Shell Petroleum Company (SPCO), a British firm engaged in the oil and gas business in Pakistan, has announced its intention to sell its 77% stake in the country and exit. The announcement to divest shares was made by Shell Pakistan Limited, a subsidiary of Shell Petroleum Company.
The Secretary of Shell Pakistan Limited informed the General Manager of Pakistan Stock Exchange Limited in a letter that the company has expressed its desire to sell its shares during the board of directors’ meeting on Wednesday.
Experts’ Confusion
The news of Shell’s intention to exit the oil and gas business in Pakistan has caused confusion among many experts. Dr. Gulfraz Khan, former Federal Secretary of Petroleum in Pakistan, stated, “I fail to understand why Shell is leaving the lucrative oil and gas market in Pakistan.”
In an interview with Independent Urdu, he said, “Shell is only involved in the business of refining oil and transporting products in Pakistan, which is a profitable venture.”
“Shell has been associated with the search for oil in Pakistan for a long time, but that is a thing of the past. Now they only engage in downstream operations (refining and transportation).”
According to Dr. Gulfraz, there could be various reasons for Shell’s decision to exit Pakistan, such as bureaucratic or government issues. However, he expressed his surprise that such a large company like Shell would not give much importance to minor issues.
“This is the reason for my confusion, that such a big organization would leave such a business due to small matters,” he added.
Elias Fazil, a researcher associated with the Islamabad Policy Institute (IPI), also expressed astonishment and confusion upon hearing the news of Shell’s exit from Pakistan. In an interview with Independent Urdu, he said, “It means the parent company is selling a major portion of its shares and exiting, but the subsidiary, Shell Pakistan, will continue its operations here. I fail to understand this.”
He mentioned that in the past, many international organizations had announced the closure of their operations in Pakistan, but most of them are still working here.
In his opinion, despite all the economic issues, the petroleum industry in Pakistan has been minimally affected.
“I believe we will have to wait and see the consequences of Shell’s decision. We cannot predict what will happen in the future,” he said.
PTI Leader’s Tweet
Farrukh Habib, a leader of the Pakistan Tehreek-e-Insaf (PTI) party, tweeted, “Multinationals are leaving Pakistan, and now Shell has decided to sell its shareholding. The reasons include an extremely uncertain political environment, regulated markets, capital controls, income restrictions, policy inconsistencies, and high taxes. Companies like Shell Disinvestment will send a very negative signal and show complete distrust in the fascist government of Shehbaz Sharif.”
Russian Oil
Some circles believe that a major reason for the British company Shell’s exit from Pakistan could be the arrival of Russian oil in the country. However, Dr. Gulfraz dismissed any connection between the arrival of Russian oil and Shell’s exit from the country.
He stated, “Even if Shell had any objections to Russian oil, there were many other ways to express them. What does it have to do with shutting down the business?”
He mentioned that Pakistan imports only one lakh barrels of oil from Russia, whereas the market is much larger, and Shell’s health is not affected in such a significant market.
Shell’s Financial Situation
Shell Pakistan had announced its financial performance for the first quarter of 2023, which was severely affected by the ongoing economic crisis in the country.
The reasons for this loss were cited as a decrease in the value of the rupee, rising inflation, and the uncertain state of macroeconomics.
Last year, the British Shell Petroleum Company suffered losses in Pakistan due to exchange rate fluctuations, a decrease in the value of the rupee, and mandatory receivables.
Amin Malik, a representative who maintains business relationships with petroleum companies, stated that the British company has been facing significant financial difficulties in the oil and gas sector for the past ten years.
In a tweet on Wednesday, he said, “Shell’s decision to sell its shares has nothing to do with the current government or the economic conditions. Shell has not been able to improve its market position for the past 10 years, which is why it is experiencing consistent decline.”
Amin Malik further stated, “If the political situation in Pakistan were the reason for Shell’s departure, then Caltex, which sold all its shares in the petrol market to Total Parco a few years ago, would not be returning to the market now and they have already planned substantial investments. Their first petrol pump launch has also taken place in Lahore.”
Shell Pakistan is a subsidiary of Royal Dutch Shell PLC, a British company. It is a leading energy and petrochemical company globally.
Shell Pakistan markets petroleum products and compressed natural gas, and also engages in blending and marketing of various types of oils.
However, Shell Pakistan has stated that its ongoing operations in Pakistan will not be affected.
Shell Petroleum Company is part of a global group of energy and petrochemical companies, with over 90,000 employees in more than 70 countries.
According to Shell UK’s website, the company utilizes new technologies and adopts innovative approaches to contribute to the development of sustainable energy for the future.
Shell, which produces approximately 3 million barrels of oil per day, sold 66 million metric tons of liquefied natural gas (LNG) during the year 2022. The company’s total revenue was nearly a billion US dollars, with profits exceeding 42 billion US dollars.
In the same year, Shell Petroleum Company invested over a billion US dollars in research and development.
Imran Malik
Lead from Independent Urdu Pakistan
