FVOCI investment 350,972 1.81%
13,751,271 70.83%
Income from non-financial assets
Handling, storage and other services 2,331,827 12.01%
Income from Compressed Natural Gas (CNG) operators 135,659 0.70%
Page | 831
PAKISTAN STATE OIL
Income from non-fuel retail business 129,564 0.67%
Income from retail outlets - net 116,604 0.60%
Insurance claims - -
Scrap sales 72,630 0.37%
Gain on disposal of property, plant and equipment 35,981 0.19%
Penalties and other recoveries 333,649 1.72%
Liabilities written back 470,948 2.43%
Exchange gain 1,763,791 9.08%
Others 273,548 1.41%
5,664,201 29.17%
19,415,472 100.00%
Page | 832
PAKISTAN STATE OIL
ntal Analysis: Average (20.04%)
2021 2020 2019 2018 2017 2016
Other Income 86.95% -38.63% 125.72% -32.71% - -8.16%
12.94%
2021 2020 2019 2018 2017 2016
Other Income 1.59% 0.93% 1.43% 0.71% 1.27% 1.89%
Forecasted Value
Other income is a very important account for PSO. After looking at all the economic and
industrial factors as well as the historical data, we predict that the account will increase within a
range of 20-25% in the future. This is also supported in the graph below.
Page | 833
PAKISTAN STATE OIL
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
0.00
2012
2025
2007
2008
2009
2010
2011
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Other Income Forecasted Other Income
Company Analysis
Factors Effects
Exchange gain on account of appreciation of Increase
PKR vs USD
Receipt of higher LPS income Increase
Late payment interest from power sector Increase
Gain on the acquisition of PRL Increase
Maturity of PIBs resulting in lower interest Decrease
income
Lower receipt of interest from IPPs due to the Decrease
upliftment
Page | 834
PAKISTAN STATE OIL
decrease.
Other Income
25000000
20000000
15000000
10000000
5000000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Other
Income of PSO year by year from 2016 to 2020.
Year 2021:
• Receipt of higher LPS income
• Exchange gain on account of appreciation of PKR vs USD: The biggest factor
influencing the final cost of petrol in Pakistan is the international oil market. Starting
Page | 835
PAKISTAN STATE OIL
from early 2018, the devaluation of the rupee meant that the cost of a barrel of crude oil
started rising significantly for Pakistan, even as the price remained fairly stable in USD
terms. For instance, a barrel of crude oil priced at USD 67 in January 2018 cost PKR
7,400 while in May 2021, the same USD price cost PKR 10,205.
• Late payment interest from power sector: Recovery from the power sector: The PSO
has recovered Rs194.283 billion from the power sector along with late payment
surcharge income. The power sector was a key defaulter of the PSO that is to pay
Rs192.5 billion to the company on account of oil supply.
Source:
Year 2020:
• Significant receipt of late payment interest from power sector: Debtor’s turnover has
increased primarily due to decrease in trade debts by 10.4% on account of recoveries
from power sector.
Page | 836
PAKISTAN STATE OIL
Source:
Year 2019:
• Gain on the acquisition of PRL: The Group earned consolidated other income of Rs.
16.9 billion mainly due to acquisition of PRL in this financial year. Other income
includes Gain of Rs 2.8 billion on acquisition of PRL, determined based on the fair
valuation of the subsidiary. The above results translated into a consolidated net profit
after tax of Rs. 15.1 billion and consolidated EPS of Rs. 36.55 per share for FY2019.
• Receipt of late payment interest from power sector in these periods: Trade debts of
an aggregate amount of Rs. 180,676 million due from power generation companies down
below;
5. GENCO Holding Company Limited (GENCO)
6. Sui Northern Gas Pipelines Limited (SNGPL)
7. Hub Power Company Limited (HUBCO)
8. Kot Addu Power Company Limited (KAPCO)
Page | 837
PAKISTAN STATE OIL
These include past due debts of Rs. 165,236 million against which no impairment has been
recognized.
Source:
Year 2018:
• Maturity of PIBs resulting in lower interest income: This represents investment in
Pakistan Investment Bonds (PIBs) amounting to Rs. 45,906,112 made in June 2013 in
accordance with plan duly approved by the Economic Coordination Committee (ECC) -
Government of Pakistan (GoP) out of the proceeds received against partial settlement of
circular debt issue then prevailing in the energy sector.
Source:
Year 2017 & 2016:
Page | 838
PAKISTAN STATE OIL
• Lower receipt of interest from IPPs due to the upliftment: FO volumes declined by
4.3% due to lower upliftment by IPP’s primarily due to shifting from FO to natural gas.
Pakistan is deficient in FO, they are imported on spot tender basis to meet the shortage
however due to the oil industry strike in Kuwait, a force majeure was declared and PSO
floated tender to meet the demand of harvesting season and electricity generation.
Source:
➢ Annual Report (2017 & 2016)
https://psopk.com/en/media-center/press-releases/news-details?newsId=287
Page | 839
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Increase in non-fuel retail business of OMCs Increase
Increase in income generated from retail outlets of OMCs Increase
Increase in losses occurred in oceans for crude oil Increase
High interests offered on savings accounts Increase
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of other income all
Total Other Income of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 37,135,536 39,636,108 16,922,354 10,385,641 19,415,472
HTL 96,177,950 71,376,823 81,540,776 126,125,099 80,449,481
APL 912,713 884,577 1,148,305 898,534 1,260,580
BPL 50,074 35,590 42,737 35,281 29,513
TOTAL 134,276,273 111,933,098 99,654,172 137,444,555 101,155,046
Page | 840
PAKISTAN STATE OIL
Total Market Share of all Companies in 5 Years w.r.t Total Other Income
PSO 21.13%
HTL 77.96%
APL 0.87%
BPL 0.03%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Other Income
Total Market Share

90.00%
80.00% 77.96%
70.00%
60.00%
50.00%
40.00%
30.00%
21.13%
20.00%
10.00%
0.87% 0.03%
0.00%
PSO HTL APL BPL
Page | 841
PAKISTAN STATE OIL
Analysis: The graph given above indicates that HTL has the highest proportion of other income
in their accounts. PSO is in the second place.
PSO’s Other Income Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 27.66% 35.41% 16.98% 7.56% 19.19%
Graph Indicating PSO’s Other Income Share in the Industry w.r.t Years

40.00%
35.00% 35.41%
30.00%
27.66%
25.00%
20.00% 19.19%
16.98%
15.00%
10.00%
7.56%
5.00%
0.00%
2017 2018 2019 2020 2021
Page | 842
PAKISTAN STATE OIL
Analysis: the market share of PSO in terms of other income has experienced a decreasing trend
for three subsequent years as the market share of HTL in these years increased.
Yearly Change/Growth in Other Income of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth 190.16% 6.73% -57.31% -38.63% 86.95%
Graph Indicating Change/Growth in Other Income of PSO

250.00%
200.00%
190.16%
150.00%
100.00%
86.95%
50.00%
0.00% 6.73%
2017 2018 2019 2020 2021
-38.63%
-50.00%
-57.31%
-100.00%
Page | 843
PAKISTAN STATE OIL
Analysis: It can be analyzed that the other income account has experienced a decrease in their
growth till 2019. However, it is increasing since the past two years for PSO.
Growth/Change in the Industry’s Other Income Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth 122.28% -16.64% -10.97% 37.92% -26.40%
Graph Indicating Growth/Change in the Industry’s Other Income Overtime
Page | 844
PAKISTAN STATE OIL

140.00%
120.00% 122.28%
100.00%
80.00%
60.00%
40.00% 37.92%
20.00%
0.00%
2017 2018 2019 2020 2021
-16.64% -10.97%
-20.00%
-26.40%
-40.00%
Analysis: The industry in terms of this account is mainly changing due to HTL and not PSO.
The growth for industry has also been negative till 2019. However, after 2020, PSO’s other
income increased to a great extent. HTL’s other income fell in those years. Due to this, the
overall trend experienced a fall.
Bifurcation of Other Income of all OMCs
➢ PSO – (2020-2021)
Page | 845
PAKISTAN STATE OIL
➢ HTL – (2020-2021)
Page | 846
PAKISTAN STATE OIL
➢ APL – (2020-2021)
Page | 847
PAKISTAN STATE OIL
➢ BPL – (2020-2021)
Factors affecting Other Income
OMCs Focus a lot more on Non-fuel Retail Businesses
Page | 848
PAKISTAN STATE OIL
PSO and other OMCs have realized the importance of their non-fuel retail businesses and have to
constantly update them to make sure they are of top priority to the customers. Today, PSO
symbolizes more than just fuel. Its corporate image extends to well beyond the realm of fuel, a
thoroughly deserved recognition earned since its historic turnaround over a decade ago. Non-
Fuel Retail initiatives are not just revenue generating propositions; They mobilize PSO’s
Forecourts in accordance with the market dynamics and offer strategic services to the population
based on their territorial needs, ultimately creating a "Customer Centric image" of their stations
Future Outlook
This will only increase and update in the future, leading to an increase in the other income
account as well.
Sources:
➢ https://www.prnewswire.com/news-releases/focus-on-non-fuel-revenue-to-have-strong-
impact-on-gasoline-station-businesses--discover-company-insights-on-bizvibe-
301325227.html
➢ https://psopk.com/en/product-and-services/non-fuel-retail
➢ https://m.economictimes.com/infrastructure-index/tanking-up-on-non-fuel-
profits/articleshow/1606068.cms
Page | 849
PAKISTAN STATE OIL
➢ https://www.ey.com/en_sg/oil-gas/how-fuel-retail-companies-can-win-customers-of-the-
future
OMCs experience Increase in Income Generated from Retail Outlets
In year 2020, the sales from the retail outlets stopped. However, in 2021, when the pandemic was
over, the gas filling stations of all the OMCs experienced an increase in their income. The OMCs
experienced an increase in their distribution margins by 15-20%. The OMCs argued that this is
because of an increase in inflation and cost of doing business. The dealers had threatened to go
on countrywide strike with effect from November 5 in protest against the government’s dilly-
dallying on increase in their margins. On November 3, they withdrew their protest strike call
after a government team led by Minister for Energy Hammad Azhar agreed to increase their
margins on sale of petroleum products by 6pc within a few days.
Future Outlook
This will increase in the future because the new government will support the business to a great
extent and would also want to provide relief to the consumers for their agenda.
Sources:
Page | 850
PAKISTAN STATE OIL
➢ https://www.business-standard.com/article/companies/new-fuel-retail-outlets-may-rely-
on-public-sector-omcs-to-build-networks-121072201512_1.html
Insurance Received for Losses Covered at Ocean during Import of Crude Oil
Typical discharge losses explaining 80–90% of total crude oil losses are 0.03% of volume for
fully loaded tanker crude oil and 0.05% for lightered or short loaded tankers, varying with
vapour pressure or ullage prior to discharge. For this, the OMCs are provided with insurance
claims to help mitigate the losses.
Future Outlook
This is something that is not controllable and would keep happening in the future as well,
increasing the other income from insurance claims.
Sources:
➢ https://www.sciencedirect.com/science/article/pii/S030142150300003X#:~:text=Typical
%20discharge%20losses%20explaining%2080,discharge%20(API%2C%201992).
➢ https://www.britannica.com/science/oil-spill
➢ https://www.intechopen.com/online-first/77067
High Interest on Savings Account to Increase Other Income
Page | 851
PAKISTAN STATE OIL
The interest rates in Pakistan have been increasing ever since. This only means that in the future
the deposits are expected to increase if the companies want to take advantage of high interest
rates. Their interest income would definitely increase with this leading to an increase in the other
income account of OMCs
Sources:
Page | 852
PAKISTAN STATE OIL
Economic Analysis
Factor Effect
Late Payment Surcharge Increase
Exchange Gains (Currency devaluation) Increase
The other income for the company accounts for almost 1.6% of its total sales which signifies the
importance it has in the net profitability of the company. Historically the other income of the
company has been very unpredictable with respect to the sales of the company as it only
increased in 2019 and 2021. However, after taking into account several economic factors, the
reasons for changes have been analyzed as well as a prediction also given.
Late payment surcharge
to PSO. The amount received against the late payment surcharge from HUBCO and KAPCO
contributed materially in easing the financial strain on the company’s cost of funds for the year.
Future Outlook
Page | 853
PAKISTAN STATE OIL
will increase their payments to PSO without delaying them any further which would increase the
other income for the company. This can also be supported by the past data.
Source:
Exchange Gain (Currency Devaluation)
stable as the Pakistani Rupee has continued to devalue under the PTI government. After the PTI
the dollar is trading at $1 for Rs.185.
Due to this, PSO booked staggering amounts of exchange gains as can be seen in the financial
statements of the company. These were done on the settlement of foreign currency transactions
which was the loan taken for the retirement of letter of credit (LCs) of crude oil. The exchange
gain added a huge amount to the other income of the company
Future Outlook
Page | 854
PAKISTAN STATE OIL
least 18%, as reported by trading economics. Owing to this, there will be exchange gains in the
future which will increase the other income for PSO ultimately having an effect on its net profit.
This forecast for an increase in the exchange rate has been demonstrated in the graph below;
Source:
Annual Report, 2021
➢ https://newztodays.com/pso-exchange-gains/
Page | 855
PAKISTAN STATE OIL
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
Other Income Naïve Forecast
Page | 856
PAKISTAN STATE OIL
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2010
2014
2018
2022
2026
2007
2008
2009
2011
2012
2013
2015
2016
2017
2019
2020
2021
2023
2024
2025
(50.00%)
(100.00%)
Page | 857
PAKISTAN STATE OIL
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Other Income Forecasted Other Income
Page | 858
PAKISTAN STATE OIL
Distribution and Marketing
Expense
Breakdown:
Vertical
Distribution and Marketing Expenses 2021 Analysis
Salaries, wages and benefits 6,571,241 55.53%
Transportation costs 552,850 4.67%
Depreciation on property, plant and equipment 1,108,405 9.37%
Amortization on right-of-use assets 411,476 3.48%
Security and other services 283,025 2.39%
Page | 859
PAKISTAN STATE OIL
Rent, rates and taxes 466,735 3.94%
Repairs and maintenance 1,293,428 10.93%
Insurance 119,053 1.01%
Travelling and office transport 241,376 2.04%
Printing and stationery 23,025 0.19%
Communication 28,483 0.24%
Utilities 226,308 1.91%
Storage and technical services 52,010 0.44%
Sales promotion and advertisement 418,773 3.54%
Fees and subscription 36,568 0.31%
100.00%
Page | 860
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Marketing and 2.13% 13.03% 13.71% 4.57% 8.29% -2.21%
Distribution Expense
2021 2020 2019 2018 2017 2016
Marketing and 0.98% 1.05% 0.88% 0.87% 1.00% 1.19%
Distribution Expense
Forecasted Value
Distribution and marketing expense is the most major expense that the company pays, with it
accounting for 1% of the total sales. Through our economic and industry analysis we found that
the expense for the company is likely to increase which can also be supported with the fact that
Page | 861
PAKISTAN STATE OIL
the sales of the company are likely to increase. All the reasons for this have been explained in
detail in the analysis section. The following graph supports the prediction.
16,000,000.00
14,000,000.00
12,000,000.00
10,000,000.00
8,000,000.00
6,000,000.00
4,000,000.00
2,000,000.00
0.00
2012
2025
2007
2008
2009
2010
2011
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Distribution & Marketing expense Forecasted D&M expense
Company Analysis
Factors Effects
Security and other services Increase
Rent, rates and taxes Increase
Repairs and maintenance Increase
Insurance Increase
Printing, stationery and advertisements Increase
Communication Increase
Utilities Increase
Storage and technical services Increase
Page | 862
PAKISTAN STATE OIL
Salaries, wages and benefits Increase
decrease.
Marketing and Distribution Expense

14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2021 2020 2019 2018 2017 2016
Marketing and Distribution Expense of PSO year by year from 2016 to 2020.
Year 2021:
There was an increase of 0.90% in the year 2021, due to the increase of following accounts;
Page | 863
PAKISTAN STATE OIL
• Salaries, wages and benefits
• Depreciation on property, plant and equipment
• Amortization on right-of-use assets
• Repairs and maintenance
• Insurance
• Printing, stationery and advertisements
• Communication
• Utilities
• Storage and technical services
Source:
Year 2020:
• Security and other services
• Rent, rates and taxes
Page | 864
PAKISTAN STATE OIL
• Communication
• Utilities
• Amortization
• Transportation Costs
Source:
Year 2019:
• Insurance
• Communication
• Utilities
Page | 865
PAKISTAN STATE OIL
• Travelling and office transport
Source:
Year 2018:
• Sales promotion and advertisement
• Depreciation
• Communication
• Utilities
• Legal and professional
• Insurance
• Donations
Source:
Page | 866
PAKISTAN STATE OIL
Year 2017:
• Depreciation
• Insurance
• Utilities
• Donations
Source:
Year 2016:
There was a decrease of 2.21% in the year 2016, due to the decrease of following accounts;
Page | 867
PAKISTAN STATE OIL
• Transportation costs
• Insurance
• Utilities
• Sales promotion and advertisement
Source:
Page | 868
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Decrease in transportation cost due to lower duties Decrease
Increase in transportation cost due to inflation Increase
Increase in Sales promotion of OMCs Increase
Increase in storage expenses of OMCs Increase
Increase in rent rates and taxes Increase
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of distribution
expense of all five years of the companies is given below.
Total Distribution Expense of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 8,758,929 9,159,330 10,414,831 11,771,399 12,022,223
HTL 472,316,882 635,791,336 846,161,758 713,811,747 812,725,253
APL 652,335 830,163 1,093,848 1,174,996 1,643,692
BPL 62,752 64,224 68,780 70,600 66,446
Page | 869
PAKISTAN STATE OIL
TOTAL 481,790,898 645,845,053 857,739,217 726,828,742 826,457,614
Total Market Share of all Companies in 5 Years w.r.t Distribution Expense
PSO 1.47%
HTL 98.37%
APL 0.15%
BPL 0.01%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Distribution Expense
Page | 870
PAKISTAN STATE OIL
Total Market Share

120.00%
98.37%
100.00%
80.00%
60.00%
40.00%
20.00%
1.47% 0.15% 0.01%

0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest level of distribution expense
as compared to other companies. PSO is at second place in this case.
PSO’s Distribution Expense Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 1.82% 1.42% 1.21% 1.62% 1.45%
Page | 871
PAKISTAN STATE OIL
Graph Indicating PSO’s Distribution Expense Share in the Industry w.r.t Years

2.00%
1.80% 1.82%
1.60% 1.62%
1.42% 1.45%
1.40%
1.20% 1.21%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
2017 2018 2019 2020 2021
Analysis: The graph given above indicates this account experienced a fall in most of the years.
The expense only increased in 2020 but it decreased in 2021.
Yearly Change/Growth in Distribution Expense of PSO
Page | 872
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
PSO Yearly Growth 8.29% 4.57% 13.71% 13.03% 2.13%
Graph Indicating Change/Growth in Distribution Expense of PSO

16.00%
14.00% 13.71%
13.03%
12.00%
10.00%
8.00% 8.29%
6.00%
4.57%
4.00%
2.00% 2.13%
0.00%
2017 2018 2019 2020 2021
Page | 873
PAKISTAN STATE OIL
Analysis: It can be analyzed that since the past three years the distribution expense has been
falling of PSO. It also fell before 2019. In 2019 only the distribution expense can be seen to have
increased at PSO.
Growth/Change in the Industry’s Distribution Expense Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth -45.37% 34.05% 32.81% -15.26% 13.71%
Graph Indicating Growth/Change in the Industry’s Distribution Expense Overtime
Page | 874
PAKISTAN STATE OIL

40.00%
34.05% 32.81%
30.00%
20.00%
13.71%
10.00%
0.00%
2017 2018 2019 2020 2021
-10.00%
-15.26%
-20.00%
-30.00%
-40.00%
-45.37%
-50.00%
Analysis: The industry’s share can be seen to have fallen between 2018 till 2020. It only
increase after 2017 and 2021. Mainly happened because of HTL.
Factors affecting distribution and marketing expense
Transportation cost of OMC Reduces as a result of Lower Import Duties
To facilitate the OMCs in Pakistan, the authorities have proposed abolishing customs duty on
crude oil and high-speed diesel to completely and partially get rid of the PDC. This would also
enable finance and tax authorities to revive the petroleum levy to mop up revenues as
Page | 875
PAKISTAN STATE OIL
international prices come down because the levy is a 100pc federal tax while customs duty,
despite being a federal tax, has to be shared with the provinces.
Future Outlook
Fall in duties would allow them to reduce their transportation cost. Moreover, the CPFTA also
allows the import of tax free oil from China. This will reduce distribution expense in the future.
Sources:
➢ https://download1.fbr.gov.pk/Docs/2019491441258797FifthScheduleupdated.pdf
➢ https://www.business-standard.com/article/opinion/oil-toil-and-turmoil-
122050901270_1.html
Increase in Transportation Cost due to High Inflation
The transportation cost has increased by 9.1% due to this reason. Given the ongoing
consultations with the International Monetary Fund (IMF) and the upward trend of global
commodity prices, the federal government increased the price of petrol by Rs 4 per litre and
high-speed diesel (HSD) by Rs 2 per litre at the start of October. In September as well, prices of
all petroleum products witnessed an increase to accommodate the impact of higher international
market rates and currency depreciation.
Page | 876
PAKISTAN STATE OIL
Future Outlook
The inflation will keep increasing and so will the transportation cost in the future. The account
would hence increase.
Source:
➢ https://www.thenews.com.pk/tns/detail/898657-revisiting-pol-prices
Increase in Sales Promotion of OMCs
The OMCs in Pakistan have taken up the new trend of the EV chargers, PSO cards and their new
affiliations and customers. In the coming future, the sales promotion of OMCs would increase as
they would be joining the bandwagon of modern technology such as EV vehicles etc.
Future Outlook
There is an increase in the distribution expense as a result of advertising expense of OMCs in
Pakistan.
Source:
➢ https://www.ravimagazine.com/oil-marketing-companies-omc-of-pakistan-an-academic-
report/
Page | 877
PAKISTAN STATE OIL
Increase in Storage Expenses of OMCs in Pakistan
The government of Pakistan will be providing investments and upgradation of the refineries of
the OMCs in the near future. This would help them in having a bigger storage capacity, more
availability of tankers and establishment of pipelines. The OMCs would have to make
investments for this as well and to increase their storage capacities. This would increase their
expenses then.
Future Outlook
The distribution expense would increase if more storage capacity is to be seen in the future.
Sources:
➢ https://tribune.com.pk/story/2341681/refineries-demand-more-financing
Rising Interest Rates make Long Term Deposits an Attractive Investment
Companies usually buy long term deposits because when the cost of borrowing money increase,
saving money becomes more attractive. The interest rates in Pakistan have been increasing ever
since. This only means that in the future the long term deposits are expected to increase if the
companies want to take advantage of high interest rates.
Sources:
Page | 878
PAKISTAN STATE OIL
Increase in Rent Rates for OMCS
As the economy is in the boost period, the rent rates have also increased with the passage of
time. These rent rates are for their vehicles, property etc. these are expected to increase in the
future as well which might lead to an increase in the expenses of OMCs.
Future Outlook
This would definitely increase the distribution expense of OMCs in Pakistan.
Source:
Page | 879
PAKISTAN STATE OIL
Economic Analysis
Factor Effect
Inflation Increase
Freight Charges Increase
Minimum Wage Increase
White Oil Pipeline Decrease
Distribution and marketing expense of PSO is the major expense that the company faces,
accounting for 1% of the total sales of the company. No other expense of the company is higher
than this. If we look at the historical data for this account, the cost has been increasing for the
past 5 years even when the sales of the company fell in 2020 due to Covid-19. This implies that
this is a fixed cost for the company and a cost which the company has to bear no matter what. All
the economic factors which might affect this account have been analyzed below.
Page | 880
PAKISTAN STATE OIL
experiencing high distribution and marketing costs.
Future Outlook
as has been predicted which would ultimately lead to an increase in the distribution and
marketing expense for the company as well since there will be high inflation. The prediction for
Page | 881
PAKISTAN STATE OIL
the increase in the international oil prices have been depicted in the graph below.
Source:
march-1/
Page | 882
PAKISTAN STATE OIL
Freight Charges
As has been discussed before, there has been an abnormal growth in the number of imports in the
country after he restrictions for Covid-19 have been lifted and the economy has started to
recover. This abnormal increase in the imports of the country can be accounted to the increasing
demand of petroleum products as well as growing energy needs. The result of this has an
increase in the transportation cost of containerized cargo by up to 700%. Moreover, this surge in
international freight charges for sea, rail and air routes has offset the positive impact of
incentives provided by the government for some imports during the pandemic which has also led
to imported inflation in the country.
Future Outlook
Moving forward the freight charges are not expected to decrease as the shipping companies have
taken this as an opportunity to keep the prices high and increase their profit margins. So, in the
future we predict that the freight charges for the company will increase which would ultimately
increasing the distribution and marketing costs for the company. This is also in line with the
prediction of increase in the sales of the company as higher sales also imply an increase in the
cost for distribution.
Source:
➢ https://tribune.com.pk/story/2289594/freight-rates-jump-up-to-700
Page | 883
PAKISTAN STATE OIL
➢ https://time.com/6073233/shipping-costs-surge-price-hike-goods/
➢ https://www.gtreview.com/news/global/freight-costs-keep-surging-despite-shipping-
giants-freezing-prices/
Minimum wage
At the start of 2022, the minimum wage in Punjab and Islamabad increased by 14.4% to almost
20,000. Moreover, the trade unions urged the new PM Shahbaz Shariff to further increase the
minimum wage due to the conditions in the economy upon which on 1st April, the P increased
this wage to a further 25,000 for government employees. This implies higher costs for the
company as now they will have to pay more wages
Future Outlook
Looking forward we predict that the minimum wage will further increase in the country as the
condition of the economy is not very good. On top of this the new PM needs to make a mark and
get people on his side which can only be done by providing reliefs to the people during desperate
times, one such measure being increasing the minimum wage.
Source:
➢ https://www.geo.tv/latest/410842-shahbaz-announces-in-camera-briefing-on-threat-
letter-to-parliament-committee
Page | 884
PAKISTAN STATE OIL
➢ https://tribune.com.pk/story/2342614/minimum-wage-increases-144-survey
➢ https://www.thenews.com.pk/print/949534-labour-leaders-hail-new-pm-s-announcement-
of-raise-in-minimum-
wage#:~:text=Trade%20unions%20and%20labour%20organisations,of%20workers%20
at%20Rs25%2C000.
White Oil Pipeline (Partnership with PARCO & PEPCO)
Future Outlook
This strategic partnership helps PSO to significantly reduce its distribution costs as the
transportation will be much cheaper and efficient. Furthermore, it is also expected that the cost
will continue to decline as more infrastructure is added which is what we also predict that the
company will add more PPE in its portfolio.
Source:
Page | 885
PAKISTAN STATE OIL
14,000,000.00
12,000,000.00
10,000,000.00
8,000,000.00
6,000,000.00
4,000,000.00
2,000,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
Distribution & Marketing expense Naïve Forecast
Page | 886
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
(10.00%)
2007
2008
2009
2010
2011
PAKISTAN STATE OIL
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Page | 887
PAKISTAN STATE OIL
Page | 888
PAKISTAN STATE OIL
16,000,000.00
14,000,000.00
12,000,000.00
10,000,000.00
8,000,000.00
6,000,000.00
4,000,000.00
2,000,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Distribution & Marketing expense Forecasted D&M expense
Page | 889
PAKISTAN STATE OIL
Administrative Expense
Breakdown:
Vertical
Administrative Expense 2021 Analysis
Salaries, wages and benefits 2,300,952 61.93%
Depreciation on property, plant and equipment 256,046 6.89%
Amortization on right-of-use assets 30,307 0.82%
Amortization 35,930 0.97%
Security and other services 44,037 1.19%
Rent, rates and taxes 13,697 0.37%
Repairs and maintenance 306,494 8.25%
Insurance 165,746 4.46%
Travelling and office transport 46,454 1.25%
Printing, stationery and advertisements 17,397 0.47%
Page | 890
PAKISTAN STATE OIL
Communication 65,311 1.76%
Utilities 72,373 1.95%
Storage and technical services 99,722 2.68%
Legal and professional 65,966 1.78%
Auditors' remuneration 18,685 0.50%
Contribution towards expenses of Board of Management 46,757 1.26%
Donations 107,348 2.89%
Fees and subscription 22,144 0.60%
3,715,366 100.00%
Page | 891
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Administrative Expense 0.90% 26.97% 4.71% 11.73% 2.31% 0.91%
2021 2020 2019 2018 2017 2016
Administrative Expense 0.30% 0.33% 0.24% 0.26% 0.28% 0.36%
Forecasted Values
According to the analysis done and the historical data, the administrative expense is likely to
increase in the future in accordance with the sales of the company. This is also supported with
the graph below.
Page | 892
PAKISTAN STATE OIL
5,000,000.00
4,500,000.00
4,000,000.00
3,500,000.00
3,000,000.00
2,500,000.00
2,000,000.00
1,500,000.00
1,000,000.00
500,000.00
0.00
2012
2025
2007
2008
2009
2010
2011
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Admin expense Forecasted Admin expense
Company Analysis
Factors Effects
Security and other services Increase
Rent, rates and taxes Increase
Repairs and maintenance Increase
Insurance Increase
Printing, stationery and advertisements Increase
Communication Increase
Utilities Increase
Storage and technical services Increase
Salaries, wages and benefits Increase
Page | 893
PAKISTAN STATE OIL
decrease.
Administrative, Marketing and Distribution

Expense
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2021 2020 2019 2018 2017 2016
Administrative, Marketing and Distribution Expense of PSO year by year from 2016 to 2020.
Year 2021:
Page | 894
PAKISTAN STATE OIL
• Amortization on right-of-use assets
• Insurance
• Communication
• Utilities
Source:
Year 2020:
• Insurance
Page | 895
PAKISTAN STATE OIL
• Communication
• Utilities
• Amortization
Source:
Year 2019:
• Amortization
• Insurance
Page | 896
PAKISTAN STATE OIL
• Communication
• Utilities
• Donations
Source:
Year 2018:
• Communication
• Utilities
Page | 897
PAKISTAN STATE OIL
• Legal and professional
• Donations
Source:
Year 2017:
• Insurance
• Utilities
• Donations
Source:
Page | 898
PAKISTAN STATE OIL
Year 2016:
• Insurance
• Communication
• Utilities
• Donations
Source:
Page | 899
PAKISTAN STATE OIL
Industry Analysis
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of administrative
expenses of all five years of the companies is given below.
Total Administrative Expense of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 2,478,797 2,769,667 2,900,105 3,682,218 3,715,366
HTL 360,692,907 444,926,193 497,432,186 381,797,129 469,239,729
APL 1,340,629 1,584,357 2,416,759 1,871,050 2,413,696
BPL 92,114 108,437 106,575 124,744 111,555
TOTAL 364,604,447 449,388,654 502,855,625 387,475,141 475,480,346
Total Market Share of all Companies in 5 Years w.r.t Administrative Expense
PSO 0.71%
HTL 98.82%
APL 0.44%
Page | 900
PAKISTAN STATE OIL
BPL 0.02%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Administrative Expense
Total Market Share

120.00%
98.82%
100.00%
80.00%
60.00%
40.00%
20.00%
0.71% 0.44% 0.02%

0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest level of administrative
expense as compared to other companies. PSO is at second place in this case.
PSO’s Administrative Expense Share in the Industry w.r.t Years
Page | 901
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
Share 0.68% 0.62% 0.58% 0.95% 0.78%
Graph Indicating PSO’s Administrative Expense Share in the Industry w.r.t Years

1.00%
0.95%
0.90%
0.80% 0.78%
0.70%
0.68%
0.60% 0.62%
0.58%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%
2017 2018 2019 2020 2021
Analysis: The graphs shows that PSO’s market share has fallen in all years except for 2020.
Page | 902
PAKISTAN STATE OIL
Yearly Change/Growth in Administrative Expense of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth 2.31% 11.73% 4.71% 26.97% 0.90%
Graph Indicating Change/Growth in Administrative Expense of PSO
PSO Yearly Administrative Expense Growth

30.00%
26.97%
25.00%
20.00%
15.00%
11.73%
10.00%
5.00% 4.71%
2.31%
0.90%
0.00%
2017 2018 2019 2020 2021
Page | 903
PAKISTAN STATE OIL
Analysis: It can be analyzed that since the administrative expense of PSO does not have a fixed
pattern. It was the highest in 2020 but is now the lowest in 2021. The growth was positive but it
was only increasing at a decreasing rate.
Growth/Change in the Industry’s Administrative Expense Overtime
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth 23.93% 23.25% 11.90% -22.95% 22.71%
Graph Indicating Growth/Change in the Industry’s Administrative Expense Overtime
Page | 904
PAKISTAN STATE OIL

30.00%
23.93% 23.25% 22.71%

20.00%
11.90%
10.00%
0.00%
2017 2018 2019 2020 2021
-10.00%
-20.00%
-22.95%
-30.00%
Analysis: The industry’s share can be seen to have a falling trend. This trend had an increase in
2021 because the administrative expense of all the OMCs increased.
Factors Effects
Increase in Depreciation of Fixed Assets of OMCs Increase
High maintenance and upgradation cost of refineries Increase
Increase in rent rates and taxes Increase
Page | 905
PAKISTAN STATE OIL
Depreciation of PPE increases for OMCs
All the OMCs have experienced depreciation of their PPE over the period of time. This is a
major contributor in their administrative expense account. This is also expected to increase in the
future as it has increased in all subsequent years.
Future Outlook
The administrative expense due to depreciation of PPE is unstoppable and will increase the
account in the future.
Sources:
Increase in Maintenance Cost of Refineries in Pakistan
The OMCs in Pakistan especially PSO has to invest a lot for this because the refineries need
constant upgrading. Currently, they have asked the refineries to make upgradation plans and this
would lead to an increase in this account. The government will contribute 26 percent of funds to
finance the up-gradation projects of existing refineries in Pakistan in the new proposed Policy
Page | 906
PAKISTAN STATE OIL
2021. Sources told Newztodays.com that Petroleum Division had moved a revised summary to
the cabinet committee on energy (CCoE) for approval. Earlier, the petroleum division had tabled
a summary before CCoE for approval. However, Asad Umar had raised questions over the
upfront tariff of 10 % for existing refineries.The CCoE had also raised questions over the
mechanism investment on up-gradation projects out of incremental revenue. Sources said that in
the revised draft, the petroleum division had informed CCoE that refineries will investment 74 %
whereas government share out of incremental revenue would be 26 % for the up-gradation
projects of refineries.
Future Outlook
There will be an increase in this account due to provisions for maintenance of refineries in the
future.
Source:
➢ https://newztodays.com/oil-refineries-pakistan/
➢ https://www.thenews.com.pk/print/425238-refineries-deserve-better-treatment-adequate-
protection
➢ https://www.thenews.com.pk/print/937581-refineries-expansion-plans-hit-snags-on-
policy-delay
Page | 907
PAKISTAN STATE OIL
Increase in Rent Rates for OMCS
As the economy is in the boost period, the rent rates have also increased with the passage of
time. These rent rates are for their vehicles, property etc. these are expected to increase in the
future as well which might lead to an increase in the expenses of OMCs.
Future Outlook
This would definitely increase the distribution expense of OMCs in Pakistan.
Source:
Page | 908
PAKISTAN STATE OIL
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2020
2024
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2021
2022
2023
2025
2026
(5.00%)
Page | 909
PAKISTAN STATE OIL
5,000,000.00
4,500,000.00
4,000,000.00
3,500,000.00
3,000,000.00
2,500,000.00
2,000,000.00
1,500,000.00
1,000,000.00
500,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Admin expense Forecasted Admin expense
Page | 910
PAKISTAN STATE OIL
Other Expense
Breakdown:
Vertical
Other Expenses 2021 Analysis
Research cost on refinery upgradation 32,638 0.81%
Penalties 10,500 0.26%
Workers' Profit Participation Fund 2,405,539 59.34%
Workers' Welfare Fund 889,958 21.96%
Exchange loss on foreign currency transactions - net - -
Provision against stock-in-trade - net - -
Provision against stores, spares, chemical and loose tools 10,895 0.27%
including capital spares 252,464 6.23%
Other provisions 443,000 10.93%
CNG receivable adjustment 4,849 0.12%
Fixed assets written-off 3,678 0.09%
Page | 911
PAKISTAN STATE OIL
Others 4,053,521 100.00%
Page | 912
PAKISTAN STATE OIL
Horizontal Analysis: Average (238%)
2021 2020 2019 2018 2017 2016
Other Expenses 1474.35% -94.12% 31.30% 40.19% 19.75% -43.46%
2021 2020 2019 2018 2017 2016
Other Expenses 0.33% 0.02% 0.37% 0.32% 0.27% 0.29%
Forecasted Value
The other expenses for the company are likely to increase within a range of 30-40% at a
decreasing rate. This prediction has been made keeping in mind all the economic and industrial
factors for the account.
Page | 913
PAKISTAN STATE OIL
Company Analysis
Factors Effects
Increase in Research cost on refinery Increase
upgradation
Increase in Penalties Increase
Increase in Workers' Profit Participation Fund Increase
Increase in Workers' Welfare Fund Increase
from years 2016 to 2021, the calculated average we get is 238% due to the sudden increase or
decrease.
Page | 914
PAKISTAN STATE OIL
Other Expenses
5,000,000
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease in the Other
Expenses of PSO year by year from 2016 to 2020.
Year 2021:
An increase of 1474.1%, due to an increase in the following reasons;
Research cost on refinery upgradation
• Penalties
• Workers' Profit Participation Fund
• Workers' Welfare Fund
Source:
Page | 915
PAKISTAN STATE OIL
Year 2020:
A decrease of 94.12, due to a decrease in the following reasons;
• Provision for impairment against other receivables - net
Source:
Year 2016-2019:
An increase was recorded from the year 2016 till 2019, due to an increase in the following
reasons;
• Research cost on refinery upgradation
• Penalties
Source:
➢ Annual Report (2016,2017,2018,2019)
Page | 916
PAKISTAN STATE OIL
Industry Analysis
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of Other expenses
of all five years of the companies is given below.
Total Other Expense of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 2,378,315 3,334,100 4,377,571 257,473 4,053,521
HTL 37,981,691 108,050,088 192,356,087 20,179,969 41,274,592
APL 112,107 126,094 79,689 32,637 94,365
BPL 9,076 11,717 12,756 12,843 9,076
TOTAL 40,481,189 111,521,999 196,826,103 20,482,922 45,431,554
Total Market Share of all Companies in 5 Years w.r.t Other Expense
Total Market
Companies Share
PSO 3.47%
Page | 917
PAKISTAN STATE OIL
HTL 96.41%
APL 0.11%
BPL 0.01%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Other Expense
Total Market Share

120.00%
100.00% 96.41%
80.00%
60.00%
40.00%
20.00%
3.47%
0.11% 0.01%
0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest level of other expense as
compared to other companies. PSO is at second place in this case.
Page | 918
PAKISTAN STATE OIL
PSO’s Other Expense Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 5.88% 2.99% 2.22% 1.26% 8.92%
Graph Indicating PSO’s Other Expense Share in the Industry w.r.t Years

10.00%
9.00% 8.92%
8.00%
7.00%
6.00% 5.88%
5.00%
4.00%
3.00% 2.99%
2.00% 2.22%
1.26%
1.00%
0.00%
2017 2018 2019 2020 2021
Page | 919
PAKISTAN STATE OIL
Analysis: The graphs shows that PSO’s market share of other expenses has fallen for four years
but it increased in 2021.
Yearly Change/Growth in Other Expense of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth 19.75% 40.19% 31.30% -94.12% 1474.35%
Graph Indicating Change/Growth in Other Expense of PSO
Page | 920
PAKISTAN STATE OIL
PSO Yearly other expenses Growth

1600.00%
1474.35%
1400.00%
1200.00%
1000.00%
800.00%
600.00%
400.00%
200.00%
19.75% 40.19% 31.30%

0.00%
2017 2018 2019 2020 2021
-94.12%
-200.00%
Analysis: It can be analyzed other expenses of PSO have grown in all the years except for 2020.
But this continue to grow in 2021 again.
Growth/Change in the Industry’s Other Expense Overtime
Page | 921
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
Industry's Yearly
Growth -11.09% 175.49% 76.49% -89.59% 121.80%
Graph Indicating Growth/Change in the Industry’s Other Expense Overtime

200.00%
175.49%
150.00%
121.80%
100.00%
76.49%
50.00%
0.00%
-11.09%
2017 2018 2019 2020 2021
-50.00%
-89.59%
-100.00%
-150.00%
Analysis: The industry’s share can be seen to have a falling tend for three years in its growth.
This is mainly because of HTL. This will be increasing in 2021 however.
Page | 922
PAKISTAN STATE OIL
Bifurcation of Other Expenses of OMCs
➢ PSO – (2020-2021)
➢ HTL – (2020-2021)
Page | 923
PAKISTAN STATE OIL
➢ APL – (2020-2021)
➢ BPL – (2020-2021)
Page | 924
PAKISTAN STATE OIL
Factors Effects
Increase in R&D cost of refinery upgradation Increase
Penalties faced by OMCs after quality assurance Increase
Increase in exchange loss of foreign currency Increase
Increase in Receivable Adjustment for CNG by OMCs Increase
Upgradation of Refineries to Require Ample Research
All the OMCs are working on the development of the refineries. This is being done to make the
DHDS more available in the refineries. Government of Pakistan (GOP) planned to introduce
Euro II complaint fuels in the country. In pursuance of the plans, GOP directed to all refineries in
Page | 925
PAKISTAN STATE OIL
the country to develop facilities to meet the above objective. To meet GOP’s requirement
regarding Euro II compliant High Speed Diesel, PARCO was the first refinery to take initiative
and commissioned a Diesel Hydro Desulphurization (DHDS) plant at their Mid-Country
Refinery in 2010, at a cost of US$132 million. By producing HSD with low-sulphur content, this
plant greatly contributes towards a greener environment. The DHDS plant is equipped with a
maximum capacity of 26,000 barrels per day, and reduces sulphur contents in High Speed Diesel
(HSD) from 7,000 parts per million to 500 parts per million which is an EURO II requirement.
This is yet another important initiative of PARCO which complies with the Government of
Pakistan’s directive to reduce sulphur contents in petroleum products. With the timely
completion of the DHDS project, PARCO has accomplished yet another milestone to greatly
augment the energy system of the country. With more projects currently in the pipeline, PARCO
is determined to continue its mission and maintain its pivotal role in the country’s Energy Sector.
Future Outlook
This research expense would only increase if OMCs want to stay in business hence increasing
the account in the future as well.
Sources:
➢ https://www.parco.com.pk/our-business/refining/dhds-plant/
Page | 926
PAKISTAN STATE OIL
➢ http://environmentclearance.nic.in/DownloadPfdFile.aspx?FileName=e2j2MtsWJaAylJ1
0SMsWhFRhISUY2siTPnb82Fkt9G3lHIgfJQFKZc1kENHWbRGH&FilePath=93ZZBm8
LWEXfg+HAlQix2fE2t8z/pgnoBhDlYdZCxzXmG8GlihX6H9UP1HygCn3pc6cozY6ep7R3
LypBLCViIFVlc4CqzCG0mJyK0ayAJaE=
➢ https://www.pacra.com/summary_report/RR_809_9130_09-Jun-21.pdf
Penalties Faced Due to Low Quality and Artificial Shortage of POL Products by OMCs
The Oil and Gas Regulatory Authority (Ogra) has imposed a fine of Rs5 million each on three oil
marketing companies (OMCs) after they were found involved in creating artificial shortage of
petrol in the country by hoarding the commodity in first 10 days of the current month. Hoarding
and artificial shortage was witnessed soon after the government’s decision to pass on the impact
of plunging international oil prices to consumers by lowering ex-refinery prices amid protests
from the OMCs.
“Ogra imposed a penalty of Rs5 million each on Byco, Askar and BE Energy on show-cause
notices issued during oil shortage crisis earlier this month,” Ogra spokesman Imran Ghaznavi
tweeted. A preliminary investigation report of the Petroleum Division and physical inspection by
Ogra, in collaboration with the Hydrocarbon Development Institute of Pakistan (HDIP),
indicated that the three OMCs were involved in hoarding petrol from June 1 to June 10.
Page | 927
PAKISTAN STATE OIL
Future Outlook
The margin of penalties will always be a part of other expenses from time to time will increase
the account as well.
Source:
➢ https://tribune.com.pk/story/2252578/ogra-imposes-fine-on-omcs
➢ https://ogra.org.pk/oil-9
➢ https://profit.pakistantoday.com.pk/2020/06/11/ogra-imposes-rs40mn-penalty-on-six-
omcs/
➢ https://www.thenews.com.pk/print/671239-govt-fines-omcs-rs40mln-for-fuel-crisis
➢ https://www.thenews.com.pk/print/10491-ogra-finds-10-omcs-responsible-for-petrol-
crisis
Exchange Loss on Foreign Currency Increases as Imports of OMCs Increase
“The current deemed duty of 7.5 percent on high-speed diesel may discontinue and instead
refinery margins may be introduced on the basis of 50 percent OMCs (oil marketing companies)
margin on MS (motor spirit or petrol) and HSD being worked out on CPI (consumer price index)
on annual basis,” the document said. The government may also include ‘ocean losses’ in import
Page | 928
PAKISTAN STATE OIL
parity formula in case of motor spirit and diesel and also add weighted average of actual tender
premium, freight and incidentals of Pakistan State Oil’s cargoes from the last importing period.
To fully recover all the actual cost incurred on the import of crude oil and petroleum products by
importing refineries and OMCs, including all duties and import incidental expenses, the relevant
foreign exchange currency rate on import parity price shall be applicable, the document said.
Any gain/ loss including losses due to delay in SBP approval to OMCs/ refineries because of in-
month movement of the foreign exchange rate shall be adjusted in the following period’s price.
An official of the petroleum ministry conceded proposals were under consideration, but the
government is also asking the refineries to upgrade their plants.
Future Outlook
The currency is constantly depreciating and this would lead to exchange losses no matter what.
So, this account is expected to increase.
Source:
➢ https://www.thenews.com.pk/print/578159-oil-refineries-may-hold-foreign-currency-
accounts
Page | 929
PAKISTAN STATE OIL
➢ http://www.nrlpak.com/pdf/FinancialReport/2008-09/third_quarter_march_31_2009.pdf
➢ https://www.accaglobal.com/hk/en/student/exam-support-resources/fundamentals-exams-
study-resources/f9/technical-articles/forex.html
Page | 930
PAKISTAN STATE OIL
Economic Analysis
Factor Effect
Worker Welfare Fund Act Increase
Supply cut to CNG stations Increase
Workers Welfare Fund Act
According to the amendments made in the act during 2020, all companies are required to
maintain 5% of its profit for disbursement among eligible workers. Due to this act the WPPF
increased by a significant amount in 2021 as the company made record profits.
Future Outlook
The company is expected to make huge profits in the future as the sales for the company are
predicted to increase along with better cost absorption by the company owing to higher demand
and steps taken to ensure better fixed cost absorption. This would ultimately increase the WWF
of the company as 5% is to be set aside of the profit, thus increasing the other expense for the
company.
Source:
Page | 931
PAKISTAN STATE OIL
➢ https://pwwf.punjab.gov.pk/finance#:~:text=Key%20Initiatives,-
Top&text=As%20per%20Companies%20Profits%20(Workers,disbursement%20amongst
%20the%20eligible%20workers.
Supply Cut to CNG stations
During the year 2021, the supply to CNG stations was cut by SNGPL as to ensure that the
pressure of gas to domestic consumers is not disrupted. In a report to tribune, the CNG station
owners said that if the situation continues like this, it will not be long before their sector gets
wiped out. The economic situation in the country only makes the situation worse.
Future Outlook
In the future it is expected that the supply to CNG stations will remain cut which ultimately
implies that they will remain closed, making this the longest supply cut to CNG stations. So PSO
is likely to recognize the receivables from CNG stations as bad debt, thus increasing its other
expenses.
Source:
➢ https://www.arabnews.pk/node/1978991/pakistan
➢ https://tribune.com.pk/story/2325196/businessmen-lament-closure-of-cng-stations
Page | 932
PAKISTAN STATE OIL
Finance Cost
Breakdown:
Finance Cost 2021 Vertical Analysis
Interest / mark-up on short-term borrowings in:
- local currency 1,221,718 11.93%
- foreign currency 504,291 4.92%
1,726,009 16.85%
Mark-up on bank accounts under Islamic mode 531,814 5.19%
Late payment surcharge and other bank charges 7,192,384 70.22%
7,724,198 75.41%
9,450,207 92.27%
Finance cost on wharfage liability 114,581 1.12%
Finance cost on lease liabilities 677,562 6.62%
10,242,350 100.00%
Page | 933
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Finance Cost -24.94% 54.62% 68.07% 0.00% -17.15% -35.10%
2021 2020 2019 2018 2017 2016
Finance Cost 0.94% 1.37% 0.84% 0.56% 0.67% 1.05%
Forecasted Values
Finance cost is a very important account for PSO as it takes into consideration the interest rates.
After analyzing all the economic and industrial factors, we predict that the finance cost for the
company will increase which is mainly on account of the interest rates by the SBP. We predict
that the increase will be between 20-30% for the next 5 years.
Page | 934
PAKISTAN STATE OIL
Company Analysis
Factors Effects
Recoveries from the power sector Decrease
Reduced Policy Rates Decrease
Increase sales in white oil Decrease
Increase in the interest rates Increase
Reliance on cheaper FE-25 borrowings Decrease
Page | 935
PAKISTAN STATE OIL
Finance Cost
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2021 2020 2019 2018 2017 2016
Factors that highly influence the Finance Cost of a company may include the increase or
decrease of the market opportunities, capital provider preference, risk, and inflation etc. Further
we’ll be dissecting the factors and the causes of the increase and decrease of the Finance Cost of
PSO year by year from 2021 to 2016.
Year 2021:
Upon analyzing the data, we found out that there was a 24.9% decrease in the Finance
Cost of PSO from Year 2020-2021. Reasons will be discussed below;
• Lower average borrowing levels due to recoveries from the power sector: The
company’s management working with GOP on recoveries and PKR 25.8 billion were
recovered from the Power Sector along with late payment surcharge income in the
preceding year while reducing finance cost by Rs 3.2 billion (24%).
Page | 936
PAKISTAN STATE OIL
• Reduced Policy Rates: The company also reported a net profit of PKR 0.83 bn. in LNG
segment. vs. loss of PKR 2.43 bn. in FY 20 mainly due to decrease in finance cost on
account of reduced policy rate maintained by SBP this year to provide stimulus to the
economy in times of COVID.
• Increased white oil sales: White Oil volumetric growth of 16.6% resulting in highest
ever White Oil sales. PSO achieved its highest ever volume of 7.6 million tons in the
white oil segment despite the shrinking jet fuel and kerosene oil industry, with a market
share of 45.2% in FY21 vs 44% in FY20 i.e., a growth of 120 basis points (bps).
Source:
Year 2020:
Upon analyzing the data, we found out that there was a 54.6% increase in the Finance
Cost of PSO from Year 2019-2020. Reasons will be discussed below;
• Higher policy rates of State Bank of Punjab: Increase in Finance cost by Rs. 4.4 bn
(54%) due to availability of financing at exorbitant rates during the year on account of
higher policy rate of 13.25% that prevailed most of the year
Page | 937
PAKISTAN STATE OIL
• Higher average borrowing levels primarily on account of delayed payments from
SNGPL: Trade debts of an aggregate amount of Rs. 169,990 million due from Sui
Northern Gas Pipelines Limited (SNGPL).
Sources:
Year 2019:
Upon analyzing the data, we found out that there was a 68% increased to a Rs3.1
billion owing to higher reliance on short-term borrowings of PSO from Year 2018-2019.
Reasons will be discussed below;
• Increase in the interest rates: Finance Cost increased significantly as the State Bank of
Pakistan took bold decisions on money market front and almost doubled the interest rate
from 6.5% to 12.25%.
• Average borrowing Levels: The growth in finance cost was surprising as it increased
despite the fact that PSO received overdue payments from the power sector and the LNG
sector.
Sources:
Page | 938
PAKISTAN STATE OIL
➢ https://tribune.com.pk/story/2090283/pso-profit-drops-17-rs3-5b
Year 2018-17:
Upon analyzing the data, we found out that there was no change in both the years.
The team’s efforts resulted in a decline in finance cost though robust negotiations with the banks
and maintenance of an appropriate mix of local and foreign currency borrowings/efficient
treasury management. Although the Finance cost remained the same, in the first half of 2017 the
Finance cost increased 2.5 times to Rs1.82 billion compared to Rs756.07 million in 2016.
Source:
➢ https://tribune.com.pk/story/1836855/psos-profit-drops-17-due-high-finance-cost
Year 2016:
Upon analyzing the data, we found out that there was a 35.10% decrease to Rs7.14 billion
from Rs11.01 billion in the previous year in the Finance Cost of PSO from Year 2015-2016.
Reasons will be discussed below;
Page | 939
PAKISTAN STATE OIL
• Reduction in borrowing rates due to declining KIBOR: the KIBOR rate is the Karachi
Inter Bank Offered Rate, which is equal to the average interest rate at which term
deposits are exchanged between prime banks in the Pakistani interbank market.
• Reliance on cheaper FE-25 borrowings: Includes favourable exchange difference of
Rs. 2,536,634 (2015: Rs. 2,506,217) arising on foreign currency borrowings (FE-25),
obtained under the directives of Ministry of Finance - GoP. These exchange differences
are to be settled in accordance with the instructions to be obtained by the Company from
MoF-GoP.
Source:
➢ https://www.researchgate.net/post/What_is_KIBOR_bid_and_offer_rate
➢ https://tribune.com.pk/story/1163109/corporate-results-psos-profit-soars-48-rs10-27b
Page | 940
PAKISTAN STATE OIL
Industry Analysis
Factors Effects
Increase in late payment surcharge from Power Sector Increase
Direct Relation with Short Term Borrowing Increase
Increase in markup rates of banks Increase
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of Finance Cost of
all five years of the companies is given below.
Total Finance Cost of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 5,923,256 5,923,256 9,955,428 15,393,332 11,553,734
HTL 77,089,573 127,280,022 313,959,399 186,325,810 81,147,580
APL 324,461 564,333 848,992 1,597,199 1,418,918
BPL 35,167 29,976 4,892 44,559 26,989
TOTAL 83,372,457 133,797,587 324,768,711 203,360,900 94,147,221
Page | 941
PAKISTAN STATE OIL
Total Market Share of all Companies in 5 Years w.r.t Finance Cost
PSO 5.81%
HTL 93.61%
APL 0.57%
BPL 0.02%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Finance Cost
Total Market Share

100.00% 93.61%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00% 5.81%
0.57% 0.02%
0.00%
PSO HTL APL BPL
Page | 942
PAKISTAN STATE OIL
Analysis: The graph given above indicates that HTL has the highest level of finance cost as
PSO’s Finance Cost Share in the Industry w.r.t Years
Years 2017 2018 2019 2020 2021
Share 7.10% 4.43% 3.07% 7.57% 12.27%
Graph Indicating PSO’s Finance Cost Share in the Industry w.r.t Years
Page | 943
PAKISTAN STATE OIL

14.00%
12.00% 12.27%
10.00%
8.00%
7.57%
7.10%
6.00%
4.43%
4.00%
3.07%
2.00%
0.00%
2017 2018 2019 2020 2021
Analysis: The graphs shows that PSO’s market share of other expenses has fallen for three years
but has been increasing since 2019.
Yearly Change/Growth in Finance Cost of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly Growth -17.15% 0.00% 68.07% 54.62% -24.94%
Graph Indicating Change/Growth in Finance Cost of PSO
Page | 944
PAKISTAN STATE OIL
PSO Yearly Finance Cost Growth

80.00%
68.07%
60.00%
54.62%
40.00%
20.00%
0.00% 0.00%
2017 2018 2019 2020 2021
-17.15%
-20.00%
-24.94%
-40.00%
Analysis: It can be analyzed finance cost of PSO has increased in all the years. The growth was
slow in 2020 however. In 2021, the finance cost did not grow and fell.
Growth/Change in the Industry’s Finance Cost Overtime
Years 2017 2018 2019 2020 2021
Page | 945
PAKISTAN STATE OIL
Industry's Yearly
Growth 228.99% 60.48% 142.73% -37.38% -53.70%
Graph Indicating Growth/Change in the Industry’s Finance Cost Overtime

250.00%
228.99%
200.00%
150.00%
142.73%
100.00%
60.48%
50.00%
0.00%
2017 2018 2019 2020 2021
-37.38%
-50.00% -53.70%
-100.00%
Analysis: The industry’s share of finance cost was such that it increased till 2019. It dropped
considerably in 2020 and 2021.
Page | 946
PAKISTAN STATE OIL
Increase in Receivables of Late Payment Surcharge from Power Sector and SNGPL
The second biggest defaulter is the power sector, which needs to pay PSO an amount of
Rs166.992 billion. Among the defaulters' list, Pakistan flag carrier, PIA also owes PSO Rs22
billion. According to the financial sheet of PSO showing its receivables and payables position as
of February 06, 2022, the payables of PSO have also increased to Rs142.5 billion. The
worsening receivables and payables position of PSO clearly narrates the fact that PSO has landed
in danger zone as its liquidity crisis has increased manifold. The SNGPL has emerged on the
scene as the biggest defaulter in the wake of non-recovery of the cost of LNG that it imports
through the first LNG terminal. In other words, PSO has also become the victim of circular debt
because of the LNG. PSO is already facing the circular debt of Rs166.992 billion in the power
sector. The daily payables and receivables position also shows that SNGPL, power sector
(CPPA, HUBCO, and KAPCO) and PIA will also have to pay a huge amount of Rs99.049 billion
in the head of late payment surcharge, which is included in the total amount of Rs443.790
billion. The details show that PSO has faced a loss of Rs6 billion just because of the exchange
rate loss on LNG imports for SNGPL. Coming to the power sector, the Central Power Purchase
Agency (CPPA) is required to pay PSO Rs140.577 billion, HUBCO Rs21.290 bn and KAPCO
Rs5.125 billion. In addition, PSO is also required to be paid Rs9.774 billion in the form of price
Page | 947
PAKISTAN STATE OIL
differential claims from the government of Pakistan. The state-owned oil marketing company,
according to the data, is also required to be paid Rs5.180 billion on account of exchange rate
differential on FE 25 loan. Moreover, PSO also needs to be paid Rs106.064 billion against the
payments on letter of credits of POL imports from Kuwait Petroleum Company and on standby
letter of credits for LNG imports. However, the amount of payables by PSO towards five local
refineries stands at Rs18.415 billion. PSO is required to pay Rs11.057 billion to PARCO, Rs620
million to PRL, Rs2.093 billion to NRL, Rs3.811 billion to ARL and Rs834 million to ENAR.
Future Outlook
The circular debt will increase and so will the receivables of the OMCs this will lead to increase
in their finance cost as well.
Sources:
➢ https://www.thenews.com.pk/print/932026-pso-receivables-rise-to-rs443-79-bn
➢ https://tribune.com.pk/story/2349028/psos-receivables-reach-record-high
Page | 948
PAKISTAN STATE OIL
Finance Cost to Increase with Increase in Short Term Borrowing of OMCs
Finance cost is expected to increase as it has a direct relationship with the Short term borrowings
account. As in the future short term borrowings are expected increase as well, it is safe to assume
that the finance cost would be expected to increase with it as well.
Future Outlook
Finance cost to increase as borrowing is necessary to invest in working capital requirements of
the OMCs.
Source:
➢ http://www.finance.gov.pk/pr_apr_jun_2020.html
Increase in Interest Rates by SBP
Even though the long term borrowings have reduced but the short term borrowings of the OMCs
have been increasing. This is what will have an impact on because the interest rates by SBP are
increasing. This would make the borrowing more expensive. The State Bank of Pakistan (SB)
has hiked the markup rate for financing under Export Finance Scheme (EFS) to 5.5%. In a
circular to all banks, the SBP has decided to increase the markup rate for financing under the
Page | 949
PAKISTAN STATE OIL
EFS by 2.5% in line with the increase in the policy rate announced in the MPC meeting earlier
today where the policy rate was hiked by 250 bps. This brings up the mark rate for EFS part I
and II to 5.5% per anum with effect from April 8, 2022. The SBP says “till further instructions”
which may be seen as an implication for a further hike in the future. Despite the increased
markup rate for EFS, the banks’ spread for corporate borrowers and SMEs remains unchanged at
1% and 2% respectively.
Future Outlook
The interest rates are expected to increase in the forthcoming future as well due to which the
finance cost is expected to increase for the OMCs.
Source:
➢ https://profit.pakistantoday.com.pk/2022/04/07/markup-rate-for-efs-up-by-2-5-to-5-
5/#:~:text=In%20a%20circular%20to%20all,was%20hiked%20by%20250%20bps.
➢ https://www.sbp.org.pk/smefd/circulars/2022/C6.html
➢ https://profit.pakistantoday.com.pk/2022/04/07/markup-rate-for-efs-up-by-2-5-to-5-5/
Page | 950
PAKISTAN STATE OIL
Economic Analysis
Factor Effect
Interest Rates Increase
Finance cost for the company plays one of the most significant costs that the company has been
facing during recent times as it stands to be the second highest cost the company is paying only
after distribution and marketing expense. If we compare the historical data for finance cost of the
last 5 years, the trend for the account was increasing up until 2021 when the finance cost for the
company decreased by a staggering 25%. All the economic reasons for such a change as well as
the factors which will affect the finance cost for the company in the future have been analyzed
below.
Lower Interest Rate
Page | 951
PAKISTAN STATE OIL
stimulus to the economy in times of Covid-19. Owing to these lower markups, PSO was able to reduce its
finance cost Rs.3.2 billion or 25%, which was also positively reflected in its net income
Future Outlook
would ultimately also increase the finance cost for PSO. This forecast has been highlighted in the graph
below;
Page | 952
PAKISTAN STATE OIL
Sources
gap
Page | 953
PAKISTAN STATE OIL
During 2018, the currency was trading at between $1 for Rs.122. However, after the PTI
the dollar is trading at $1 for Rs.185. This ultimately meant that the costs for the company will
increase as what was cheaper before is now expensive, ultimately increasing the finance cost as
well.
Future Outlook
least 18%, as reported by trading economics. This ultimately implies that the costs for the
company would increase. Moreover, we also predict that the long-term borrowings for the
company are expected to increase which implies that the interest on them will also increase due
to the rupee being of less value thus increasing the finance costs for the company. The forecast
Page | 954
PAKISTAN STATE OIL
Source:
Page | 955
PAKISTAN STATE OIL
18,000,000.00
16,000,000.00
14,000,000.00
12,000,000.00
10,000,000.00
8,000,000.00
6,000,000.00
4,000,000.00
2,000,000.00
0.00
200720082009201020112012201320142015201620172018201920202021
Finance cost Naïve Forecast
Page | 956
PAKISTAN STATE OIL
400.00%
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2010
2014
2018
2022
2026
2007
2008
2009
2011
2012
2013
2015
2016
2017
2019
2020
2021
2023
2024
2025
(50.00%)
(100.00%)
Page | 957
PAKISTAN STATE OIL
Page | 958
PAKISTAN STATE OIL
18,000,000.00
16,000,000.00
14,000,000.00
12,000,000.00
10,000,000.00
8,000,000.00
6,000,000.00
4,000,000.00
2,000,000.00
0.00
2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2023
2024
2025
Finance cost Forecasted finance cost
Page | 959
PAKISTAN STATE OIL
Taxation
Breakdown:
Taxation 2021 Vertical Analysis
Current
for the year 10,676,540 71.58%
for prior years - (net) 511,043 3.43%
11,187,583 75.00%
Deferred 3,728,924 25.00%
14,916,507 100.00%
Page | 960
PAKISTAN STATE OIL
2021 2020 2019 2018 2017 2016
Taxation 819.70% -75.56% -41.27% 5.20% 84.86% 18.02%
2021 2020 2019 2018 2017 2016
Taxation 1.26% 0.15% 0.58% 1.11% 1.27% 0.89%
Forecasted Value
The tax rate applied is the average of the last 5 years and the forecasted value is calculated
accordingly.
Page | 961
PAKISTAN STATE OIL
Company Analysis
Factors Effects
Decrease in Deferred Taxes Increase
Increase in the Current Tax Increase
from years 2016 to 2021, the calculated average we get is 135.16% due to the sudden increase
and decrease in some years.
Taxation
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2021 2020 2019 2018 2017 2016
Further we’ll be dissecting the factors and the causes of the increase and decrease of the taxation
of PSO year by year from 2021 to 2016.
Page | 962
PAKISTAN STATE OIL
Provision for current taxation is based on the taxable income for the year determined in
accordance with the prevailing law for taxation on income. The charge for current tax is
calculated using prevailing tax rates. The charge for current tax also includes adjustments for
prior years or otherwise considered necessary for such years. Current tax is charged to profit or
loss except to the extent it relates to items recognized in statement of other comprehensive
income. The Holding Company and Subsidiary Company are taxed as separate entities. The
current and deferred income taxes have been estimated on income of each of the companies
according to the applicable law. Accordingly, no adjustment arising solely with respect to the
losses unutilized by the subsidiary company.
Source:
Year 2021:
Tax charge for the year June 30, 2021 included minimum tax at the rate of 0.75% on the
turnover, in accordance with section 113 of the Income Tax Ordinance. An overall increase in
the taxation was seen in 2021 of 819.7%.
Page | 963
PAKISTAN STATE OIL
• The value remains negative fluctuating between -10 million to -1 million rupees after
2017. Hence, the drastic increase in the taxation was seen in 2021.
• Decrease in Deferred: 44.1%
• Increase in the Current Tax: 61.93%
Source:
Year 2020:
Includes minimum tax at the rate of 0.75% on the turnover, in accordance with Section 113 of
the Income Tax Ordinance, 2001. An overall decrease in the taxation was seen in 2020 of 75.5%.
2017. Hence, the drastic decrease in the taxation was seen in 2020.
• Increase in Deferred: 421.54%
• Decrease in the Current Tax: 5.41%
Source:
Year 2019:
An overall decrease in the taxation was seen in 2019 of 41.2%.
Page | 964
PAKISTAN STATE OIL
2017. Hence, the decrease in the taxation was seen in 2019.
• Increase in Deferred: 252.17%
Source:
Year 2018:
An overall increase in the taxation was seen in 2018 of 5.20%, although 2017 had higher
deferred taxation.
2017. Hence, the decrease in the taxation was seen in 2018.
Source:
Year 2017:
Page | 965
PAKISTAN STATE OIL
Taxation has been positive in the year 2017 due to high subsidiaries from the government. The
Company recognized deferred taxation of Rs. 11.9 billion as at June 30, 2017 on the assumption
that sufficient taxable profits will exist in future periods to utilize this deferred tax asset. Further,
significant judgments have been applied in determining the provision for income taxes. An
overall increase was seen in 2017 of 84.8%.
Source:
Year 2016:
An overall increase in the taxation was seen in 2016 of 18.02%.
Source:
Page | 966
PAKISTAN STATE OIL
Industry Analysis
in order to avail the latest data ate HTL, APL, BPL and PSO. The total value of Taxation of all
five years of the companies is given below.
Total Taxation of all Companies in 5 Years
Companies 2017 2018 2019 2020 2021
PSO 11,121,242 11,699,223 6,870,536 1,679,384 15,445,368
HTL 334,677,749 391,017,141 259,447,192 10,979,935 142,532,964
APL 2,400,000 2,632,963 1,762,251 494,792 2,019,426
BPL 21,628 34,035 39,150 164,253 70,460
TOTAL 348,220,619 405,383,362 268,119,129 13,318,364 160,068,218
Total Market Share of all Companies in 5 Years w.r.t Taxation
PSO 3.92%
HTL 95.28%
APL 0.78%
Page | 967
PAKISTAN STATE OIL
BPL 0.03%
TOTAL 100.00%
Graph of Market Share of all Companies w.r.t Taxation
Total Market Share

120.00%
100.00% 95.28%
80.00%
60.00%
40.00%
20.00%
3.92%
0.78% 0.03%
0.00%
PSO HTL APL BPL
Analysis: The graph given above indicates that HTL has the highest level of Taxation as
PSO’s Taxation Share in the Industry w.r.t Years
Page | 968
PAKISTAN STATE OIL
Years 2017 2018 2019 2020 2021
Share 3.19% 2.89% 2.56% 12.61% 9.65%
Graph Indicating PSO’s Taxation Share in the Industry w.r.t Years
14.00%
12.61%
12.00%
10.00%
9.65%
8.00%
6.00%
4.00%
3.19% 2.89%
2.56%
2.00%
0.00%
2017 2018 2019 2020 2021
Page | 969
PAKISTAN STATE OIL
Analysis: The graph shows that the taxation share of PSO fell till 2019. It only increased in 2020
and fell again in 2021.
Yearly Change/Growth in Taxation of PSO
Years 2017 2018 2019 2020 2021
PSO Yearly
Growth 84.86% 5.20% -41.27% -75.56% 819.70%
Graph Indicating Change/Growth in Taxation of PSO
Page | 970
PAKISTAN STATE OIL
PSO Yearly Taxation Growth

900.00%
800.00% 819.70%
700.00%
600.00%
500.00%
400.00%
300.00%
200.00%
100.00% 84.86%
0.00% 5.20%
-41.27%
2017 2018 2019 2020 2021
-100.00% -75.56%
-200.00%
Analysis: It can be analyzed taxation of PSO faced a declining growth. The taxation only
reduced in 2019. In all other years, the taxation of PSO has grown.
Growth/Change in the Industry’s Taxation Overtime
Years 2017 2018 2019 2020 2021
Page | 971
PAKISTAN STATE OIL
Industry's Yearly
Growth -2.40% 16.42% -33.86% -95.03% 1101.86%
Graph Indicating Growth/Change in the Industry’s Taxation Overtime

1200.00%
1101.86%
1000.00%
800.00%
600.00%
400.00%
200.00%
0.00% -2.40% 16.42%

-33.86%
2017 2018 2019 2020 2021
-95.03%
-200.00%
Page | 972
PAKISTAN STATE OIL
Analysis: The industry’s share of taxation was such that it fell in 2019 and in 2020. In all other
years taxation on the industry has increased.
Factors Effects
Increase in Sindh Maintenance and Development “Cess” Increase
Increase in Excise Duties of Crude Oil Increase
Increase in turnover tax to hinder profits Increase
OMCs pay a lot more than corporate tax rates Increase
Increase in Sindh Maintenance and Development Cess
The OMCs wanted to be more developed in the Sindh province of Pakistan due to which they
were working on the development of stations in that area and imported POL products for that.
However, with that came the tax on the maintenance and development called the cess. OMCs
have a target of becoming more accessible. This would keep generating development cess.
Through the said notice, a demand of Rs.6,438,869 thousand was raised on account of Sindh
maintenance & development infrastructure cess (SMDIC) in respect of POL products
consignments imported by PSO.
Future Outlook
Page | 973
PAKISTAN STATE OIL
The cess is something the government is not ready to provide relief with so it will increase the
taxes in the future as well.
Sources:
➢ http://www.pas.gov.pk/index.php/acts/details/en/31/364
➢ https://excise.gos.pk/taxes/Infrastructure-Cess
➢ http://www.pas.gov.pk/uploads/acts/Sindh%20Act%20No.XVIII%20of%202017.pdf
Excise Duty increases by 73% due to Crude Oil being Expensive
The companies' finances suggest a five times jump in excise duty on petroleum products in the
last seven years. If prices of petrol and diesel are burning a hole in your pocket, then blame it on
the steep hike in excise duty on transport fuels last year. The country’s top four oil-refining and -
marketing companies paid 73 per cent higher excise duty in FY21 than they did the previous
fiscal year.
Future Outlook
Price of crude oil is not expected to fall in the future so the excise duty will increase in the future
as well.
Source:
Page | 974
PAKISTAN STATE OIL
➢ https://www.business-standard.com/article/companies/omcs-pay-73-higher-excise-duty-
even-as-crude-oil-prices-decline-121053100008_1.html
Increase in Turnover Taxes Lowers the Profits made by OMCs
Turnover over tax is applied on the cumulative per liter price of petrol and HSD, which
comprises taxes like petroleum levy and sales tax, besides distribution costs. Only fixed margin
is the turnover/revenue of the OMCs. For the purpose of minimum tax u/s 113 of the Ordinance,
only fixed margin needs to be considered, he said. The fixed margin for OMCs on petrol and
HSD in Rs2.97 against retail prices of Rs108.56 for petrol and Rs110.76 for HSD. The rate of
0.75 percent of turnover is excessive as the OMCs are bound to sell the goods on fixed margin
which constitutes less than 3 percent of the turnover and where margin is less than 3 percent of
the turnover (meaning gross profit lesser than 3 percent of turnover) imposition of minimum tax
at the rate of 0.75 percent of the turnover is harsh and exorbitant. The objective of minimum tax
is to require the companies which suffered loss or made low profit during a tax year to contribute
reasonable amount in relation to their respective turnover towards the government exchequer
during that year – something they would be entitled to adjust against normal tax liability of
subsequent years.
Page | 975
PAKISTAN STATE OIL
Future Outlook
The turnover taxes reduced by 0.25% for OMCs but the government is expected to increase the
turnover tax again in the future. This would increase the taxation account.
Source:
➢ https://dailytimes.com.pk/761696/turnover-tax-hurting-viability-of-omcs-ipi-report/
➢ https://dailytimes.com.pk/761376/ipi-proposes-review-of-turnover-tax-on-oil-marketing-
companies/
➢ https://www.dawn.com/news/577783/turnover-tax-on-omcs-reverted-to-0-5pc
➢ https://www.dawn.com/news/979217/omcs-turnover-tax-issue-remains-unresolved
OMCs pay significantly more than the normal Corporate Tax Rates
Oil marketing companies (OMCs) are paying significantly higher than the 29 percent corporate
tax rate in the country because of anomalies in turnover taxation, an independent think-tank said
on Tuesday. In a report, Islamabad Policy Institute (IPI) said the turnover tax is effectively
negating the provisions of Section 57 of the Income Tax Ordinance, 2001 and is putting a
significant additional financial burden on the long-term viability of the regulated petroleum
sector. Although the profit margin of petroleum dealers, petroleum agents and distributors is
higher than that of OMCs, the petroleum dealers operating petrol pumps are exempt from this tax
Page | 976
PAKISTAN STATE OIL
and petroleum agents are enjoying low rate of 0.25 percent, IPI said in a report. This is
discriminatory, arbitrary and absurd as in similar sector the persons with high profit margin pay
no/lesser percentage of tax on turnover while the OMCs having fewer profit margins suffer
higher rates. Citing examples of other sectors like dealers, sub-dealers, retailers and wholesalers
of fast-moving consumer goods, sugar, cement and edible oil that have been allowed discounted
rate of 0.25 percent under Clause (24D) of Part II of the second schedule to the Income Tax
Ordinance, 2001, the IPI said petrol and HSD also fell in the definition of fast-moving consumer
goods and needed to be treated at par with regards to rate of turnover tax.
Future Outlook
OMCs are facing a hard luck with respect to their taxation and the government takes little
measures to facilitate them as they want to provide relief to the customers. So, the taxation
account is expected to increase in the future as well.
Sources:
corporate-tax-rates
➢ https://psopk.com/files/corporate_briefing_session/Corporate%20briefing%20session281
019.pdf
Page | 977
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Taxation
Economic Analysis
Factor Effect
Inflation Increase
Track and Trace System Increase
Higher Profitability Increase
Effective Tax Rate Increase
Taxation is one of the most important accounts any company can maintain and is one of the
accounts which any company flaunts very proudly i.e. they are a tax paying country. In Pakistan
OMCs is one of the highest tax paying industries and it accounts for a large proportion of the
government revenue. PSO being the largest OMC in the country thus pays a huge amount of tax
to the government. The amount of tax which the company pays ultimately depends on a number
of economic factors which have been analyzed below.
Source:
corporate-tax-rates
Page | 978
PAKISTAN STATE OIL
Inflation
This inflationary pressure and variances in the price of oil internationally has led to an increase
in the sales of the company in numeric terms which has ultimately increased the profit and thus
taxation.
Future Outlook
Page | 979
PAKISTAN STATE OIL
as has been predicted which would ultimately lead to higher profits and thus a higher tax being
paid.
Source:
march-1/
Page | 980
PAKISTAN STATE OIL
Track and trace system
In order to prevent leakage of revenue, under-reporting of production and sales, and to ensure
proper payment of FED (Federal Excise Duty) and Sales Tax on the manufacture and sale of
specified goods/ products, the FBR (Federal board of Revenue) has decided to implement a
Track and Trace System for specified goods/ products which include Petroleum, Cement, Sugar,
Fertilizer and Beverages imported into or manufactured in Pakistan.
Federal Board of Revenue has successfully completed the Evaluation Process for the grant of
five-year license for an IT-based solution for electronic monitoring (Track and Trace System) of
specified goods i.e. Tobacco, Cement, Sugar, Petroleum and Fertilizer.
This has resulted in an effective and efficient collection of taxes from different businesses,
ultimately increasing the tax revenue of the government.
Future Outlook
Page | 981
PAKISTAN STATE OIL
Moving forward the system is expected to play a very important part in the tax collection for the
government as it will ensure effective and efficient tax collection thus increasing the amount of
tax for PSO.
Source:
➢ https://www.fbr.gov.pk/introduction-track-and-trace/152962/152963
➢ https://tribune.com.pk/story/2328522/track-and-trace-system-a-game-changer
➢ https://www.thenews.com.pk/print/911235-fbr-s-track-trace-system-launched-ex-rulers-
must-be-punished-for-taking-rs30tr-loans-pm
Higher Profitability
During the fiscal year 2021, PSO recorded all time highest sales and an all-time highest profit
after tax. The main reasons for this could be attributed to better cost absorption as well as the
increase in prices and demand of petroleum products.
An increase in the profits for the company ultimately implies that the taxation that it will be
paying on its profits will also be high which the case is for PSO. It could clearly be seen that the
record high profits for the company resulted in the increase in taxation paid by a significant
amount, despite the tax rate being the same at 29%.
Page | 982
PAKISTAN STATE OIL
Future Outlook
Looking forward the sales of the company are expected to increase and thus the profitability of
the company is also expected to increase as we predict better cost absorption by the company.
Thus assuming this, it is safe to say that the tax paid by the company will also increase.
Source:
➢ https://www.dawn.com/news/1683025/tax-revenues
➢ https://tribune.com.pk/story/2354945/fbr-collects-rs486tr-in-taxes
the dollar is trading at $1 for Rs.185. This ultimately meant that the cost of buying will increase
thus increasing the price of the petroleum products. Sales of the company also increased
Page | 983
PAKISTAN STATE OIL
numerically which increased the profit in numeric terms as well, as was reported in the annual
report of 2021.
Future Outlook
stock would increase, which would in turn increase the selling price of the petroleum products,
thus increasing the sales and profits. Higher profits would ultimately mean higher taxation. The
forecast for currency devaluation against dollar is illustrated in the graph below.
Source:
Page | 984
PAKISTAN STATE OIL
Effective tax rate for the company
The applicable tax rate for the company has not changed since last year and stands at stands at
29%. However as has been reported by the news, OMCs pay a higher tax rate than the corporate
29% in the country because of anomalies in turnover taxation. This is also reflected in the annual
report of the company where the effective tax rate for the company has increased to 33% in 2021
from 26% in 2020. Even if we look at the historical data, the effective tax rate has been much
higher where it was 39% in 2019 while it was 43% in 2018.
These high percentages of effective tax rate can mainly be attributed to adjustments relating to
prior years as well as the advances which the company has been and have not been adjusted.
Future Outlook
Page | 985
PAKISTAN STATE OIL
Moving forward it is safe to assume that the effective tax rate will remain significantly higher as
compared to the normal tax rate, a statement which can also be supported by the historical data.
So the tax paid by the company will also increase in the future.
Sources:
➢ Annual report, 2021
corporate-tax-rates
Page | 986
PAKISTAN STATE OIL
__________________________________________________________
________________________
Page | 987
PAKISTAN STATE OIL
SECTION XI:
APPLICATION OF
VALUATION MODELS
Page | 988
PAKISTAN STATE OIL
Accounting Valuation Model
Page | 989
PAKISTAN STATE OIL
Page | 990
PAKISTAN STATE OIL
Introduction
This model is designed to determine whether or not our stock is undervalued. We can come to
this conclusion by comparing the stock's intrinsic worth to its market value. One of the three
outcomes is possible.
1. Stock is undervalued because intrinsic value is greater than market value. (Intrinsic Value
> Market Value)
2. Stock is fairly priced, intrinsic value equals market value (Intrinsic Value = Market
Value)
3. Market value vs. intrinsic value, stock is overvalued (Intrinsic Value < Market Value)
This is the most appealing stock to investors, and it should be purchased. This implies that the
stock should be traded at a greater price than it now is. This scenario benefits investors, who are
more willing to invest because the stock price is expect ed to rise in the future
This type of stock isn't very appealing to investors because they won't make a lot of money, but
they won't lose anything either. Investors in desperate need of cash would sell this stock since
there would be no risk of losing money.
This is the least appealing stock to investors, and it should be sold. This implies that the stock
should be traded at a lower price than it already is. This scenario is risky for investors because
the stock price will drop in the future, causing them to lose money.
Page | 991
PAKISTAN STATE OIL
Working
We used the values of expected net income for the computation of intrinsic value per share. from
the income statement predicted for the next five years. For each year, the initial owner's equity is
taken as the previous year's closing owner's equity. Kc was estimated using the CAPM approach,
and ROE was derived by dividing anticipated NI by forecasted owner's equity for each year.
Then, for all future years, (ROE-Kc) was calculated. ANIs were calculated using the formula
BOE* using the above data (ROE-Kc). The terminal value was estimated using the sustainable
growth rate. This terminal value was then included in the year 2025's final ANI. The NPV was
then estimated using the BA2 Plus calculator. The PE ratio was multiplied by the EPS Ratio to
arrive at the market value. The number of shares included in the model is the average of all
anticipated years' number of shares.
Conclusion
The results show that stock is overvalued. Intrinsic value came out to be PKR 54.38 whereas,
market price is PKR 76.5. This will not attract many investors towards PSO stocks in the next
five years.
Page | 992
PAKISTAN STATE OIL
Free Cash Flow Model
Page | 993
PAKISTAN STATE OIL
Page | 994
PAKISTAN STATE OIL
Introduction
Free cash flow (FCF) is a financial performance indicator computed by subtracting operating
cash flow from capital expenditure. Free cash flow (FCF) is the amount of money a firm can
generate after deducting the costs of maintaining or expanding its asset base. Free cash flow is
critical because it allows a business to pursue possibilities that will increase shareholder value.
There are three inferences that can be drawn.
1. Stock is underappreciated (Intrinsic Value < Market Value)
2. The stock market is overpriced (Intrinsic Value > Market Value).
3. The stock market is overpriced (Market Value = Intrinsic Value)
This first case implies that the stock should be traded at a greater price than it now is. This
scenario benefits investors, and they are more likely to invest because the stock price is expected
to rise in the future.
This first second that the stock should be traded at a lower price than it is now. This scenario is
unfavorable for investors, who are more likely to invest because the stock price will fall in the
future.
This third case that the stock should be traded at the same price as it currently is. This is the same
scenario for investors, who are likely to invest or not invest based on whether the stock price will
rise or fall in the future.
Page | 995
PAKISTAN STATE OIL
Working
Free cash flow is determined by subtracting the increase in operating capital from NOPAT,
which is the operating cash flow for the years 2021-2025. The outcome of tax adjusted EBIT is
NOPAT. FCF was negative throughout the years. The terminal value is then computed by
increasing FCF Because the corporation is discounting future free cash flows to determine their
present value today, this WACC is used. After that, FCF was discounted at WACC every year,
and in 2025, FCF was added to the terminal value and then discounted. We next estimated the
stock's net present value using a financial calculator. The fair price per share was calculated by
dividing the net present value by the number of shares.
Conclusion
As the fair price is well below the current market price, we can say that the stock is overvalued,
and investors shouldn’t invest in it
Page | 996
PAKISTAN STATE OIL
P/E Model
Page | 997
PAKISTAN STATE OIL
Page | 998
PAKISTAN STATE OIL
Introduction
The PE valuation model was employed, with the EPS and DPS calculated first. Kc was
determined using the CAPM method, and then Kc and ROE were combined to determine the
franchise factor value. The difference between 1/Kc and 1/ROE is known as the franchise factor.
A ratio of return to owner's equity was used to determine the ROE. The formula was used to
compute the growth rates 'g'; ROE (1-d). As a result, these growth rates were used to derive the
growth factor. Furthermore, multiplying the growth factor by the franchise factor yielded the
franchise PE value, which was then added to tangible PE to yield the intrinsic leading PE. The
division of Po with EPS1 (MVo/NI1) was the actual leading PE
Conclusion
When the intrinsic and actual leading PEs were compared, the actual PE was higher than the
intrinsic PE, indicating that the stock is overvalued.
Page | 999
PAKISTAN STATE OIL
__________________________________________________________
________________________
Page | 1000
PAKISTAN STATE OIL
SECTION XI: REMARKS
FROM LAST SUBMISSION
Page | 1001
PAKISTAN STATE OIL
Page | 1002

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PAKISTAN STATE OIL

Final Submission: All Accounts

Submitted to: Maha Ijaz

Programme: BBA (Hons) Double Majors Finance & Marketing

Muhammad Wahaj Faisal

Dated: 11th May 2022

SECTION I: BETA CALCULATION ...................................................................................................... 8

Non-Current Assets ................................................................................................................................ 135

Industry Analysis .................................................................................................................................. 285

________________________________________________________________________________ .... 500

General Analysis ................................................................................................................................... 645

Economic Analysis ............................................................................................................................... 853

P/E Model ................................................................................................................................................ 997

SECTION II: FINANCIAL

Balance Sheet (2007-2021)

Income Statement (2007-2021)

Cash Flow Statement (2007-2021)

Balance Sheet (2007-2021)

Income Statement (2007-2021)

Cash Flow Statement (2007-2021)

Balance Sheet (2007-2021)

Income Statement (2007-2021)

Cash Flow Statement (2007-2021)

Balance Sheet (2022-2026)

Income Statement (2022-2026)

Cash Flow Statement (2022-2026)

Balance Sheet (2022-2026)

Income Statement (2022-2026)

Cash Flow Statement (2022-2026)

Balance Sheet (2022-2026)

Income Statement (2022-2026)

Cash Flow Statement (2022-2026)

SECTION IV: BALANCE

Property Plant & Equipment

Property, Plant and Equipment 2021 Vertical Analysis

Operating assets 32,810,904 85.30%

Capital work-in-progress 5,653,483 14.70%

Horizontal Analysis: Average (66.31%)

2021 2020 2019 2018 2017 2016

PPE 7.77% 3.21% 371.95% 5.51% 5.10% 4.33%

Vertical Analysis: Average (5.32%)

2021 2020 2019 2018 2017 2016

PPE 9.29% 9.51% 7.62% 1.82% 1.77% 1.93%

Increase in Capital Expenditure Increase

Capital Work in Progress Increase

Increase in Tanks and Pipes Increase

Filling Stations Increase

Oil Storage Facilities Increase

Upgradation in Fleet Increase

Increase in Retail Outlets Increase

decrease in some years.

property, plant and equipment.

indicating maintenance level capital expenditure.

services filling stations, plants and machinery etc.

• Increase in Rehabilitation Storages: The company fast tracked infrastructural projects

which significantly increase the number of day's cover of petroleum products.

integrated oil storage and dispatch terminal in Karachi.

➢ Annual Report (2021)

having cost of Rs.16,262,751 (2019: Rs.15,700,444).

services filling stations, plants and machinery etc.

• Increase in Storage Tanks: The Infrastructure Construction Department initiated

completed and commissioned. Development of new 151,000 MT storage tanks is also

under progress at five locations.

and PARCO terminals at Machike and Shikarpur were successfully connected.