PSO, Govt and IMF Work on Circular Debt Plan
Pakistan State Oil (PSO), the government and the International Monetary Fund (IMF) are working on a plan to settle outstanding circular debt, the company’s management told shareholders at its annual general meeting. The circular debt plan comes as PSO says its receivables have remained unchanged since February 2024.
Management said PSO had received around Rs10 billion from the Power Division after the financial year ended, and Rs26 billion from Sui Northern Gas Pipelines Limited (SNGPL) during the final quarter. Those payments have not cleared the stock of receivables weighing on the company.
Market share back above 40 per cent
PSO has recovered its market share to more than 40 per cent, with most of the gains recorded since July 2026. Management credited better availability, pricing discipline and supply chain execution, and said the recovery was profitable, not discount-driven.
To hold its position among more than 40 oil marketing companies, PSO is refreshing its brand and automating its supply chain. The company expects industry fuel sales to stay broadly stable, but warned that high prices, austerity and rising electric vehicle and solar adoption are weighing on demand.
Gasoline demand growth is expected to slow as electric vehicle use increases. In response, PSO plans to install electric vehicle charging facilities at selected outlets and along major routes, including Karachi-Hyderabad, Lahore and Rawalpindi-Peshawar, as well as in other key cities.
Automation, margins and the circular debt plan
Management said higher oil marketing company margins depend on completing retail network automation, including automatic tank gauging systems. PSO expects to finish the upgrades by March 2027, which could qualify it for revised margins.
Dealer margins have already increased, while oil marketing company margins remain unchanged until the automation requirements are met. The company is also preparing for potential petroleum sector deregulation, which the government is keen to pursue. A credible circular debt plan would ease the financing pressure behind all of these upgrades.
LNG, Qatar cargoes and the tax problem
PSO said QatarEnergy LNG supplies under a government-to-government contract remain profitable on a standalone basis. Yet an effective tax rate above 50 per cent, largely due to a one per cent minimum tax on LNG turnover, makes the business loss-making after finance costs.
Despite disruptions in the Strait of Hormuz, PSO received 11 QatarEnergy cargoes since March under existing contracts. Winter supply planning is under way, with the government coordinating procurement and contractual deliveries.
PSO said it had no plans to exit LNG, provided structural issues were resolved with government support, and that LNG accounts with SNGPL have been reconciled.
Feature Pakistan recently reported that Pakistan and Qatar are close to a revised LNG deal, which forms part of the same effort to put energy imports on a firmer footing. The PSO update adds the company’s side of that story: cargoes are flowing, but the tax treatment of LNG still turns a profitable supply deal into a loss after finance costs.
Refineries, diesel and the White Oil Pipeline
Local refineries meet around 95 to 97 per cent of domestic high-speed diesel demand, PSO said, with only four to five diesel cargoes imported since March 2026.
The company also stressed the need to diversify crude oil and finished-product suppliers to reduce exposure to geopolitical disruptions. The Ministry of Petroleum is prioritising a broader supplier base, management said.
Pakistan Refinery Limited (PRL) remains a strategic asset for PSO, with backward integration seen as important for profitability and supply security. The refining industry needs an estimated $5 billion to $6 billion for upgrades, but the funding structure remains undecided.
PSO is discussing upgrade and financing options with PRL, including possible equity arrangements. Any stake change will depend on a technical study, Euro V compliance and the partner’s identity.
Commercial and tariff negotiations for the White Oil Pipeline to Peshawar are nearing completion, with a few issues unresolved. The project, involving PSO, SOCAR and the Frontier Works Organisation, aims to reduce road transport reliance and improve the safe and cost-effective movement of petroleum products. Construction is expected to begin once outstanding matters are settled.
Frequently asked questions
What is the PSO circular debt plan?
PSO, the government and the IMF are working on a plan to settle outstanding circular debt. PSO management said its receivables have remained unchanged since February 2024.
