Reportedly, Saudi Aramco has acquired a 40% stake in Gas & Oil Pakistan (GO Petroleum). This is the second major development in Pakistan’s oil marketing space this year – both led by Saudi Arabia – with Wafi Energy earlier entering into a share purchase agreement to buy Shell Pakistan (SHEL PA).
Incorporated in 2015, GO Petroleum retails fuels and lubricants, backed by about 1,100 outlets and a storage capacity of 200,000 tons. It is the 2nd largest oil marketing company in Pakistan in terms of retail outlets. However, its market share has fluctuated between 6 to 8 percent in the last three years, making it smaller than SHEL and APL. The industry leader remains PSO (enjoying market share of 50%).
Although, pricing details have not been divulged as yet, according to Pakistan’s leading brokerage house, Intermarket Securities the assessed intrinsic value of US$200 million for SHEL to tentatively price the GO deal.
Given GO’s smaller market share, including in the lubricants business and the lack of a brand value comparable to SHEL, the brokerage house takes the deal price between US$100 million to US$150 million.
A 40% stake at this valuation range translates to US$40 million to US$60 million.
The brokerage house estimates that Vitol Dubai has a 10% share in GO Petroleum but it is unclear at this point if this is part of the 40% stake being acquired by Aramco.
It is likely but not certain that Aramco will take over management rights.
The GO Petroleum deal will be Aramco’s first investment in Pakistan, and comes on the heels of its earlier moves to acquire Valvoline’s global operations and Chile’s Esmax Distribution SpA.
The GO Petroleum investment will likely be very small in comparison to these other overseas downstream ventures. This leads analysts to think it may well represent a testing of the waters, with Aramco reportedly also interested in setting up a mega refinery project in Pakistan.
If GO Petroleum expands rapidly it could eat into the existing market shares of competitors. At present, given its major presence on motorways and the North region, GO primarily competes with HASCOL and APL, while urban centers are dominated by PSO and SHEL.
A possible expansion into the South region will impact the latter two companies more.
