The Pakistan Credit Rating Agency Limited
Press Release


Andleeb Zahra

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PACRA maintains entity ratings of Pak-Arab Pipeline Company Limited.

Rating Type Entity
(01-Jun-24 )
(02-Jun-23 )
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

Pak Arab Pipeline Company Ltd. (the Company) owns and operates a dedicated pipeline network which is used to transport White Oil. The pipeline network is 786KM long which extends from Port Qasim and Kaemari to mid-country Mehmodkot. The pipeline capacity to transport is 8mln tons of the commodity/annum, which can be increased up to 12mln tons/annum, considered to be sufficient to meet the upcountry’s demand. Its unique business model provides basic infrastructure for smooth running and transportation of White Oil through mid-country. Therefore, its strategic importance at country level is eminent. The pipeline has been upgraded to transport Motor Gasoline (MOGAS) in addition of High Speed Diesel (HSD) in Nov’21. This upgradation is debt driven; from syndicate local debt and foreign borrowings. The Company has successfully started its repayment as per schedule and going forward leverage is expected to reduce. The ratings are reflective of PAPCO’s strategic importance to the country and its distinctive business model deriving its strength from a US$ based tariff structure, providing sustainability to the Company’s profit and certain cushion against exchange rate fluctuations. Market for petroleum products (POL) declined by 7% in 3QFY24. Macro economic factors lead to slow down in economic activity which resulted in lower demand of petroleum products. Capacity utilization of PAPCO also showed the same trend reported to be ~45% including 17% for MOGAS in 3QFY24 (3QFY23: 51%). In addition, authority approval for the upliftment of at least 35% of MOGAS transported through pipeline has been enhanced to 45% since Sep'23 for one year period. The liquidity profile of the Company is considered as strong due to its sizable short-term investment book on the balance sheet and its cash richness. The cash flows of the company remain persistently strong, stemming from formidable profitability margins. The Company's governance structure derives full benefit from its association with PARCO, which also deputes its functionaries in PAPCO, with Shell Pakistan Limited nominating the CFO.
The ratings are dependent on sustainable business model and its share in the overall country’s petroleum movement. Sustainability in system share remains vital for the Ratings. Execution of contracts and timely delivery of products is also important. Meanwhile, adherence to strong performance indicators is imperative

About the Entity
PAPCO’s majority holding lies in the hands of PARCO - 62%, which is majorly owned by GoP, while remaining by Shell Pakistan Limited (26%) and PSO (12%). Shell Pakistan Limited, a subsidiary of Shell plc (Shell), has agreed to sell its 77.42% majority interest in Shell Pakistan Limited (SPL) to Wafi Energy LLC. PAPCO operates a cross-country pipeline system to transport refined High Speed Diesel from Karachi ports to mid-country. It has the flexibility to receive imported and locally produced HSD products from multiple sources and to deliver it at different demand centers. The pipeline was commissioned in March 2005, comprising 786 Km 26” dia cross-country pipeline, storage tanks, pumps and other allied facilities. The Company’s overall control is overseen by ten-member board of directors (BoD), representing all the shareholders. The Chairman of the board is nominated by PARCO. Mr. Amr Ahmed, Chief Executive Officer (CEO), holds a Bachelors degree in Mechanical Engineering and is also an MBA. He took charge as CEO PAPCO in December 2020 and has been aptly deploying his expertise since then. Mr. Syed Muhammad Haris Chief Financial Officer (CFO) is an MBA. and has a vast experience in the Oil & Gas sector and has been nominated by Shell Pakistan Limited.

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