Petroleum products were the top revenue contributor of domestic sales tax, contributing around 44 percent (or Rs233.2 billion) to the total proceeds during 2014-15. Sales tax collection was concentrated in few commodities as 10 major items, including POL (petrol, oil and lubricants) and natural gas, shared 73 percent of the total domestic sales tax. All the major 10 items posted positive growth except natural gas and fertilizer.
The collection of Rs233.2 billion through domestic sales of petroleum products in 2014-15 was 1.1 percent higher than Rs230.7 billion a year earlier. The major reason behind this low growth was falling international prices of petroleum products during the year. Like domestic sales tax, petroleum was a leading source of sales tax collection at import stage, too, with a share of 29.8 percent. The share of top three items namely POL products, iron and steel, and machinery was around 50 percent.
Production and sales
Crude oil production in Pakistan increased to 88 barrels per day in October 2015. Crude oil production in Pakistan averaged 63.54 barrels per day from 1994 until 2015, reaching an all-time high of 98 barrels per day in November of 2014 and a record low of 50 barrels per day in April of 1999. Crude oil production in Pakistan is reported by the US Energy Information Administration.
The petroleum sales in the country have been growing with increased consumption. Data from Oil Companies Advisory Committee (OCAC) for 10 month fiscal year shows that the overall petroleum sales by the OMCs grew by almost four percent year-on-year, touching 18.8 million tons.
In 10 months of fiscal year 2016, oil sales registered growth of 4 percent to 18.8 million tons led by MOGAS and HSD sales, which are up 25 percent and 4 percent respectively. FO sales were down 6 to 7 million tons in the stated period.
Sales of key petroleum products comprising of petrol, diesel and furnace oil increased by over three percent year-on-year, while the imports of the same registered a 4.5 percent year-on-year increase in the equivalent period. Sales of petrol and diesel remained strong in the 10-month period due to sharp fall in petroleum product prices and increasing consumer purchasing power.
Petrol sales have been climbing without a break. And diesel sales can too be seen moving up in the recent couple of months. This has been due to improving demand of retail products, rising car sales, and improving economic activity.
Oil marketing companies like PSO, Shell, and APL suffered high inventory losses in the 9 month financial year 2015-16 performance. However, they are also banking on rising volumetric sales as the trigger to their profitability.
PSO is gradually becoming a favoured stock due to increased demand of retail products, LNG sales replacing the declining furnace oil sales (only PSO is dealing in imported LNG), and improving liquidity issues. The OMCs are likely to benefit further with the recent decision to increase OMC margins and linking it to CPI — a subject that the column will take up separately soon.
The petrol and diesel sales during the month of April 2016 remained strong, increasing by 12 percent and 6 percent to 0.5 million and 0.7 million tons, respectively.
April data show that the furnace oil sales remained cowed due to lower off-take by the power sector and the industrial sector that have been shifted to imported LNG. Furnace oil volumes decreased by 23 percent year-on-year in April 2016, and its imports sloped down by 14 percent year-on-year.
According to latest data, furnace oil sales remained under pressure as they declined 24 percent year-on-year to 0.6 million tons in April 2016. As a result, total oil sales of the country were down 5 percent year-on-year to 2 million tons in April 2016.
Sales of MOGAS and HSD have remained strong due to sharp fall in petroleum product prices thus increasing consumer purchasing power. MOGAS and HSD prices have both come down by 13 percent year-on-year in April 2016 to Rs64/liter and Rs73/liter. FO sales have come under pressure due to availability of LNG to power plants and industrial sector.
With expanding country wide network, Hascol Petroleum’s sales showed strong growth of 67 percent year-on-year to 142,000 tons with market share improving to 7 percent in April 2016 vs 4 percent in April 2015. Sales of Pakistan State Oil (PSO), Pakistan’s largest oil marketing company, came down by 8 percent year-on-year to 1.1 million tons driven by lower FO sales.
The OMC sector due to increasing demand of retail products, improving economic activity and increasing car sales. OMCs are likely to benefit from increasing sales volume of MOGAS and HSD as margins on these items are fixed in rupee terms in contrast to FO where margins are as a percentage of revenues. They continue to favor PSO due to subsiding cash flow problems, increased demand of retail products, and upside from LNG sales since PSO is the only OMC importing LNG.