CNG stations likely to face hardships in winter
Govt plans to increase gas holidays by 1-1/2-day per week
KARACHI: The government is considering curtailing gas supply to compressed natural gas (CNG) stations as there are apprehensions of a severe gas crisis in the upcoming winter season.
The government is likely to increase gas holidays by one-and-a-half-day at CNG stations. After the increase Sindh’s CNG stations will not receive CNG for two-and-a-half-day, and Punjab and Khyber Pakhtunkhwa four-and-a-half-day a week.
The government is also likely to reduce the petrol-CNG price parity by 20 percent from current 40 percent during the winter season (December to March).
The fuel experts expect the move to result in an increased demand for petrol, which they estimate could improve earnings by 2.0 to 4.0 percent of the oil-marketing sector.
At present, they said ‘market-weight’ outlook on the sector with a potential uptick in margins is the key trigger. Top pick is Pakistan State Oil (PSO), as the government is looking at increasing gas holidays.
The measure to increase gas holidays is likely to save around 120 million cubic feet per day (MMCFD) of natural gas, where the country is bracing for a shortage of 600 MMCFD in the upcoming winter season.
They estimated and suggested this was likely to generate additional demand of 280,000 tonnes for petrol during the winter. According to statistics, on base of working on the latest annual Oil Companies Advisory Committee (OCAC) statistics, where CNG stations in FY11 sold 113 billion cubic feet gas, it translates into per day sales of 12,000 tonnes equivalent to petrol.
Keeping present market shares of oil marketing companies constant, the experts estimate potential positive earnings impact of Rs 1.1 per share (2.0 percent) for PSO, Rs 0.5 per share (1.0 percent) for Attock Petroleum Limited (APL) and Rs 1.1 per share for Shell, besides it could reduce petrol-CNG price parity.
The government is also considering imposing 33 percent higher winter tariff on CNG to reduce petrol-CNG price differential to 20 percent from 40 percent. If the same transpires, it is estimated that 50 percent of CNG users might switch over to petrol (out of convenience given long queues at CNG filing stations) delivering incremental demand of 330,000 tonnes per day for petrol. Assuming winter tariff is for the period December 2012 to March 2013, the experts estimate potential earnings upside of Rs 1.3 per share (2.0 percent) for PSO, Rs 0.6 per share (1.0 percent) for APL and Rs 1.3 per share for Shell.
Petrol sales have already seen an increase of 40 percent over the past two years owing to the gas shortages in the country. Meanwhile they estimated Rs 0.25 per litre increase in petrol and diesel margin would deliver 4.0 to 6.0 percent potential annualised earnings upside for oil marketing companies.
Top picks in the sector remain PSO (buy at Rs 270), while potential upside of 9.0 percent for APL (hold at Rs 518).
The federal cabinet turned down Ministry of Industries’ (MoI) request to ease car imports. The cabinet division has returned a summary prepared by the MoI on reduction in age limit of imported cars from five years to three years contending the issue falls under the domain of Ministry of Commerce.
Meanwhile, deputy prime minister and minister for industries said the issue of import of used cars is likely to be resolved next week.
The experts reiterate ‘under-weight’ stance on the sector and continued to flag substantial regulatory risks.
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