June 07, 2023 (MLN): Pakistan State Oil (PSO), Pakistan's premier energy marketing company, finds itself at a crossroads as it risks missing out on a proposed golden deal between the government and international oil giants that would allow them to operate custom bonded storage facilities at Pakistani ports.
As per the rule, all public companies have to open a tender under the Public Procurement Regulatory Authority (PPRA) regulations before making any selling or purchasing deals, which is a time-consuming process.
On the other hand, privately operated OMCs do not have to go through such a cumbersome practice.
Thus, PSO, being a public company, is obligated by an archaic regulation that requires the company to announce tenders before opening Letters of Credit (LCs) for oil imports.
In this setting, there are growing concerns about how the company, bound to deal with such a long-waited tender process, will reap the benefits from custom bonded storage facilities for spot oil purchases.
This is the reason why, while other market players position themselves to benefit from deals, PSO remains stuck in the official procedures of the tender process. This condition, formerly seen as a protective measure, has now become a considerable stumbling block as PSO will find itself unable to fully leverage the benefits.
In order to provide a level playing field for all the OMCs, the government has to remove this tender condition for PSO. The only reason that PSO remains competitive is due to its heavy volumes, which exceed those of any other privately operated OMCs. At present, PSO's market share stands at 50.2% in 11MFY23.
Sources close to this golden deal have informed Mettis Global that the government is actively finding a way to exempt public OMCs from the lengthy tender process.
