The Pakistan Credit Rating Agency Limited
Press Release


Ahsan Zahid

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PACRA maintains Entity Ratings of Pak-Arab Refinery Limited

Rating Type Entity
(09-Dec-22 )
(10-Dec-21 )
Action Maintain Maintain
Long Term AAA AAA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings incorporate PARCO's unique 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%). The rating also incorporates PARCO’s strategic importance to economy through operations providing efficient, low-cost, and environment-friendly energy solutions through transportation of petroleum products via integrated Pipelines, Refining and Marketing. PARCO is also contributing substantially towards socioeconomic benefits and Foreign Exchange savings for the country. Being the market leader, PARCO retains a large chunk of the market share of ~49% of the total domestic supply of Petroleum products. In addition, PARCO witnessed the revenue growth of 134% during FY22, while a significant increase was observed in 1QFY23 where the sales increased by ~20.8%. The Company has low leveraged structure and operations are generally funded by its own resources. Further, the revenue streams also includes return on investments in subsidiaries and associate. Also, Company's investments in dollar-based funds acts as an implied hedge against exchange rate fluctuations. In line with its strategic vision, PARCO has also initiated an integrated refinery-Petrochemical complex of 250-350kbpd project namely the PARCO Coastal Refinery Project. PARCO has also recently completed a feasibility study for Bottom-of-Barrel upgradation project for its existing refinery in order to produce Euro-V compliant fuel products and minimize the production of Furnace Oil as per the directions of the Government of Pakistan. Through its subsidiary, Pak Arab Pipeline Company Ltd (PAPCO), PARCO has initiated development of an Oil Import Terminal (OIT) to meet the growing domestic requirements for petroleum products and to reduce congestion of existing ports.
Effective management of upcoming projects, consistency in Government policies and technological improvisation will remain critical for the ratings. Meanwhile, sustained competitive positioning is also imperative.

About the Entity
PARCO established in 1974, started out as a pipeline network which later extended to include Pak Arab Pipeline Company Limited (PAPCO), for capacity enhancements and network expansion. The combined pipeline network of PARCO & PAPCO consists of ~2000 km consisting of crude oil and petroleum products. PAPCO is a subsidiary with joint venture between PARCO, PSO, and Shell. PARCO also has major investments in marketing operations which include: Total PARCO Pakistan Limited (TPPL) - a joint venture in a rapidly expanding retail fuel/lubricants network and PARCO Pearl Gas (Private) Limited (PPGL) – a fully owned subsidiary; one of the largest LPG marketing/distribution companies. PARCO is also engaged in the direct supply of oil products to industrial customers and the Armed Forces through the Pearl brand. PARCO's equity investment in its related business is as follows; a) PAPCO - 62%; b) PPGL- 100%; c) TPPL - 50%, and d) PARCO Coastal Refinery Limited - 100%. The company's ten-member Board of Directors (BoD) includes six nominees of the GoP, including the Chairman and the Managing Director (MD), while the remaining four are EAD nominees, one of whom represents OMV, Austria. The Managing Director, Mr. Shahid Mahmood Khan, has been associated with the Company for over a decade and is supported by a team of qualified and experienced professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.