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PAKISTAN STATE OIL COMPANY

INSTITUTE OF COST & MANAGEMENT ACCOUNTANT OF PAKISTAN


PAKISTAN STATE OIL COMPANY

INSTITUTE OF COST & MANAGEMENT ACCOUNTANT OF PAKISTAN


PAKISTAN STATE OIL COMPANY

INSTITUTE OF COST & MANAGEMENT ACCOUNTANT OF PAKISTAN


PAKISTAN STATE OIL COMPANY

DEPARTMENT OF BUSINESS ADMINISTRATION

PALISTAN STATE OIL COMPANY LIMITED

SUBMITTING TO
MR: -Abdul Samad
Faculty – Business Administration

SUBMITTING BY
Saleem Ahmed (ID # 48)
Sonia Nabi (ID # 52)
Sabiha Arshad (ID # 44)
Yasir Ali (ID # 57)

INSTITUTE OF COST & MANAGEMENT ACCOUNTANT OF PAKISTAN


PAKISTAN STATE OIL COMPANY

Table of Contact

• Title Fly
• Title Page
• Letter of Authorization
• Letter of Transmittal
• Letter of Acknowledgement
• Company Introduction
• Company Profile
• Short History PSO
• Organizational Structure Chart
• Company Object
• Future Outlook
• Quality Policy
• Customer Care
• Company Vision
• Company Mission Statement
• Core Value of PSO
• Management Profile
• Departments PSO
• Sales Division
• Financial High Lights 2007
• Competitor Profile
• SWOT of PSO
• Matching strategies
• Strategic Position and evaluation matrix
• Power Project (PSO Role in the Power Sector
• Company Balance Sheet
• Company Profit Loss
• Cash Flow Statement
• Corporate Profile
• Our Plans in 2007-08
• Bibliography
• Appendix

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PAKISTAN STATE OIL COMPANY

Letter of Authorization

MBA Students
GROUP (FUUAST)
3rd Stage

Subject Pakistan State Oil Company Limited

Dear Students:

You are instructed to do term report on “Analysis Stratrgic


Managment” and submit a report on the same as part of your
curriculum by May 03, 2009. The report must contain all the
necessary requirements of the report writing as taught in the
lectures.

Your summary must contain all the information on the topic,


which must appeal the readers. You can consult the books
referred by me and other sources like magazines, Internet and of
course you can also find about this topic from any advertising
agency of repute. There are lots of advertising agencies working
in this area that can provide you the correct information in this
regard.

Your report must have all the parts including prefatory parts,
body, findings and addenda. You have to submit the report on or
before the due date in order that your report must be analyzed
and graded. You must develop interest in the report so that the
information provided by you must attract readers. Nowadays
advertising and print media are very important for business; in
fact business cannot go along smoothly without taking on
account of this important aspect. Advertising is promotion and
boosting of any company so without presence of advertising
nobody will be aware of any company.

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PAKISTAN STATE OIL COMPANY

You are advised to put you utmost in this report and produce a
professional report. You can get any sort of help from me on
behalf of this topic and developing of report.

MR: -Abdul Samad


Faculty – Business Administration

Letter of Transmittal
MR: -Abdul Samad
Faculty – Business Administration

Subject: Analysis of Financial Statement of PSO and


Strategic Managment

Respected Sir:

You are informed here by Group of Saleem Ahmed, Yasir, Sabiha


and Sonia that we have completed our report as per your
instructions.

During the research work we met different Finance department


employees of PSO organization from whom we gathered lot of
information. They have plenty of experience behind them in lieu
of Strategic Management.

You will find this report very informative as we have done


analysis for this topic from resources like direct interviews,
magazines, journals and Internet. The rest of the information
about resources is provided in the bibliography and appendix
section.

Your guidance really helped us to work out on this report. Your


feedback will enhance further our capabilities and reduce the
missing areas in the report.

INSTITUTE OF COST & MANAGEMENT ACCOUNTANT OF PAKISTAN


PAKISTAN STATE OIL COMPANY

MBA Students
GROUP (FUUAST)
3rd Semester

Company Introduction

The history of Pakistan State Oil starts from mid-70s when the Government of
Pakistan amalgamated three OMCs: Esso Eastern, Pakistan National Oil (PNO)
and Dawood Petroleum as part of its reorganization plan. It is considered as one of
the most successful mergers in the history of Pakistan. The main objective of the
Nationalization of POL Giant was backed by the facilitation of the sensitive
national issue of providing fuel to Defense forces. Because, during the war of
1971, the nation suffered from the problem that no fuel company was interested to
provide fuel to the Armed forces at that and the sensitivity of the nation was in
very crucial condition.

The than Federal government decided to nationalize three petroleum companies


along with management control.

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PAKISTAN STATE OIL COMPANY

The company is the only public sector entity in Pakistan that has been competing
effectively with three multinationals companies which are supported technically
by their parent organization.

Pakistan State Oil Company Ltd; is the largest oil marketing company of Pakistan.
It is engaged in the Storage, Import, Distribution and Marketing of Petroleum
Products, Petrochemicals, Aviation & Bunker Fuels, LPG and CNG Dominates
the Country’s Fuel and Energy Need.

Since its inception in 1976 the company has been meeting more than 70% of the
country’s fuel needs. PSO’s 3805 outlets all across the country markets more than
12 million tons of fuel products annually. This network is supported by PSO’s 28
storage facilities with a capacity of more than 800,000 tons. PSO took a major step
in improving its distribution facilities by acquiring 12% equity in the 800km long
Karachi-Mehmoodkot White Oil Pipeline.

As part of PSOCLs policy of providing better customer service, it has embarked


upon its New Vision of retail development program. Equipped with the most
modern facilities like electronic dispensing units, auto car wash, convenience
stores, internet facilities and business centers. These state of the art designed
stations provide greater customer confidence and a friendlier environment. As a
manifestation of PSOCL’s greater customer focus a PSO 24hr Customer Service
has been launched where customer’s can lodge their queries and suggestions about
various PSO products and services.

Along side its retail network, PSO is playing an equally important role in the
industrial sector. From the locomotives of Pakistan Railways to the giant turbines
of Power Projects, all are fuelled by PSO. Being fully alive to its responsibilities
towards the agriculture sector PSO’s 700 strong agency network helps keep the

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PAKISTAN STATE OIL COMPANY

farm machinery running. Further, its kerosene sales are a major source of energy
for the rural and lacking gas facilities.

Pakistan State Oil Company Limited remains equally strong in Aviation and
Bunker Sales. PSO has been constantly upgrading its facilities to serve a wide
range of commercial aircrafts. Through a chain of eight Aviation Service Stations
scattered all across the country PSO fuels the aircrafts of many local and
international airlines. Acquisition of new Lahore Terminal Complex at the Lahore
International Airport has enabled PSO to serve the busiest corridor of East/West
bound flights benefiting the airlines in shape of time saving and lesser fuel burn
off. While it’s bunkering facilities at all the major ports of country fill up the
ocean liners of many nationalities facilitating the nation’s international trade.

In its endeavor to provide quality lubricants, PSO has formed an alliance with
world-renowned company Castrol whose products are manufactured at PSO’s own
ISO 9000 certified facilities ensuring the highest quality standards for both retail
and industrial sales.

More cordial relationship with its dealers is one of the important objectives of
PSO’s New Vision Program. To give them a sense of participation PSO has
instituted “TOP DEALER AWARDS” and “MILLION LITER AWARDS”
whereby efforts of the high performing dealers are recognized.

Emergence of Health Safety & Environment (HSE) as the corner stone of PSO’s
corporate governance testifies to its commitment to environmental protection.
Complete HSE Certification of all its facilities and installations is one of its major
goals for the coming months, which are being vigorously pursued.

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Privatization of Pakistan State Oil Company Ltd; is underway whereby JP


Morgan’s financial advisory consortium is assisting the Government of Pakistan in
the privatization process. They have undertaken the initial due diligence including
financial and regulatory issues and subsequent to which the interest of the
potential investors in the transaction will be solicited.

COMPANY PROFILE

Pakistan State Oil (PSO) is the oil market leader in Pakistan enjoying over 79%
share of Black Oil market and 58% share of White Oil market. It is engaged in
import, storage, distribution and marketing of various POL products, including
Mogas, HSD, Fuel Oil, Jet Fuel, Kerosene, LPG, CNG and petro-chemicals. This
blue chip company, the winner of "Karachi Stock Exchange Top Companies
Award" and a member of World Economic Forum, has been a popular topic of
case studies in Pakistan and abroad based on its radical corporate turnaround over
the last few years.

Excellence in Customer Service


PSO serves a wide range of customers throughout Pakistan, including retail,
industrial, aviation, marine and government/defence sectors. Professionals at PSO
strive for providing unmatched and diverse services to the customers in line with

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PAKISTAN STATE OIL COMPANY

best international practices. PSO's state-of-the-art New Vision retail outlets are
equipped with the most modern facilities, including auto car wash, electronic
dispensing units, convenience stores, business centres, internet facilities and Easy
Payment Centres for payment of utility and Citibank credit card bills. The concept
of Quick Oil Lube Vans introduced by PSO, provides the lube change facilities at
customers' doorsteps. About 21 Mobile Quality Testing Units ensure top of the
line quality of products and services. As innovative customer service initiatives,
PSO has launched Loyalty Card, Corporate Card, Fleet Card and Prepaid Card.
These cards provide added convenience, flexibility and security to the customers
while enabling them to earn redeemable loyalty points and avail attractive
discounts for purchase of non-petroleum products at a large number of merchant
outlets in various cities on use of Loyalty and Corporate Cards.

For efficient handling of customer complaints, queries and suggestions, PSO has
developed Customer Service Centres at all its 14 divisional offices. Furbished with
a toll free telephone number (0800-03000) and automated customer feedback
registration system, these centres provide an efficient system of 24-hour customer
care. An attractive and comprehensive PSO website (www. psocl.com) is available
as a source of PSO-related news and information.

Total Quality Control


PSO has been meeting the country's fuel needs by merging sound business sense
with national obligation. In order to satisfy the customers' needs while ensuring
the highest quality of products and services, PSO has introduced total quality
management system in its operational activities. Consistent conformance to
prescribed standards and specifications across the whole range of activities from
receipt, storage, transportation and delivery of products is the cornerstone of PSO's
quality management system. In addition to quality assurance in upkeep and
maintenance of existing facilities, compliance with quality standards is ensured in

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PAKISTAN STATE OIL COMPANY

construction of new facilities like recently developed state-of-the-art facilities for


Aviation customers at Lahore Airport.

Health, Safety and Environment


Ensuring the health and safety of PSO employees, contractors, customers and
members of public likely to be affected by the Company's operations is one of the
basic corporate objectives, and as a priority it ranks equally with market share and
profit. Accordingly, it is the Company's policy to perform work in the safest
practicable manner, consistent with best industrial practices while adhering
completely to the requirements of health and safety codes and practices. The
Company's Health, Safety & Environment (HSE) Steering Committee monitors
HSE compliance on regular basis while HSE Site Committees ensure that HSE
Requirements are met at all operating locations, including Depots, Terminals,
Plants, Retail Outlets and Airports. Use of relevant safety equipment at work is
mandatory for employees. Regular HSE audit of facilities and HSE training of
relevant staff is carried out and commissioning of new facilities is subject to HSE
clearance. Adequate resources are made available to ensure the success of HSE
policy.

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PAKISTAN STATE OIL COMPANY

Short History of PSO


Chronology of Events leading to the formation of: Pakistan State Oil Co. Ltd.(PSO)

 01-01-1974

Federal Government takes over management of PNO (Pakistan National Oil) and DPL
(Dawood Petroleum Limited), renamed into POCL (Premier Oil Company Limited)
under marketing of Petroleum Products (Federal Control) Act, 1974.

 03-06-1974

Government incorporates "Petroleum Storage Development Corporation" PSDC.

 23-08-1976

Name of PSDC changed to State Oil Company Limited (SOCL).

 15-09-1976

Government purchases ESSO Undertakings, vests their control in SOCL.

(State Oil Company Limited) and names it as Pakistan State Oil Company Limited
(PSO).

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PAKISTAN STATE OIL COMPANY

INSTITUTE OF COST & MANAGEMENT ACCOUNTANT OF PAKISTAN


PAKISTAN STATE OIL COMPANY

ORGANIZATIONAL CHART OF PSO

BOARD OF
DIRECTORS

MANAGING
DIRECTOR

INTERNAL AUDIT
MD’S
SECRETARIAT

MANA
PURIFICA ENGINEE FINANCE
DISTRIBU COMME GEME
AND
TION AND RING NT
TION RCIAL MATERIA
TRANSMISS SERVICE SERVI
DIVISIO DIVISIO L
ION DIVISIO CE
DIVISIO
DIVISION N N DIVISI
N ON
N

PLANN
-ING &
PURIFICA HUMAN
-
DEVEL ACCOU
KARACHI RESOU
- SALES NTS
TION RCE
OPME
NT

ADMI
SINDH CONST NINIS
TRANSMI- (EXCL TRATI
RUCTIO BILLIN BUDGE
SSION KARACHI VE
)
N G SERVI T
CES

CON
PRIVI
BALOC SUM
COMPRE- SERVIC-ES
TIZA
SSION HISTAN ER
TION TREA
SERV SURY
ICE

MEASUREM
ENT &
METER
PROCURE
MANUFACT EXTER MENT &
URING NAL INVENTOR
Y
RELATI
MANAGE
ONS MENT

SAFETY,
HEALTH &
ENVIRONM
ENT
LEGAL
SERVIC
ES

INFORMATION

TECHNOLOGY

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PAKISTAN STATE OIL COMPANY

COMPANY OBJECTIVES

1. Excellence

We believe that excellence in our core activities emerges from a passion for satisfying
our customers' needs in terms of total quality management. Our foremost goal is to retain
our corporate leadership.

2. Cohesiveness

We endeavor to achieve higher collective and individual goals through team. This is
inculcated in the organization through effective communication.

3. Respect

We are an Equal Opportunity Employer attracting and recruiting the finest people from
around the country. We value contribution of individuals and teams. Individual
contributions are recognized through our reward and recognition program.

4. Integrity

We uphold our values and Business Ethics principles in every action and decision.
Professional and personal honesty, dedication and commitment are the landmarks of our
success. Open and transparent business practices are based on ethical values and respect
for employees, communities and the environment.

5. Innovation

We are committed to continuous improvement, both in New Product and Processes as


well as those existing already. We encourage Creative Ideas from all stakeholders.

6. Corporate Responsibility

We promote Health, Safety and Environment culture both internally and externally. We
emphasize on Community Development and aspire to make society a better place to live
in.

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PAKISTAN STATE OIL COMPANY

QUALITY POLICY:

Pso will Continuously Endeavor to Better Satisfy the Needs of


Customers and Stakeholders and will Promote Innovation, Creativity
and Pursuit of Excellence by Employees for Providing Quality Service in
all Areas of Company Operations.

CUSTOMER CARE:
We're committed to providing you with a high level of
service that you might not expect from your local
utility. From our meter readers and service crews to
our customer service representatives, all of us are
committed to providing you with the highest possible
standard of customer service.

Vision Statement
To excel in delivering value to customers as an
innovative and dynamic energy company that
gets to the future first.

Mission Statement
We are committed to leadership in energy market through competitive advantage in
providing the highest quality petroleum products and services to our customers, based on:

 Market leader providing the highest quality petroleum products and


services to its customers

 Professionally trained, high quality, motivated workforce, working as a


team in an environment, which recognizes and rewards performance, innovation and
creativity, and provides for personal growth and development

 Lowest cost operations and assured access to long-term and cost effective
supply sources

 Sustained growth in earnings in real terms

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PAKISTAN STATE OIL COMPANY

 Highly ethical, safe environment friendly and socially responsible


business practices

PSO – Departments

Legal Department

With a view to protect the company as a corporate entity and in order to safeguard the
company interest and position against all sorts of litigation and other legal matters, the
legal department has, as part of its contribution to the organization's corporate
governance and in order to take necessary, calculated, effective and successful measures
and to overcome the flaws & weaknesses came up with a number of objectives and in
order to achieve the same adopted numerous strategies, and as a result of the
implementation of such strategies the legal department has managed to achieve number
of accomplishments.

Special Projects Department

1. Retail Construction

The Retail Construction department has been responsible for the development of New
Vision Retail and Consumer Outlets throughout Pakistan since the inception of the New
Vision Programme in 1999. During the past 5 years PSO completed a total number of
over 1000 NVRO's and another 200 outlets will be developed during the current fiscal
year. Outlets are constructed on fast track basis with some outlets completing within 30
days. One outlet was completed in 15 days - an industry record in Pakistan.

2. Retail Facilities

Retail facilities department has always played a vital role in promoting company image
through better up keep of retail outlets- especially New Vision Retail Outlets (NVRO's)
and made significant contributions in companies strive to gain market share by means of
reduced forecourt downtime.

Corporate Planning Level

This is no longer a news that PSO's corporate development has been widely
acknowledged as one of the most dramatic examples of corporate turnaround in the
world. Today, PSO is a popular topic of case studies in Pakistan and abroad and one of
the most sought out sources of corporate advice and guidance in the country. Several
major business enterprises have obtained permission to replicate PSO's Corporate
Planning model. Based on its corporate excellence, PSO ranks among top global

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PAKISTAN STATE OIL COMPANY

companies by way of its membership of the World Economic Forum. Qualification for
the Forum's membership, based on stringent and forward looking criteria, is a unique
distinction for PSO as a Pakistani company.

This unprecedented level of corporate accomplishment and such a high international


ranking achieved by a Pakistani company is a product of professional teamwork and
outstanding corporate leadership. Nevertheless, the story of PSO's global renaissance
would be incomplete without due recognition and acknowledgement of the dedicated
professional support of a very high caliber provided by the newly established Corporate
Planning department (CP) of PSO, based on world-class qualifications and high-level
international exposure of CP team.

The legendary rise of PSO to global horizon, duly decorated by global recognition of
corporate excellence, involved dedicated hard work of highest professional standard in
the following broad areas:

Establishment of a robust framework of the state-of-the-art systems and procedures of


corporate planning, management and performance review

Without a well-established and competitive framework of corporate systems, no company


can achieve such a high professional ranking that PSO has achieved. Usually, the
companies get such systems developed on a turnkey basis by external consultants, based
on payment of heavy fees and expenses. PSO has a unique distinction of developing and
putting in place such systems through in-house teamwork. CP played a key role in this
regard. The in-house systems development enabled PSO professionals to internalize the
systems for effective implementation.

Today, PSO's planning and management structure is highly regarded. In addition to


formulating PSO's first ever Corporate Plan in line with best business practices, CP
assisted all the departments of PSO in developing their plans. Today, every department of
PSO, particularly each business unit, has a robust business plan. Together, the Corporate
Plan and departmental plans form a cohesive, dynamic and internationally competitive
strategic framework for good corporate governance.

PSO's systems and procedures have been extensively reviewed and evaluated by leading
international organizations and individuals, who have been involved in study and due
diligence of PSO's corporate development. While acknowledging PSO's remarkable
corporate transformation in categorical terms, the independent international Financial
Advisory consortium, JP Morgan, made special references in their Information
Memorandum to the elements of reform established by CP. That Memorandum,
circulated around the world, contained the following statement:

"Significant progress has been made towards putting in place the basic framework for
corporate reform in line with the modern concepts and practices. This includes
streamlining the investment planning process, developing a model for business-wise and

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PAKISTAN STATE OIL COMPANY

product-wise profitability analysis and developing a comprehensive corporate plan."

Subsequent to the assessment by JP Morgan, several additional systems and models have
been developed at PSO, including the Corporate Performance Reporting System (CPR)
and the Capital Resource Planning, Management and Optimization System (Capex
System). CPR operates by way of obtaining and analyzing up-to-date sales and expense
information relating to products and business units, translating that information into
comparable benchmarks and conducting comparison of the present level of performance
with past and planned levels of performance. CPR is a powerful analytical tool and
control mechanism, which serves as a watchdog to ensure that implementation of the
Corporate Plan is on-course and the performance milestones are achieved in a timely
manner. It helps reconceptualise the corporate business and establish primacy of Strategic
Business Units with clear allocation of responsibility and accountability. Capex System
facilitates understanding, development and implementation of Investment Plan as well as
on-line management of capital resources. It helps eliminate the hassle-factor inherent in
manual budget operation, including appropriation, re-appropriation, re-allocation,
contingency utilization, record reconciliation, reporting, and periodic monitoring &
review.

While serving as Secretariat of PSO's Management Committee (Man-Com), CP helped


redefine the role and restructure the operations of Man-Com to transform it into an
institution playing a pivotal role in PSO's corporate renewal and market success.
Presentations to Man-Com utilize numeric and graphic depictions of how the company
measures up not only against the industry but also against itself. Meetings of Man-Com
provide useful corporate exposure and learning opportunity to young professionals, who
are encouraged to participate and present in the meetings.

In recognition of PSO's glaring progress and significance of CP's assistance in this


regard, Mr. Amjad Parvez, General Manager, CP, received invitations to lecture at
leading business schools of USA and UK. Professor Thomas W. Dunfee invited Mr.
Amjad Parvez to lecture at the Wharton Business School, USA, in the following words:

"I am delighted to invite you to participate as a guest lecturer in my class … the PSO case
you are presenting will enhance the course and promote class discussion."

Compilation of PSO's corporate accomplishments in terms of strategy, structure,


processes and performance

This is a prerequisite to sustainable market leadership and professional recognition of a


company. Higher professional and scholarly circles give serious consideration to
corporate reform initiatives only if they are carried out in context of classical and neo-
classical management and organization theories and within the framework of comparative
research on corporate transformation. Such corporate modeling and research is
undertaken by world's leading companies, either by establishing internal R&D units
equipped with adequate professional resources, or by assigning the work to international
consulting firms. It is yet another distinction of PSO to undertake and successfully

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PAKISTAN STATE OIL COMPANY

complete this work in-house, without external advisory support. CP played a vital role in
this regard.

CP developed a corporate model to work as a capstone on PSO's transformation


initiatives. This model tracks success from corporate policies and management behavior
through employee attitude to customer satisfaction and financial performance. It provides
an effective framework for analyzing various elements of PSO's corporate renewal
program in context of classical and modern research. This corporate model triggered and
facilitated various landmark studies on PSO as well as consideration and recognition of
PSO's accomplishments by international forums. This exercise resulted in exponential
rise in PSO's professional reputation and ranking.

In this context, internationally renowned management scholar Professor Roderick Martin


acknowledged PSO's remarkable corporate development, in the following words:

"The direction of structural change has been identified, which increased decentralization,
management autonomy and the change from reliance on managerial authority to
teamwork and the delegation of responsibility. The purpose of the structural change is to
increase the flexibility of the firm and its ability to respond to different market
conditions."

In addition to playing a vital role in institutionalizing PSO's corporate reform and


securing glittering recognition benchmarks for the Company, CP orchestrated PSO's
success story as a case of exemplary corporate transformation through presentations to
business professionals in seminars on best corporate practices, and lectures at the
advanced courses for senior government officers. CP's relentless quest for corporate
excellence marked a new era of professional dynamism and management excellence in
PSO. The successive waves of value addition, in terms of innovative and high-tech
systems, international studies and global recognitions, rocked the corporate scene.

Aviation & Marine

Our objective is to provide reliable, timely & safe service to all our valued customers.

Technical Support

PSO is in technical & commercial collaboration with Air Total International, Paris, one
of the largest oil companies of the world.

 Every year PSO is sending 3 employees to France for Aviation training,


which keeps them abreast with the technological development in the industry

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PAKISTAN STATE OIL COMPANY

a) Our Valued Customers

We are proud to serve both national & international air carriers like Aero Asia, Aeroflot,
Air France, Air China, Defence Aviation Wings, Emirates Airlines, Gulf Airways, Iran
Air, Kuwait Airways, Pakistan International Airlines, Qatar Airways, Saudi Arabian
Airlines, Shaheen Air International, Singapore Airlines, Swiss Air, Thai Airways and
many other small carriers/charters etc.

In addition to contractual customers, we also accept carnet of Air Total International, Air
BP, WFS, UV Air, AVCARD. Aviation Department is proud that

 Our quality service has given us a market share of approx. 70% volume in
the aviation industry of Pakistan.

 We are in the process of getting ISO-9001/2000 certification for


Islamabad, Lahore, Peshawar, Multan & Faisalabad Airports by 1st quarter of 2004.

Marine Business Line

Marine Business deals in selling of fuels to ships at Karachi & Port Qasim and is also
called the Bunkering Department.

Products

There are 3 major fuels, which are used by the ships for their own use.

 BFO (Bunker Fuel Oil) commonly known as Furnace Oil.

 MGO (Marine Gas Oil) commonly known as High Speed Diesel.

 MDO (Marine Diesel Oil) commonly known as Light Diesel Oil.

 Supply of DIESO F-76 (Filtered HSDO) to Pakistan Navy.

A special quality treatment unit - Pre-coat unit was installed in July 1997 to cater entire
HSDO (Dieso F-76) requirements of Pakistan Navy for supplying Clear and Bright
Colour filtered HSDO, which not only enhance the life of the machinery but also helps in
preserving a healthy pollution free environment.

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PAKISTAN STATE OIL COMPANY

Our Products

 Motor Gasoline

 Kerosene

 High Speed Diesel

 Light Diesel Oil

 Furnace Oil

 Lubricants

Sales Division
Product Movement-The Back Bone of PSO
PSO, being a flagship company, carries a strong and wide logistics network to cater 70%
of total country's demand of POL products timely and efficiently, from Karachi to the
remotest areas of the country, through 29 storage points spread throughout the country.
At present, most of the POL product movement is carried through self-owned and
outsourced tank lorries and rest through tank wagons and pipelines. Recently the
adequate availability of alternate fuels like gas has drastically reduced the demand of
Furnace oil by 50% which has resulted in surplus fleet of tank lorries and tank wagons.

1. Financial Ratios - PSO at a glance:

Year 2007 2006 2005 2004 2003 2002

Sales Revenue 195,110 206,376 182,323 195,039 135,040 115,636


Marketing &
Administrative 2,022 1,982 1,411 1,640 1,452 1,153
Expenses
Profit before
7062 6,263 6,209 5,137 3,451 3,581
Tax
Profit after
5002 4,212 4,030 3,188 2,251 2,231
Tax

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Capital
2516 2,096 1,643 1,430 1,254 967
Expenditure
Shareholders'
14996 14,160 13,063 11,253 9,808 8,986
Equity
No. of Shares
Outstanding 172 172 172 143 143 143
(in million)
Profitability

Gross Profit
% 4.7 4.3 3.7 3.3 4.2 4.5
ration
Net Profit
% 2.2 2.0 1.7 1.2 1.7 2.3
ration
Return on
Shareholders' % 29.7 30.9 28.3 23.0 24.8 32.6
Equity
Return on
Capital % 10.8 13.8 12.1 9.0 8.9 12.2
Employed
Return on total
% 9.9 12.5 9.7 7.5 7.2 10.4
assets

Asset utilization

Inventory
(x) 13.1 19.7 18.7 18.5 16.0 13.1
turnover ration
Debtor
(x) 40.1 25.9 22.5 21.5 13.7 8.5
turnover ration
Total asset
(x) 5.2 6.3 5.8 6.4 4.8 4.2
turnover ration
Fixed asset
(x) 27.5 34.8 36.3 45.8 37.3 34.4
turnover

Investment

Earning per
24.6 23.5 18.6 15.8 15.6 18.7
share
Market value
256.8 228.4 140.0 132.5 163.0 92.5
per share
Price Earning
(x) 10.4 9.7 7.5 8.4 10.4 5.0
ratio
Dividend per
17.5 16 13 10 10 9
share

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PAKISTAN STATE OIL COMPANY

Leverage

Debt: Equity
- - - - - -
ratio
Interest Cover
(x) 34.1 23.6 10.0 10.3 11.3 12.6
ratio

Current Ration 1.25:1 1.25:1 1.20:1 1.28:1 1.27:1 1.31:1

Value Addition

Employees as
1,474 1,403 990 1,292 1,102 776
remuneration
Government
50,942 53,699 45,946 52,933 33,923 54,625
as taxes
Shareholders
3,002 2,744 1,858 1,429 1,429 1,072
as dividends
Retained
within the 1,210 1,290 1,040 820 800 1,360
business

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PAKISTAN STATE OIL COMPANY

FINANCIAL HIGHLIGHTS 2007

• Recorded an all-time high profit before tax of Rs. 11.7 billion


• Posted unprecedented profit after tax of Rs. 7.5 billion, up by around 33%
over prior year
• Declared an all-time record cash dividend of 340% (Rs. 34 per share) to its
shareholders
• Recorded highest Mogas market share in last ten years, i.e. 45.3%.
• With an addition of 209 leased retail outlets, the New Vision network
expanded to 1,459 across the country
• Expanded PSO Cards infrastructure to 1,200 Point-of-Sale Terminals in
over 170 cities
• Assumed lead role at World Business Council for Sustainable Development
as the first company in the Muslim world to have its CEO on WBCSD’s
Business Role Focus Area Core Team
• Began the year with full implementation of SAP ERP system.
• Won NFEH Award 2005, Help International Trust Award 2005 and
EFP/ILO Occupational Health & Safety Award 2006.
• Received “Management Excellence Award 2005” from Management
Association of Pakistan.
• Rated as “AAA” (Triple A) company by Pakistan Credit Rating Agency
(PACRA).

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PAKISTAN STATE OIL COMPANY

COMPETITOR PROFILE
The Shell brand name enjoys a 100-year history in this part of the world, dating
back to 1899 when Asiatic Petroleum, the far eastern marketing arm of two
companies: Shell Transport Company and Royal Dutch Petroleum Company,
began importing kerosene oil from Azerbaijan into the subcontinent. Even today,
the legacy of the past is visible in a storage tank carrying the date - 1898.

Shell Pakistan Ltd. recognizes five areas of responsibility. It is the duty of


management continuously to assess the priorities and discharge these inseparable
responsibilities on the basis of that assessment.

a. To shareholders b. To customers c. To employee

d. To those with whom we do business e. To society

In the line of competition in Pakistan, PSO, Shell Pakistan and Caltex are major
competitor to ane an others. PSO and Shell are arch competitors with respect to same
product in market.

Shell Products

 Motor Gasoline

 Kerosene

 JP-1

 Green Diesel Oil

 Furnace Oil

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PAKISTAN STATE OIL COMPANY

SWOT (Strength, Weakness. Opportunities, Threats)


A situation (SWOT) analysis is critical to the creation of any strategic plan. The SWOT
analysis begins with a scan of the external environment. Organization must examine their
situation in order to seek opportunities and monitor threats. Sources on information
include customers (internal or external), supplier, government (local, state, international)
professional or trade association (convention and exhibition), journal and reports
(scientific, professional and trade).

SWOT is the assumption and facts on which a plan will be based. Analyzed strengths and
weaknesses comprise the internal assessment of the organization. Assess the strengths of
the organization. What makes the organization distinctive? How efficient is our
manufacturing? How skilled is our workforce? What is our market share? What financing
is available? Do we have a superior reputation? Assess the weakness of the organization.
What are te vulnerable areas of the organization that could be explored/ Are our facilities
outdated? Is research and development adequate? Are our technologies obsolete? What
does the competition do well?

Analyzing opportunities and threats comprises the external assessment of the


environment. Identify opportunities. In which area is the competition not meeting
customer needs? What are the possible new markets? What is the strength of the
economy? What is the strength of the economy? Are our rivals weak? Identify threats. In
which area does the competition meet customer needs more effectively? Are there new
competitors? Is there a shortage of resources? Are market tastes changing? What are the
new regulations? What substitute products exist? The best strategy is one that fits the
organization’s strengths to opportunities in the environment.

The SWOT analysis is used as a baseline for the future improvement, as well as gap
analysis. Comprising the organization to external benchmarks (the best practices) is used
to assess current capabilities. Benchmarking systematically compares measures such as
efficiency or outcome of an organization against similar measure from other internal or
external organization. This analysis helps uncover best practices that can bee adopted for
improvement. (See camp, R. C> Benchmarking: The search for industry best practices
that lead to superior performance. Norcross, GA: Industrial engineering and management
press 1993) Benchmaking with other organization can help identify a gap. Gap analysis
identifies the progress required to move the organization can help identify a current
capabilities to its desired future state. In this way, the organization can adapt the best
practices to improve organizational performance.

Strengths
 Our vast storage capacity means ensured supplies

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PAKISTAN STATE OIL COMPANY

 Our strong logistic support meeting huge demands in short time


 Our widespread depots and divisions to serve the customer better
 Fleet and corporate cards adds value to our customer

Achievements

a) Industrial
Consumer (Head Office) - The First Marketing Department To Be
ISO 9001-2000 Certified

Industrial Consumer is proud to announce that we have achieved ISO 9001-2000


Certification for the Head Office. We are the first marketing department at PSO to be ISO
Certified.
This is a great achievement for Industrial Consumer Department. It will help improve our
processes as well as further enhance our image with our customers. The Quality
Management System will help us streamline our processes to improve efficiency and be
PRO-active rather than RE-active. This will directly benefit our customers in terms of
improved service quality.

b) Pakistan Steel
Mills Business Gained

Pakistan Steel Mills is one of the most sought customers by OMCs in Pakistan. Having
business of Pakistan Steel Mills not only adds prestige to that particular OMC but also
significantly improves that OMC's market share and overall standing. Pakistan Steel
Mills is the largest POL consuming manufacturing facility in Pakistan. After long and
intense series of negotiations, we have gained considerable business of Pakistan Steel
Mills.

c) PSO Fleet and


Corporate Cards
With a view to provide a Total Solution to our IC customers, we have launched the
PF&CC in March 2003. This is a technical and innovative product geared towards better
management of IC customers' fleet. Through the PF&CC, the IC customers can utilize the
services of the wide range of stations in the major cities. It offers convenience and time-
saving to our customer. The PF&CC allows setting of credit limits through increased
monitoring for the clients.

IC is Proud that

More than 2,000 industrial units & business houses are being catered through PSO's
Industrial Consumer department

We are serving all the existing industries in Pakistan through quality products and
technical back up

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PAKISTAN STATE OIL COMPANY

We are utilizing Fleet and Corporate cards for giving more benefits to our customers
exclusively

IC Department is being ISO Certified to improve the quality of service

Our People

We have a team of well-qualified professionals who are dedicated to achieve the tasks
assigned to them most efficiently.

Our people are our strength. We have a customer-focused approach to decision making.

We believe in teamwork to accomplish tasks and encourage empowering our team to take
timely decisions. Together we work as a team to achieve our objectives.

Power Projects Department

PSO's Role in the Power Sector

The primary source for generation of Thermal Power Stations is through Furnace Oil.
The demand of FO depends on the electricity generation from the FO powered plants
after having exhausted available generation from Hydel, Gas, Nuclear and Coal
resources. The reason being, FO generation is the most expensive as compared to other
sources.
In 1994, PSO was the only OMC which made huge investment of around 2.2 billion and
aggressively entered the power sector and captured a market share of approximately 88%
by supplying product to all power plants from its state of art oil installations at
Zulfiqarabad and from up country Depots and Installations.

Products Handled

 High Sulphur Furnace Oil-(HSFO)


 Low Sulphur Furnace Oil-(LSFO)
 High Speed Diesel (HSD)\
 Lubricants

a) Nature Of Business

 Non Contractual Business (WAPDA)/(KESC)


 Contractual Business (IPPs)

b) Power Customers

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PAKISTAN STATE OIL COMPANY

 RPPL (Rousch Power Co. Ltd.)-Abdul Hakim


 AES (AES Lalpir Ltd. & AES Pakgen (Pvt.) Co. Ltd)-Lalpir
 SABA (Saba Power Co. Ltd.)-Farooqabad
 KEL (Kohinoor Energy Ltd.)-Raiwand
 JPGL (Japan Power Generation Ltd.)- Raiwand
 SEPCOL (Southern Electric Power Co. Ltd.)- Raiwand
 TEL (Tapal Energy Ltd.)-Karachi
 GAEL (Gul Ahmed Energy Ltd.)-Karachi
 HUBCO (Hub Power Co. Ltd.)-Hub River Road Baluchistan
 KAPCO (Kot Addu Power Co. Ltd.)-Kot Addu
 WAPDA (Water and Power Development Authority)- At various locations
in Pakistan
 KESC (Karachi Electric Supply Corporation)-Karachi

PSO Contribution in FO Industry (2006-2007)

SPL COPL
0% 4% APL TPPL
3%
3%

Graphical Presentation Of Power Sector Scenario


PSO
90%

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PAKISTAN STATE OIL COMPANY

F O S a le s B re a k u p o f P o w e r S e c to r (2 0 0 6 - 2 0 0 7 )

HUB C O
KAPC O
11% W APD A
(L S F O )
9% 31%

K E OCAC
Source: SC
19%

P riva te
Pow er
30%

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PAKISTAN STATE OIL COMPANY

Source: OCAC

FO Sales Breakup of PSO (2006 - 2007)

KESC
0% (LSFO)
KAPCO
0%
ROAD
TRANSPOR HUBCO
26% 20%

Private Power
24%
WAPDA
30%
Source: PSO

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PAKISTAN STATE OIL COMPANY

Corporate Profile
Founded in 1976, PSO has inherited a wealth of experience in oil marketing from its
predecessor companies - PNO, POCL and SOCL.

With 32 depots and terminals, nearly 4,000 outlets and more than 8,500 enlisted tank
lorries, PSO enjoys 67% of total market share of petroleum products in the country. A
well-established infrastructure, at par with international standards, provides PSO an edge
over its competitors.

During the last 3 years, PSO has undergone a radical change and has emerged with a new
corporate outlook as a market leader with a long-term vision. It is a blue chip company
with market capitalization of around Rs. 48-50 billion (USD 825-860 million).

1. Corporate Governance Model

In order to establish good corporate governance framework, the Ministry of Petroleum &
Natural Resources has reconstituted the Board of Management (BoM) of PSO by giving
it the autonomy to run the company on a professional and commercial basis. The Board
comprises ten members - two each representing the government and the public sector
financial institutions, and six from the private sector.

The Board is responsible for management and control of the company business. It meets
periodically to comply with the statutory requirements of the national legislations and the
Memorandum and Articles of Association of the Company, and to meet the requirements
of the shareholders. The Board is assisted by three Board Committees in its decision-
making process - the Board Audit Committee, the Board Finance Committee and the
Board Human Resource Committee.

The Board Audit Committee reviews, amongst other areas, management policies and
practices to ensure adequacy and effectiveness of the company’s system of internal
controls. It also reviews business ethics violations, conflict-of-interest issues and
irregularities as well as management’s compliance with relevant policies set by the BoM.

The Board Finance Committee reviews and evaluates the financial performance of the
company as well as major projects and plans, based on economical viability or
operational necessity, as directed by the Board of Management.
The Board Human Resource Committee is responsible for developing a sound
organizational plan for the company, and effective employee development programs,
compensation and benefits plans and policies that would help attract and retain high
quality professionals.

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PSO’s current BoM is fully autonomous with the statutory powers under the Companies
Ordinance 1989.

In addition to these Board Committees, the following committees assist the Management
of PSO:

 Management (Man-Com) and Executive (Ex-Com) Committees

 Compensation, Organizational & Employee Development (COED)

 HSE Steering Committee

 Audit Committee

 SAP and Purchase Committees

 Cross-Functional Teams

2. Financial Performance

Effective implementation of corporate reform and business development strategies, in


line with best international practices, enabled PSO to maintain its market leadership
position in a highly competitive business environment. Accordingly, PSO increased its
market share in key products, including Mogas, HSD and Jet A-1.

PSO’s sales revenue during FY03 surged to Rs.206.37 billion; up by 13.2 % over prior
year. The company earned highest-ever profit before tax of Rs.6.21 billion, up by 20.9%,
while the profit after tax reached an all-time high figure of Rs.4.03 billion, up by 26.4%.

Based on this remarkable financial performance, the company announced a final cash
dividend of Rs 7/- per share (70%) to its shareholders, resulting in total dividend of 160%
for the whole year, as against 130% cash dividend plus 20% bonus shares declared during
the preceding year.

The company spent Rs 1,643 million during FY03 to expand its retail network and
enhance infrastructure along with sizeable expenditure on information technology.

During the period under review, PSO contributed approximately Rs.54 billion to the
national exchequer in terms of taxes, duties, dividends and levies thus supporting the
government in its revenue generation targets.

Other performance indicators like Return on Assets, Return on Capital Employed and
Return on Equity reveal that PSO has outperformed its competitors in terms of operating
performance.

PSO’s impressive business performance has resulted mainly from the management’s

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PAKISTAN STATE OIL COMPANY

thrust on increased operating efficiency, concentration on higher margin products,


expansion of new product lines and services, and margins.

Our Plans in 2006:07

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 Energy conservation

 Use and promotion of renewable energy resources

 We plan to improve our performance matrix to make the results


measurable

 Solid waste management of PSO House

 Waste treatment plant for Zulfiqarabad Oil Terminal

 Oil separators at our New Vision Retail Outlets

 Purchasing based on environmental concerns

 Training program in tackling oil spills

 Induction of Tier-1 oil spill equipment at Installations

Gender Justice

The company has ensured environment conducive to, and free from, gender
discrimination and harassment. Recently the management enforced Gender Justice Code
of Conduct for safe working condition for one of the important stakeholders of the
company. This has contributed to further enhancing the confidence of female employees.

The commitment to gender justice is practically reflected in PSO’s recruitment and


promotion policy.

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PAKISTAN STATE OIL COMPANY

Bibliography:

Global Network:

http://www.psocl.com/

(Pakistan State Oil Company Limited)

http://WWW.kse.com.pk

(Karachi Stock Exchange – Pakistan)

http://www.Google.com

Books and Journal

Annual Report of Pakistan State Oil Company Limited

VISSION - A PSO Magazine

Management - A Global Perspective

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PAKISTAN STATE OIL COMPANY

Appendix

Sales Revenue

250,000

206,376
200,000 195,110 195,039
182,323
Amount in Figuar

150,000
135,040

115,636

100,000

50,000

0
2007 2006 2005 2004 2003 2002

Year

INSTITUTE OF COST & MANAGEMENT ACCOUNTANT OF PAKISTAN


PAKISTAN STATE OIL COMPANY

Marketing & Administrative Expenses

2,500
Net Profit ration

2.5
2,022 2.3
1,982
2,000
2.2

2
2 1,640
Amount in Figuar

1,500 1,452
1,411
1.7 1.7
Amount in Figuar

1,153
1.5

1,000
1.2

500

0.5
0
2006 2005 2004 2003 2002 2001

Year
0
2007 2006 2005 2004 2003 2002
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Year
PAKISTAN STATE OIL COMPANY

INSTITUTE OF COST & MANAGEMENT ACCOUNTANT OF PAKISTAN


PAKISTAN STATE OIL COMPANY

Fixed asset turnover

50

45.8
45

40
37.3
36.3
34.8 34.4
35
Amount in Figuar

30
27.5

25

20

15

10

0
2007 2006 2005 2004 2003 2002

Year

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