PSO Bleeds Cash as Management Stalls on Recovery Plan

Staff Report

Islamabad: As management fails to recover over Rs732 billion unpaid dues and has no concrete recovery roadmap, PSO’s ability to sustain operations and maintain market dominance is now under serious threat.

The state owned company is facing a critical financial crunch due to the highest ever receivables which have ballooned to an alarming Rs732 billion.

Out of total, it has to recover Rs325 billion outstanding from SNGPL alone.  Moreover it has also to recover over Rs200 billion in Late Payment Surcharge (LPS) which has strained PSO’s cash flow.

Despite ongoing discussions, the management of PSO has no concrete plan to resolve the circular debt crisis which would further worsen the financial position of the company.

The company is already losing market share due to growing dominance of Go Pakistan, which has already been acquired by Saudi Aramco.

The investment plan of PSO have already been suffered due to severe liquidity constraint due to lack of funds. The unresolved dues and reliance on government action have threatened PSO’s operational sustainability, profitability, and ability to compete effectively.

Pakistan State Oil (PSO) conducted its Corporate Briefing Session today where management discussed financial performance and future outlook of the company.

As per management, efforts are ongoing to resolve circular debt, though no definitive plan is in place. The target is to recover both principal and Late Payment Surcharge (LPS). As of Mar 2025, PSO’s total receivables stand at Rs732bn, which included Rs325bn in principle from SNGPL alone. Overall LPS amount is over Rs200bn+. Investment plans are in place, pending liquidity, with options still under review.

Since Feb 2024, there has been no buildup in circular debt from SNGPL side as company has made it clear to Government and PSO that payments should flow on monthly basis. And this understanding is continuing and being implemented in true spirit. In contrast, OGDC and PPL receivables increased from Sui companies in 3QFY25.

PSO Huge Inventory Loss to Turn Earnings in Red

Increase in margins on petroleum products is due, however, its timeline can not be confirmed. In next fortnight, increase in margins is difficult considering the uptick in oil prices amidst middle east region tensions.

PSO expanded its retail outlet during the year by opening 67 new sites as storage capacity was expanded. The expansion strategy of retail outlets will continue in next few years. PSO operates over 3,600 retail outlets nationwide, including 31 company-operated stations. PSO has 9 installations, 19 depots, and 15 aviation stations across Pakistan.

Smuggling ranges between 1,500–6,000 tons per day, typically averaging 2,000–3,000 tons, depending on weather conditions and law enforcement activity.

PSO’s overall market share declined compared to previous year due to intense competition and unsustainable discounts offered by other OMCs, which would not be profitable for PSO. While last year was an abnormal period, PSO’s realistic market share stands at 45–46%, with plans to organically strengthen its position.

Digital payments account for 12–13% of PSO’s transactions, including PSO and bank cards, compared to 9–10% for the other industry players.

The company has a total storage capacity of approximately 1.24 million tons, following the removal of certain OGRA restrictions. It operates two lubricant manufacturing facilities with a single-shift blending capacity of 70 KMTs per annum.

 PSO constructed two 25,000 MT tanks at Faqirabad depot and rehabilitated four tanks (5,300 MT) at KTB, DLP, and LMPA.

The decline in international fuel prices from $85.03/bbl in 9MFY24 to $76.43/bbl in 9MFY25, driven by the Israel-Iran conflict, led to inventory losses. Despite this, PSO’s profits rose 14% YoY to Rs15bn in 9MFY25.

In 9MFY25, Pakistan’s liquid oil mix shifted with higher Mogas (48.3%) and HSD (41.9%) shares, while Furnace Oil dropped to 5.0% (vs 8.4%); JP-1 remained at 4.3%. PSO followed a similar trend, with Mogas and HSD rising to 44% and 43.7%, Furnace Oil declining to 1.9% (vs 4.2%), and JP-1 increasing to 9.6% (vs 8.5%).

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