KARACHI: Byco Petroleum is in talks to buy Admore Gas in a bid to boost profits by bringing economies of scale and become the fourth largest oil marketing company (OMC) of the country, a top company official said on Friday.
“We are very serious about this acquisition as this is the only way we can ensure profits,” said Kaleem Siddiqui, Byco Petroleum President. “Negotiations are still underway.”
Margins of OMCs on sale of petroleum products are regulated by the government, which recently fixed them in absolute rupee terms to control prices at filling stations.
Siddiqui said that OMCs cannot rely on sale margins to shore up profits. “The other option left is to increase volumes. That is exactly what we will do.”
He did not say how much the company was considering paying for the takeover or when a final outcome was expected.
Rumours of a possible takeover of Admore have been circulating since November last year. Admore has not issued any statement on the matter.
The takeover will make Byco the fourth largest OMC in the country in terms of reach with a combined strength of nearly 600 filling stations. Admore has over 400 filling stations, most of them in the north. Byco has 180.
Siddiqui said that Byco would not face any difficulty in financing the acquisition if negotiations concluded successfully. “Our refinery might be in losses but Byco as a group has already invested a lot of money in the industry.”
Byco is building another 120,000 barrels per day refinery in Hub, Balochistan, with an investment of over $800 million. It is planned to be commissioned later this year.
Attock Petroleum had also tried to buy Admore Gas, but the talks failed last year. Admore has faced low sales at retail outlets in recent months owing to unavailability of products, analysts said.
Byco has already intensified work on finding ways to supply millions of tons of petroleum products to consumers ahead of the launch of its refinery.
It is looking at selling most of the fuel oil produced by the new refinery to Hub Power Company (HUBCO), which is situated at a stone’ throw from its plant.
The refinery has capacity to produce two million tons each of furnace oil and high speed diesel (HSD) annually, the two main petroleum products that the country has to import.
It is also in talks with Pakistan State Oil (PSO) to use latter’s 84-km pipeline for pumping petroleum products from the refinery to Zulfiqarabad Oil Terminal (ZOT). From there the petroleum products can be pumped to storage facilities in the upcountry through the white oil pipeline.
This article was published in The News on 26 Feb. 2011
