PACRA Maintains Entity Ratings of Pak Arab Refinery Limited

The ratings reflect Pak-Arab Refinery Limited ("PARCO" or "the Company") ownership structure representing the Government of Pakistan (GoP) – (60%) and Abu Dhabi Petroleum Investment Company (ADPI) through Mubadala Investment Company (based in Emirates of Abu Dhabi – UAE) – (40%). PARCO's strategic importance to the national economy is also factored into the ratings, as the Company plays a vital role in providing efficient and environmentally friendly energy solutions through the transportation of petroleum products via its integrated pipeline network. In FY24, Pakistan's total consumption of refined petroleum products was approximately 16.317 million metric tons (MT), down 3% from 16.853 million MT in FY23, largely due to slower industrial activity, reduced transport fuel demand, weaker auto sales, and high prices. Domestic refineries, including PARCO, supplied 10.081 million MT, meeting 62% of the country’s demand, while the rest was imported. PARCO achieved a 20% revenue growth in FY24, increasing sales volumes to 4.9 million MT from 4.3 million MT in FY23, aided by improved petroleum prices. However, in 1QFY25, the Company experienced a 22% decline in revenue, primarily due to a decrease in sales volumes to 1.2 million MT from 1.3 million MT in the same period of the previous year, coupled with lower petroleum product prices. The Company maintains a moderate leverage structure, funding operations through both internal resources and short-term bank borrowings. In addition to refining activities, PARCO’s revenue streams also strengthened by the returns from its investments in subsidiaries and associates. The equity base of the Company is strong and recorded at approximately PKR 180 billion as at end September, 2024. The approved "Refining Policy for Upgrade of Existing/Brownfield Refineries and New/Greenfield Refineries 2023" provides fiscal incentives, including tariff protection, for refineries undertaking upgrades. PARCO has completed the feasibility study for its upgrade project and further exploring cost effective options for Euro-V compliance and reducing Furnace Oil (FO) production.
The effective management of upcoming projects, consistency in government policies and technological advancements will remain critical. At the same time, sustaining a strong competitive position is also imperative.

About the Entity
PARCO, established in 1974, operates Pakistan's most modern refinery with a processing capacity of 120,000 bpd and an extensive cross-country pipeline network spanning over 2,000 kilometers. This network includes the Pak-Arab Pipeline Company Limited (PAPCO), a joint venture subsidiary in which PARCO holds a 62% stake. The Company’s equity investments extend to several other ventures, including PARCO Pearl Gas (Private) Limited (100%), Total PARCO Pakistan Limited (50%), and PARCO Coastal Refinery Limited (100%). The Company is governed by a ten-member Board of Directors, with six nominated by the GoP, including the Chairman and the Managing Director (MD), and four from the EAD, one representing OMV, Austria. Mr. Irteza Ali Qureshi assumed the role of MD in February 2024.