Pakistan State Oil (PSO), the largest oil marketer in the country, has revealed plans to acquire stakes in public sector energy companies as part of a strategy to address mounting debt owed to it by firms like the national airline.
The accumulation of unresolved debt across Pakistan’s power sector is a significant concern for international organizations like the International Monetary Fund (IMF). PSO’s aggregate receivables from government agencies and autonomous bodies amount to approximately $1.8 billion.
Syed Muhammad Taha, the Managing Director and Chief Executive of PSO, disclosed the proposal in an interview with Reuters. The plan involves participating in competitive bidding processes to acquire stakes in public sector energy companies, with the acquired stakes offsetting PSO’s receivables.
While the government holds a stake of about 25 percent in PSO, private shareholders own the remainder. The proposal is currently under consideration by the government, but officials, including the petroleum minister and information minister, have not yet commented on the matter.
Circular debt, which arises from the failure to pay dues along the power sector chain, poses a significant challenge to Pakistan’s economy. This debt, amounting to about 5 percent of GDP by June 2023, affects various sectors, including power and gas.
As part of IMF reforms, Pakistan has raised energy prices to address the debt accumulation. However, a resolution for the accumulated debt is still pending. PSO’s receivables from government agencies and autonomous bodies, including gas provider Sui Northern Gas, constitute a substantial portion of the overall debt.
PSO’s proposal includes the acquisition of stakes or complete ownership of assets such as power plants in Nandipur and Guddu, as well as equity stakes in profitable public sector companies like Oil and Gas Development Co.
Furthermore, PSO is involved in the broader settlement framework for the privatization of Pakistan International Airlines (PIA). This includes a potential “clean asset swap” and acquiring stakes in non-core assets of PIA, such as property.
As economic conditions improve, PSO anticipates modest growth in demand for petroleum products. The company is collaborating with strategic investors from China and the Middle East to upgrade and expand its refinery arm, Pakistan Refinery Ltd.
With a vast network of retail outlets, depots, airport refueling facilities, and storage capacity, PSO plays a crucial role in Pakistan’s energy sector.
