The Pakistani subsidiary of the French multinational, TotalEnergies SE, is being partly sold to another foreign entity, Gunvor Group.
Total Parco came into being in 2022 as a joint venture between Pak-Arab Refinery Limited and the French multinational. Today, the company’s operations span various domains, including fuel logistics and lubricants, besides its core business, the 800+ service stations it runs across the country.
While the sale has been agreed upon, it is yet to be formalized. The transaction for the sale of the 50 percent stake will take place once the regulatory bodies greenlight it. According to the French multinational, the decision is in line with its strategy to selectively market and provide its services.
Despite being sold to another foreign entity, the Pakistani subsidiary will continue its operations under the same branding for the next five years.
It is worth mentioning here that Shell Petroleum Company sold 77 percent of its stake in Shell Pakistan last year, thus formalizing its exit from the country. The company which had once been a promising venture for the global petroleum company, decided to sell its shareholding in the local business when the latter suffered massive losses after heavy devaluation of the Pakistan Rupee in the wake of an economic crisis.
While the decision was on the cards for nearly a decade, what finally led to the company pulling out was the way the economic challenges of the country were affecting its business in Pakistan. Successive governments failed to address the grievances of the company, which culminated in Shell Petroleum Company issuing a declaration to terminate the 76-year-long partnership.
The move, while less concerning than the exit of Shell Petroleum Company, still comes as a setback to Pakistan, which is losing its status as a “core geography” for TotalEnergies.
In the wake of the development, a meeting was held between the officials of Parco and Gunvor Group and Finance Minister Muhammad Aurangzeb on Monday, wherein the officials expressed their dedication to the growth of the energy sector in Pakistan.
The officials of Parco and Gunvor Group told the finance minister about the ongoing projects of their respective companies in the country. In response, the finance minister informed them about the energy reforms being spearheaded by the government, alongside efforts to manage the unprofitable state-owned enterprises and sell off loss-making entities.
It is worth mentioning here that two months ago, following a letter from the Oil Marketing Association of Pakistan (OMAC), wherein the challenges faced by the sector were aptly highlighted, the Special Investment Facilitation Council (SIFC) Secretariat based at the Prime Minister’s Office sought comments from government bodies over the matter.
According to the letter, the industry was facing unrecovered exchange losses of Rs26 billion, with reimbursement remaining slow despite assurances from the Ministry of Energy and the Oil and Gas Regulatory Authority (OGRA). Moreover, it highlighted that following the reduction in sales tax to zero, Rs65 billion were stuck with the government and the sector was facing bureaucratic hurdles in recovering this amount. Furthermore, another aspect that compounded the cash flow situation was the funds held in the Inland Freight Equalization Margin (IFEM).
The chairman of the association told the government that these issues were putting the survival of the industry at stake. He also highlighted that the government’s reluctance to take action on the matter is affecting both domestic and foreign investments in this sector.
Taking action over the letter, the SIFC Secretariat asked the Ministry of Energy, OGRA, and the Federal Board of Revenue (FBR) to respond.