Shell Pakistan

History

Royal Dutch Petroleum Company spent almost 12 years exploring oil and getting production under way before being registered as an enterprise in 1890. In February 1892 these efforts were rewarded by crude oil flowing from the company’s wells in the north Sumatran jungles. The remote location of these wells required Royal Dutch Petroleum to emerge as an integrated oil company from well-head to consumer, exporting its products around Asia. To do this, Royal Dutch Petroleum reached an agreement with merchant trading company M Samuel & Co to operate the Asian arm of their transportation business. The fleet formed an integral part of Shell’s entrance into Asian oil market by shipping kerosene in bulk from Russia via the Suez Canal. In 1897, the venture was incorporated as Shell Transport and Trading Company. In 1907 Royal Dutch Petroleum Company merged with Shell Transport and Trading Company. Though the two companies originated from different positions – Royal Dutch as an upstream producer and refiner, and Shell Transport a midstream transporter and wholesaler of oil – because both companies were focused on Asian markets, they were able to combine their marketing operations in Asia to form a joint venture called Asiatic Petroleum.

Shell’s History in the South Asia

Shell Businesses/Stakeholders

Shell Pakistan – OP Marketing (Aviation and Commercial)

Aviation

The Aviation business is an important and profitable part of Shell Pakistan Limited’s (SPL) portfolio. Shell's presence at five major airfields across Pakistan has enabled the company to be involved in supplying both domestic and foreign airline carriers, making Shell Aviation the second largest Jet fuel supplier in Pakistan with over 30% market share.

Shell Lubricants

SPL is the largest lubricant marketing company in Pakistan with over 20% share of the total lubricant market in the country. SPL’s lubricant business is the second most profitable within Shell’s Global Lubricant portfolio. The business is focused on sales of key Shell brands (Rimula, Helix & Advance) to high street traders and the transportation sector as well as heavy-duty brands to industrial customers and power sector customers.

Shell Retail

SPL is the second-largest oil marketing company (OMC) and the largest private OMC in Pakistan with a 25% share of the white-oils market. The Retail business comprises over 800 retail outlets.

Pakistan Refinery Limited

Pakistan Refinery Limited (PRL), located at Karachi, is the third largest refinery in the country, with a refining capacity of 2.1 mn tons per annum. The refinery was set up in the 1960s, and Shell has a 26% equity interest in it. With the introduction of the deemed duty element in the oil products pricing mechanism in 2001, the refineries profitability has improved considerably. As 50% of its profits are mandated by the Government to be retained for upgrading/modernization, PRL is now embarking on major up-gradation projects including expansion and de-sulphurization.

Pak-Arab Pipeline Company Limited

In August 2001, a new company called Pak-Arab Pipeline Company (PAPCO) was formed to construct and operate a critical 840 km white-oil pipeline for transportation of AGO from Karachi to major markets in the centre and north of Pakistan. SPL has a 26% equity interest in PAPCO and the PAPCO’s Chief Financial Officer remains a SPL nominee. The pipeline has been operational since Q1/2005 and is an important element in business continuity and transport safety in the sector.

Management

Farooq Rehmatullah succeeded David M Weston in 2001, to become the first Pakistani national CEO of SPL. He retired in 2006. SPL Managing Directors

Jawwad A Cheema is the CEO and Managing Director of Shell Pakistan Limited. He is also the Vice President for Shell Business Operations and custodian of Shell Group’s strategy for off-shored business operations that is delivered through a network of seven Business Service Centers across the world. He joined Shell in 1997 in Pakistan and worked in the Retail Business for almost eight years in various specializations before moving to global roles outside Pakistan. Prior to this role, he has held several senior leadership roles within the Shell Group. He was the Consultancy Manager in the Downstream Strategy & Consultancy team, Customer Experience Manager managing Global Operational Excellence for Retail and Retail General Manager in Indonesia managing Retail’s entry into this new market.

Board of Directors

Shell Pakistan in 2012

Shell Pakistan Limited (SPL) has more than 850 retail stations in more than 330 cities, having 20% market share and is the largest foreign investor in Pakistan’s oil marketing sector. Shell has been the leader in the lubricants sector since 2002, currently with more than 40% share of the organized sector. Shell’s Commercial Fuels business (including commercial transport) is a significant opportunity for growth. Its aviation business supplies fuels to six key airports across Pakistan. Shell has 30% interest in the Pakistan Refinery Limited (PRL) (average production: 40,000 bpd) located in Karachi and a 26% interest in US$480mn 780 km white oil pipelines. In FY2010-2011 the Company earned a profit after tax of Rs. 906 million and recorded 11% growth in net revenue and 3% increase in gross profits compared to previous year.

Fast facts

Government receivables

One of SPL’s biggest challenges to doing business in Pakistan is Government receivables owed to it. These receivables are due on account of price differential claims, sales tax and Petroleum Development Levy. Currently, they stand at an all-time high of Rs 13,800 million (94.5 million GBP). Due to delays in the receipt of these receivables, Shell suffered approximately Rs 1,700 million in additional financing costs in 2011 to run day-to-day operations. Note: Given below are headings in Wikipedia article on Royal Dutch Shell.