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Petroleum minister expects refiners' earnings to improve

ISLAMABAD – Pakistan may deregulate the pricing of petroleum products this week, allowing refiners to determine rates for the first time, Bloomberg reports quoting a government minister.

"Earnings of almost all the refiners will improve," Syed Naveed Qamar, petroleum minister, said in an interview in Islamabad on Thursday. The pricing of diesel will continue to be regulated.

National Refinery, the nation's second-biggest, and Pakistan Refinery, the third-largest, may gain from the deregulation. The government agreed to shift pricing powers to the industry on a proposal by the petroleum ministry.

"This was a long-awaited decision," said Sajjid Bhanji, vice-president of equity sales at Arif Habib in Karachi.

"It will encourage oil-related companies to expand capacities and distribution networks."

The Oil and Gas Regulatory Authority, a government agency, determines rates. Pak-Arab Refinery, the biggest, is not listed on the stock exchange.

Lower rates
The so-called inland freight equalisation margin, under which petroleum product prices were held at the same level across the country, will also be abolished, Qamar said.

This will lead to lower rates in major cities as refineries compete, he said.

Pakistan State Oil, the biggest fuel retailer, which is owed Rs148 billion (Dh6 billion) by energy companies for purchases of furnace oil and diesel, needs funds to avoid defaulting on petroleum import payments, Qamar said.

"The Finance Ministry will give State Oil about Rs20 billion next week to save it from default," he said.