20 percent drop in September POL consumption

The petroleum products' consumption in Pakistan declined by 20.2 percent on month-on-month basis during September 2011. On aggregate basis, consumption during the first quarter of FY12 increased by 6.7 percent on year-on-year basis with total petroleum product volumes (ex non-energy) being at 4.98 million tons.
"The nominal growth in cumulative volumes has been primarily on the back of massive decline in FO (37 percent), HSD (7 percent) and JP (7 percent) volumes in September 2011", Khurram Schehzad, Head of Research at InvestCap said. The local refineries improved their share in the products' local-import mix, as 61 percent of the country's petroleum consumption demand was met through imports as compared to 65 percent in the first quarter of FY11.
He said that petroleum consumption during September 2011 was been recorded as lowest since February 2010 with total volumes standing at 1.38 million tons, while posting a massive 20 percent decline. This total decline was a result of decline witnessed in the two major products, FO (-37 percent, contributing 42 percent to basket) and HSD (-7 percent), sharing 33 percent of basket), which cumulatively brought the overall consumption growth down, despite other products gaining strength, he said.
In the same vein, FO also recorded 10-month low volumes while HSD consumption stood at a year's low, since last September 2010. Thus, total volume during September 2011 recorded a marginal growth of 1.1 percent, despite low base-effect (flood). He said the decline can partly be attributed to continuous spells of rainfalls followed by flood in the Sindh province. In this regard, HSD's volume was affected, followed by decline in FO consumption amid acute liquidity crunch making FO importers unable to provide product on time for consumption (PSO with massive 40 percent decline in FO volume). This is also evident from the fact that country's petroleum products import is also down 29 percent in September 2011.
PSO, with huge 29 percent on month-on-month and 11.6 percent on year-on-year decline in volume (led by FO -40 percent MoM, HSD -21 percent MoM), lost its market share by a significant 740bps on MoM to even below 60 percent at 59.3 percent. While PSO lost a big chunk, Shell managed to improve market share by 320bps to 11.6 percent in September 2011 with 10.8 percent MoM growth in volumes. APL continued gaining market share, adding 110bps to a total of 9.1 percent. Interestingly, APL improved market share despite 9.4 percent decline in volume.
"As far as export ban of petroleum products to Afghanistan is concerned, keeping portion of the products and their respective share in gross profit margins, we have calculated earnings impact on the listed OMCs and the impact ranges between 3 percent-14 percent on the three OMCs where Shell and APL seem to be affected the most as 13.5 percent and 7 percent of their POL products were exported as per last year's volume figures", he said. Since the share in gross profits is minimal for all the three OMCs, change in EPS may be greatest for Shell, followed by APL, while least for PSO, he added.