- Oil Marketing Companies (OMCs) ensure fuel supply, boost GDP, create jobs, and drive industrial productivity nationwide
Pakistan’s economy, characterized by its reliance on energy to fuel industrial, commercial, and domestic activities, is significantly influenced by the oil and gas sector. Oil Marketing Companies (OMCs) play a pivotal role in this ecosystem, acting as the backbone of the country’s energy supply chain. These companies are responsible for the procurement, storage, distribution, and retailing of petroleum products, ensuring that Pakistan’s transportation, industrial, and power sectors remain operational. With Pakistan’s energy demand rising due to population growth, urbanization, and industrial expansion, OMCs are critical to sustaining economic stability and growth.
Pakistan’s energy sector is heavily reliant on oil and gas, which together account for a significant portion of the country’s primary energy supply. According to the International Energy Agency (IEA), natural gas and coal dominate Pakistan’s energy mix, with oil-based fuels powering millions of vehicles, aircraft, and industrial operations. In 2023, Pakistan’s total energy import bill was approximately $17.5 billion, with projections estimating a rise to $31 billion by 2030 due to increasing demand. The country imports 85% of its oil, 29% of its gas, 50% of its liquefied petroleum gas (LPG), and 20% of its coal requirements, highlighting its dependence on external energy sources.
How OMCs keep Pakistan moving
OMCs are integral to managing this dependency by ensuring the efficient distribution of imported and domestically produced petroleum products. These products, including High-Speed Diesel (HSD), Motor Gasoline (MS), Furnace Oil (FO), and Liquefied Petroleum Gas (LPG), are critical for transportation, power generation, and industrial activities. The oil and gas sector contributes significantly to Pakistan’s GDP, with the market valued at $60.2 billion in 2022, reflecting a compound annual growth rate (CAGR) of 21.4% between 2017 and 2022.
OMCs in Pakistan, such as Pakistan State Oil (PSO), Shell Pakistan, Attock Petroleum Limited (APL), and Hascol Petroleum Limited, are responsible for the marketing and distribution of petroleum products. They operate extensive networks of retail outlets, storage facilities, and transportation infrastructure to ensure a steady supply of fuel across the country. PSO, the market leader, holds a 48% market share as of June 2023, followed by APL at 11.2% and Shell at 7.1%. These companies cater to diverse sectors, including retail, industrial, aviation, and marine, making them indispensable to Pakistan’s economic framework. OMCs also contribute to innovation in the sector by introducing advanced lubricants and fuel-efficient products.
For instance, PSO’s introduction of Carient S-PRO, a fully synthetic motor oil with Opticore Technology, enhances engine performance and fuel economy, benefiting both consumers and the environment. By meeting the energy needs of various sectors, OMCs support industrial productivity, transportation efficiency, and energy security, all of which are vital for economic growth. OMCs are significant employers in Pakistan, providing jobs across various segments of the oil and gas value chain, including exploration, refining, distribution, and retail. Companies like PSO, Shell, and APL employ thousands of individuals directly and indirectly through their retail networks, logistics operations, and service stations. For example, Hascol Petroleum Limited has commissioned over 500 retail outlets across Pakistan, creating numerous jobs in retail management, logistics, and customer service. These employment opportunities contribute to poverty alleviation and social development, particularly in rural areas where OMC retail outlets are often the only formal economic activity.
Discoveries pave new horizons
The oil and gas sector, driven by OMCs, is a major contributor to Pakistan’s GDP. The sector’s market value of $60.2 billion in 2022 underscores its economic significance. OMCs generate substantial tax revenue through duties, levies, and sales taxes on petroleum products. These revenues are critical for funding public infrastructure, healthcare, and education. For instance, PSO’s gross sales reached PKR 1.74 trillion in the first half of FY25, contributing significantly to the national exchequer.OMCs ensure a reliable supply of petroleum products to Pakistan’s industrial and transportation sectors, which are key drivers of economic activity. The transportation sector, including road, rail, and aviation, relies heavily on HSD, MS, and jet fuel supplied by OMCs. In 2023, domestic refineries met 60% of Pakistan’s diesel demand, 30% of motor gasoline demand, and 100% of jet fuel demand, with OMCs facilitating the distribution of these products. Similarly, industries such as cement, textiles, and manufacturing depend on furnace oil and natural gas for power generation and production processes. By ensuring a steady supply of these fuels, OMCs enable industrial productivity and export growth, which are crucial for Pakistan’s balance of trade.
OMCs invest heavily in infrastructure, including storage terminals, pipelines, and retail networks, which stimulate economic activity. For example, PSO operates a nationwide network of fuel stations, convenience stores, and car care services, enhancing local economies and improving consumer access to quality products. These investments create a ripple effect, generating demand for construction, logistics, and maintenance services, thereby supporting small and medium enterprises (SMEs) and local businesses. OMCs manage a complex supply chain that involves importing crude oil and refined products, storing them in strategic terminals, and distributing them through a network of depots and retail outlets.
Pakistan’s five main oil refineries, with a combined capacity of 450,000 barrels per day (bpd), process both domestic and imported crude oil to produce HSD, MS, FO, and other products. OMCs like PSO and Shell coordinate with refineries such as Cnergyico PK Limited, which operates the largest refinery in Balochistan with a capacity of 156,000 bpd, to ensure a seamless supply chain. The logistics network of OMCs is critical for maintaining supply chain efficiency. For instance, PSO’s fleet of fuel cards and mobile fueling services, such as PSO on Wheels, enhances accessibility and convenience for consumers. However, challenges such as high import costs, fluctuating global oil prices, and logistical constraints due to Pakistan’s security environment pose significant hurdles.
The OMC sector in Pakistan is highly competitive, with companies like PSO, Shell, APL, and Hascol vying for market share. PSO’s dominance, with a 48% market share in June 2023, is attributed to its extensive retail network and strategic partnerships with international oil trading companies. Competition drives innovation, as seen in PSO’s introduction of advanced lubricants with technologies like Opticore and Oxidation Resistance. Similarly, Shell Pakistan and APL focus on quality assurance and customer service to maintain their market positions. Despite economic challenges, OMCs have demonstrated resilience. PSO reported a net profit of PKR 11.2 billion in the first half of FY25, with gross sales of PKR 1.74 trillion. However, the sector has faced declining sales volumes due to high petroleum prices and an economic slowdown. In FY23, total oil sales dropped 27% year-on-year to 16.6 million tons, the lowest since FY06, excluding the COVID year. This decline was driven by a 49% drop in furnace oil sales and a 28% drop in HSD sales, reflecting the impact of high prices and reduced demand.
Security concerns are a major challenge for OMCs operating in Pakistan. The oil and gas sector requires significant investment in security to protect employees and assets, particularly in regions like Balochistan and Khyber Pakhtunkhwa. In March 2024, five Chinese engineers were killed in a suicide attack in Khyber Pakhtunkhwa, highlighting the risks faced by energy projects. Such incidents deter foreign investment and increase operational costs for OMCs, impacting their profitability. Pakistan’s economic challenges, including high inflation (nearly 30% in 2023) and a growing trade deficit, exacerbate the difficulties faced by OMCs. The country’s reliance on imported oil and gas, which accounted for $17.5 billion in 2023, strains foreign exchange reserves and increases vulnerability to global price fluctuations. OMCs must navigate these challenges while maintaining affordable prices for consumers.
The regulatory environment in Pakistan poses challenges for OMCs. Policies related to pricing, taxation, and environmental compliance can impact profitability. For instance, the government’s push for Euro-5 grade fuels requires OMCs to invest in upgrading refining and distribution infrastructure, increasing operational costs. Additionally, delays in policy implementation and bureaucratic hurdles can hinder the sector’s growth.
Pakistan’s recent discovery of potentially the world’s fourth-largest offshore oil and gas reserves in its territorial waters presents a significant opportunity for OMCs. Estimated to rival the reserves of major oil-producing nations, this find could reduce Pakistan’s reliance on imports and transform its energy landscape. OMCs stand to benefit by expanding their distribution networks to handle increased domestic production. The partnership with Turkey’s TPAO to explore these reserves further enhances the potential for OMCs to play a larger role in the economy. The Government of Pakistan’s new refining policy, approved in 2023, offers incentives for brownfield refineries to upgrade their facilities to produce Euro-5 grade fuels. This policy is expected to attract investment in hydro desulfurization units and isomerization plants, enabling OMCs to distribute higher-quality, environmentally friendly fuels. The policy also presents opportunities for international collaboration, particularly with U.S. companies providing auxiliary equipment and services.
The discovery of offshore reserves opens avenues for OMCs to participate in the “blue water economy,” which includes not only oil and gas but also marine biotechnology, fishing, and ecotourism. By diversifying their operations, OMCs can contribute to economic diversification and create new revenue streams.
PSO, the largest OMC in Pakistan, has been a cornerstone of the country’s energy sector. With a market share of 48% in June 2023, PSO operates an extensive network of fuel stations, storage terminals, and convenience stores. The company’s financial performance remains robust, with a net profit of PKR 13.4 billion in 9MFY24. PSO’s initiatives, such as the Shaheen Program for women’s driving skill training and the Blue LPG Initiative, demonstrate its commitment to social and environmental responsibility.
Shell Pakistan, with a 7.1% market share, is a key player in the OMC sector. Despite a 37% year-on-year sales decline in June 2023, Shell maintains a strong presence through its focus on quality assurance and customer service. The company’s global expertise and brand reputation enable it to compete effectively in Pakistan’s competitive market.
Attock Petroleum Limited (APL) with an 11.2% market share, has expanded its presence in urban areas like Karachi and Punjab. The company’s emphasis on on-site testing and quality assurance has strengthened its reputation among consumers. APL’s growth reflects the increasing demand for reliable petroleum products in Pakistan’s growing urban centers.
The future horizon
To capitalize on recent oil and gas discoveries, OMCs must invest in expanding their distribution networks and storage capacities. Collaboration with international partners, such as Turkey’s TPAO, can provide the technological expertise needed for offshore exploration. The government should streamline bidding processes and offer incentives to attract foreign investment, ensuring that OMCs can efficiently distribute domestically produced fuels. Reducing Pakistan’s reliance on imported fuels is critical for energy security. OMCs can play a role by partnering with refineries to increase domestic production and by investing in renewable energy solutions, such as biofuels and LPG, to diversify the energy mix. The Blue LPG Initiative by PSO is a step in this direction. To mitigate security risks, OMCs should collaborate with the government to enhance security measures at exploration and distribution sites. Public-private partnerships can help fund security infrastructure, reducing the financial burden on OMCs and encouraging foreign investment. OMCs should align with global sustainability trends by investing in cleaner fuels and energy-efficient technologies. The government’s push for Euro-5 fuels is a positive step, but OMCs must also explore renewable energy options to reduce the sector’s carbon footprint.
Oil Marketing Companies are indispensable to Pakistan’s economy, driving growth through their contributions to employment, GDP, and industrial productivity. Despite challenges such as security risks, economic instability, and regulatory constraints, OMCs have demonstrated resilience and adaptability. Recent discoveries of offshore oil and gas reserves, coupled with supportive government policies, present unprecedented opportunities for OMCs to enhance their role in the economy. By leveraging these opportunities, investing in infrastructure, and embracing sustainability, OMCs can continue to fuel Pakistan’s economic progress while addressing the nation’s energy needs. The future of Pakistan’s oil and gas sector, driven by OMCs, holds immense potential to transform the country into a regional energy hub, provided that challenges are addressed through strategic policies and international collaboration.
The author, Nazir Ahmed Shaikh, is a freelance writer, columnist, blogger, and motivational speaker. He writes articles on diversified topics. He can be reached at nazir_shaikh86@hotmail.com