Pakistan sets April 26 bidding date for PSO

Pakistan's Privatisation Commi-ssion said yesterday it had set April 26 as the bidding date for the the privatisation of Pakistan State Oil.

"The government plans to privatise Pakistan State Oil Company Limited (PSO) as an integrated company by selling a 51 per cent stake in the company to a qualified strategic buyer," a statement from the Commission said.

Representatives of state-run Kuwait Petroleum Corp, the Saudi Arabian group Midroc and a local business group, the Fauji Foundation, met officials of the commission in Islamabad yesterday to finalise the bidding date.

The statement said certain issues needed to be resolved before the bidding but did not identify them.

However, a commission official told Reuters bidders wanted to know what would happen to billions of rupees owed to the PSO by two state-run power companies.

He said the state-run Karachi Electric Supply Corp (KESC) owed roughly Rs4.5 billion ($77.5 million) to PSO, while the Water and Power Development Authority (Wapda) owed about Rs3 billion ($51.7 million).

PSO, which has a 70 per cent share of Pakistan's petroleum market, has long demanded that Wapda and KESC clear up their debts, but the financial woes of the two power companies have prevented them from paying, said the official, who did not want to be identified.

Mohammad Sohail, research head at Investcap Securities, told Reuters the issue was the key concern of the bidders.

Analysts also said that any prolonged war in Iraq could have an adverse impact on the sale of PSO, which the government wants to complete as soon as possible.

"If a prolonged war breaks out in Iraq, than PSO's privatisation could be delayed for a few months," he said. "But considering the nature, profitability and potential of the company, buyers will remain interested."

PSO, a heavyweight on the country's main Karachi Stock Exchange, closed down Rs7.75, or 4.04 per cent, at Rs184 yesterday.

Meanwhile, PSO said it expects profit in the year to June 30, 2003 to grow about 25 per cent, boosted by economic growth and higher sales.

Net profit is expected to rise to about Rs4 billion ($69 million) from Rs3.1 billion a year earlier, Tariq Kirmani, managing director of the company, told reporters in Karachi yesterday. Profit rose fivefold in the first half to Rs2.065 billion. "This trend showed that the profit will be around Rs4 billion by the end of this fiscal year," Kirmani said.

The company also urged the government to levy some additional taxes to cover the $1 billion cost to help double oil storage capacity in the country, Kirmani said.

Pakistan oil companies recently raised their oil inventories to 21 days' consumption from 15 in case a U.S.-led attack on Iraq disrupts oil shipments. Pakistan State Oil wants the government to raise capacity to 50 days over three years.

The company has asked the government to increase the strategic oil reserves of the country by increasing taxes on fuel, Kirmani said. "The government could levy as much as 0.75 paisa a litre."

Taxes vary on oil products with the government collecting as much as 50 per cent as taxes per litre.

Pakistan State Oil has the capacity to store 800,000 tonnes of oil - 80 per cent of Pakistan's total capacity - and will raise it by 60,000 tons over the next six months, Kirmani said.

The company is planning to construct three oil terminals at Gwadar port. It is premature to give details of the project cost, storage capacity and the allocated area, he said.

PSO may build three import terminals at the port of Gwadar in the country's south, the Business Recorder reported on its Website, Kirmani.

The government reserved land for the terminals, the report cited Kirmani as saying. The project scale and cost have yet to be decided, it said.

Pakistan State Oil would store imported oil products in the terminals before they get distributed across the country, Kirmani said.