| Pakistan State Oil |
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| Annual
Report 2000 |
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| Our Vision |
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Market leader providing the highest quality petroleum |
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| products
and services to its customers |
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| *
Professionally trained, 'high quality, motivated workforce, |
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| working
as a team in an environment which recognizes and |
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| rewards
performance, innovation and creativity, and |
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| provides
for personal growth and development |
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Lowest cost supplier with assured access to long term supplies |
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Sustained growth in earnings in real terms |
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Highly ethical company; good corporate citizen |
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| Contents |
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| Company
Information |
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| Highlights |
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| Notice
of the Meeting |
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| Report
to the Shareholders |
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| PSO at a Glance |
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| Auditors'
Report |
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| Balance Sheet |
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| Profit
and Loss Account |
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| Cash
Flow Statement |
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| Statement
of changes in Equity |
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| Notes
to the Accounts |
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| Statement
Pursuant to Section 237 of the |
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| Companies
Ordinance, 1984 |
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| Pattern
of Holding of Shares |
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| Accounts
of Subsidiary Companies |
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| Company
Information |
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| Board
of Management |
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| Mr. M. Salim |
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| Chairman,
Pakistan State Oil |
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| Mr.
Shaukat Raza Mirza |
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| Managing
Director, Pakistan State Oil |
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| Mr. G.A. Sabri |
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| Director
General (Oil), Ministry of Petroleum |
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| &
Natural Resources |
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| Mr.
Mohammad Iqbal Awan |
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| Financial
Advisor, Ministry of Petroleum |
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| &
Natural Resources |
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| Mr.
Istaqbal Mehdi |
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Bankers |
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| Chairman/CEO,
National Investment Trust |
ABN AMRO Bank N.V. |
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|
Allied Bank of Pakistan
Limited |
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| Mr.
Nisar A. Memon |
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Askari Commercial Bank
Ltd |
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| President,
The Reformers |
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Citibank N.A. |
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Deutsche Bank AG |
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| Mr.
Kamran Mirza |
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Emirates Bank
International (PJSC) |
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| Chairman
& MD, Abbott Laboratories |
Habib Bank A.G. Zurich |
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Habib Bank Limited |
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| Mr.
Arshad Said |
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Mashreq Bank- PSC |
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| Former
Senior Executive, Shell Pakistan |
Muslim Commercial Bank
Limited |
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National Bank of Pakistan |
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| Mr. Asad Umar |
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Societe Generale, The
French and International Bank |
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| President,
Engro Asahi Polymer & Chemicals |
Standard Chartered
Grindlays Bank Limited |
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The Bank of Khyber |
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The Hongkong &
Shanghai Banking Corporation Limited |
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| Secretary |
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Union Bank Limited |
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| Mr.
Jalil-ur-Rehman Tarin |
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United Bank Limited |
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| Auditors |
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Registered Office: |
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| Sidat
Hyder Qamar & Co. |
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PSO House,
Khayaban-e-Iqbal, Clifton, Karachi. |
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| Taseer
Hadi Khalid & Co. |
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| Solicitors |
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| Orr
Digham & Co. |
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| Highlights
of the Year |
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| *
All time record sales revenue Rs. 135 billion; up 17% over prior year |
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Profit before tax of Rs. 3.6 billion; up 7% over prior year |
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Highest ever cash dividend of 100% (Rs. 1.4 billion) |
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Established 110 New Vision retail outlets |
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Successfully took over the Fuel Oil imports from Government of Pakistan |
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Signed long-term product off-take agreement with PARCO |
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Ranked as the No.1 performing company in Pakistan by |
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| Karachi
Stock Exchange; received award for the 16th consecutive year |
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Board of Management reconstituted by Government of Pakistan; |
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| principles
of corporate governance established |
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| Notice
of the meeting |
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| Notice
is hereby given that the Twenty Fourth Annual General Meeting of the Company
will be held at Karachi |
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| Marriott
Hotel, 9 Abdullah Haroon Road Karachi on Thursday, December 21, 2000 at 11:00
A.M. to transact the |
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| following
business. |
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| 1.
To confirm the minutes of the Twenty Third Annual General Meeting held on
February 15, 2000. |
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| 2.
To receive and adopt the audited accounts for the year ended June 30, 2000
together with the report to the |
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| Shareholders
and the Auditors' report thereon. |
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| 3.
To lay information before the members of the Company of the appointment of
Messers Sidat Hyder Qamar & |
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| Company
and Messers A.F. Ferguson & Company, Chartered Accountants, as Auditors
of the Company, for |
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| the
year ending June 30, 2001. |
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| 4.
To declare a final dividend of 700/0 in addition to the interim dividend of
300/0 already paid, thereby making a |
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| total
dividend of 100% for the year ended June 30, 2000. |
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AND |
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| 5.
To transact any other Ordinary Business of the Company with the permission of
the Chairman. |
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By Order of the Board |
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Jalil-ur-Rehman Tarin |
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| Karachi:
November 13, 2000 |
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Secretary |
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| Notes: |
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| 1.
A member entitled to attend and vote at this meeting may appoint any other
member as his/her proxy |
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| attend
and vote. A proxy form is enclosed. |
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| 2.
The Share Transfer Books of the Company will remain closed from Thursday,
December 7, 2000 to Thursday |
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| December
21, 2000, (both days inclusive). Transfers received in order at the
Registered Office of the Company |
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| up
to the close of business on Wednesday, December 6, 2000 will be considered in
time to be eligible for |
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| payment
of Final Dividend to the transferees |
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| 3.
The instrument appointing a proxy and the power of attorney or other
authority under which it is signed or a |
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| notarially
attested copy of the power of attorney must be deposited at the registered
office of the Company at |
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| least
48 hours before the time of the meeting. |
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| 4.
Shareholders who have deposited their shares into Central Depository Company
of Pakistan Limited, are being |
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| advised
to bring their National Identity Cards along with CDC Participant ID and
account numbers at the |
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| meeting
venue. If any proxies are granted by any such shareholders, the same must be
accompanied with |
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| attested
copies of the National Identity Cards of the grantor and the signatures on
the proxy forms should be |
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| the
same as appearing on the National Identity Cards. |
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| Report
to the Shareholders |
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| The
Board of Management is pleased to present the |
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| Twenty
Fourth Annual Report and the audited accounts of |
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| the
Company for the year ended June 30, 2000. |
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| Petroleum
Industry Overview |
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| The
demand for petroleum products in Pakistan increased to |
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| 17.6
million tons during the year ended June 30, 2000. |
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| This
represents a growth of 6.3% over the prior year. |
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| Motor
gasoline demand declined by 5.6% mainly due to |
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| substitution
by CNG, SKO demand grew by 2.7%, while HSD |
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| demand
was up 5.1%. Fuel oil demand increased by 9.7% |
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| due
to increased lifting by IPPs and WAPDA/KESC. |
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| Local
refineries covered only about 33% of the domestic |
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| requirements.
Deficit fuel product imports constituted about |
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| 67%
of the total demand and included 6.2 million tons of |
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| Furnace
Oil and 5.5 million tons of High Speed Diesel. The |
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| new
mid-country refinery with a capacity of 4.5 million tons |
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| per
year came on stream in September 2000. Bulk of the |
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| capacity
of the existing White Oil Pipeline has been switched |
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| over
to crude oil shipments to this refinery. A large quantity |
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| of
the imported fuel products is being transported by |
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| Rail/Road
to the Northern parts of the country. |
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| The
Government has initiated steps to privatize and |
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| deregulate
the Oil and Gas Sector. Fuel Oil imports |
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| have
been deregulated with lifting of price controls. |
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| Government
has announced phased deregulation of |
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| other
petroleum products by mid 2002. A new White Oil |
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| Pipeline
is expected to be completed by end 2002 at an |
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| investment
of US$ 529 million. |
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| Marketing |
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| During
the year, the Company sold 12.7 million tons as |
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| against
12.1 million tons in the previous year while sales |
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| revenue
increased by 17% to Rs. 135 billion. |
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| PSO
management has taken a number of steps to arrest the |
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| decline
in its market share over the last several years. |
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| The
Company has launched an aggressive plan to build |
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| New
Vision retail outlets to provide better quality service to |
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| its
customers. 110 outlets were completed during the year |
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| and
more are being built. The number of Company-Owned |
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| &
Operated sites (CoCo) has been increased to 12. A strong |
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| focus
is being placed on customer and forecourt services |
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| with
extensive training of field sales force and forecourt |
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| attendants.
Mobile quality control vans have been |
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| introduced
in major cities to monitor quality of products |
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| being
supplied to our customers. To motivate and strengthen |
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| dealer
network, dealer meetings/conferences have been |
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| held.
Efforts of high selling dealers (11) have been |
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| recognized
through "Million Liter" award. A number of |
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| successful
media campaigns (PSO Petro Prize & Scratch-a- |
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| Match)
have been launched to strengthen the PSO brand. |
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| Marketing
alliances with international brands like Pepsi, |
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| Walls
and Citibank have been formed. These and other steps |
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| are
beginning to produce results and the decline in market |
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| share
in key products is being arrested. |
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| A
separate cell has been set up by the Company which works |
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| closely
with the government agencies to curb the production |
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| and
flow of spurious and smuggled petroleum products |
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| within
the country. PSO has also introduced a new pilfer |
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| proof
plastic packaging along with ink-jet coding on plastic |
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| cans.
The development of an in-house plastic can |
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| manufacturing
facility is underway. An innovative service |
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| "Mobile
Quick Oil-Change-At-Your-Doorstep" has been |
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| launched
in Karachi, Lahore and Islamabad. |
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| Operations |
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| Consequent
upon deregulation of furnace oil from July 1, |
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| 2000,
PSO became the first oil marketing company to invite |
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| international
competitive bids to meet our customers' |
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| requirements.
A total of 1.9 million tons was imported during |
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| the
period July-October 2000. In June 2000, a record 13 |
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| ships
were received at Port Qasim. The Company has |
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| maintained
uninterrupted supplies to our customers inspite |
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| of
a difficult hydel generation situation in March 2000 and |
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| explosion
at the Kuwait Petroleum Company (KPC) refinery |
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| in June 2000. |
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| In
September 2000, PSO signed a long-term product off-take |
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| agreement
with the Mid Country Refinery. |
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| The
Board has approved the acquisition of 12o/o equity |
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| (approximately
Rs. 950 million) in the Karachi-Mehmood |
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| Kot
864 Km long White Oil Pipeline Project, which is |
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| scheduled
to be completed by December 2002. |
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| In
collaboration with the other Oil Marketing Companies and |
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| District
Civil Administration, the Company took the initiative |
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| to
shift Shireen Jinnah Colony tank lorry stand near Keamari |
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| Terminal
to the open areas near Zulfiqarabad Oil Terminal |
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| Basic
amenities for the truck drivers have also been provided |
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| at
the site. While streamlining the tank lorry movement in |
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| Karachi,
this effort has helped the city by freeing it from a |
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| source
of noise, traffic congestion and environmental pollution. |
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| Financial
Results |
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| During
the year ended June 30, 2000 the Company sales |
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| revenue
showed a growth of 17% rising to Rs. 135 billion. |
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| Profit
before tax was Rs. 3,581 million, up by 7% over the |
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| prior
year. Profit after tax was Rs. 2,231 million compared |
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| with
Rs. 2,670 million in the previous year. The prior year |
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| had
the benefit of tax write back of Rs. 515 million. Your |
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| Board
recommends that the net profit of Rs. 2,231 million |
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| earned
during the year together with the balance of |
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| unappropriated
profit of Rs. 2 million brought forward from |
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| the
prior year be appropriated as follows. |
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|
(Rs.
Million) |
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2000 |
1999 |
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| Total
profit available for appropriation |
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2,233 |
2,672 |
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| Appropriations |
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| Transfer
to general reserve |
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|
800 |
1,360 |
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| Interim
dividend @ 30% already paid |
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429 |
357 |
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| Proposed
final dividend @ 70% i.e. Rs. 7/- |
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| per
share of Rs. 10/- |
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1,001 |
715 |
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------------------ |
------------------ |
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| Total
dividend for the year |
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1,430 |
1,072 |
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| Issue
of bonus shares |
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0 |
238 |
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------------------ |
------------------ |
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| Unappropriated
profit carried forward |
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3 |
2 |
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========== |
========== |
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| A
record capital expenditure of Rs. 967 million was spent |
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| during
the year primarily on New Vision retail development |
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| program.
Total expenditure during 1995-2000 exceeded |
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| Rs.
3.5 billion. Bulk of the expenditure in prior years |
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| has
been on infrastructure development like the |
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| Zulfiqarabad
Oil Terminal (ZOT). |
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| Receivables
from WAPDA declined from Rs. 6,129 million |
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| to
Rs. 4,054 million. With the support of Ministry of Petroleum & |
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| Natural
Resources, the Economic Coordination Committee of the |
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| Federal
Cabinet ruled that WAPDA settle with PSO over a period of |
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| three
years the arrears of Rs. 3,026 million outstanding as of June 30, |
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| 2000
on account of HSFO/LSFO price differential. |
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| The
company was declared the top performing company in Pakistan |
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| by
the Karachi Stock Exchange. It has won the KSE Top 25 Companies |
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| Award
for the record 16th consecutive year. PSO was also ranked in |
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| the
top 1000 companies by Asia Week, for its sales, profit, assets and |
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| best
performance. |
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| Health,
Safety & Environment |
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| Health,
Safety & Environment (HSE) is the cornerstone of the |
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| Company's
corporate governance. The Company recently set up a |
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| separate
HSE department with consultant support. An HSE policy has |
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| been
formulated and communicated throughout the organization. |
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| The
HSE Steering Committee has been appointed for steering HSE |
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| activities
throughout the Company to ensure implementation of HSE |
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| action
plan and continuous improvement in performance. |
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| The
Company holds regular training programs on development of |
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| Environmental
Management Systems. |
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| Health,
Safety & Environment Policy |
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| Pakistan
State Oil Company Limited will ensure that |
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| ·
The health of its employees, its contractors, its customers and the public is
protected. |
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| ·
All its activities are carried out safely. |
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| ·
Environmental performance meets legislative requirements |
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| To
implement HSE Policy, Pakistan State Oil Company Limited will |
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| ·
Comply with relevant laws and regulations. |
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| ·
Ensure that required Health, Safety and Environment Standards and Procedures
are developed and established. |
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| ·
Ensure that all its activities are carried out in accordance with Company's
Health, Safety and Environment Standards and Procedures. |
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| ·
Set demanding targets and measure progress to ensure continuous improvement
in Health, Safety and Environment performance. |
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| ·
Require every employee to exercise personal responsibility in preventing harm
to themselves, to others and to the environment. |
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| ·
Provide appropriate Health, Safety and Environment training/information to
all employees, contractors and others who work with |
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| the Company. |
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| ·
Ensure provision of safe working environment. |
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| ·
Promote awareness and give due recognition to performance in the area of
Health, Safety and Environment. |
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| Community
Welfare |
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| The
Company has contributed to several causes like the Chief Executive's |
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| Drought
Relief Fund to help the drought-affected people in interior |
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| Sind
and Baluchistan, development of a public park near one of its |
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| retail
outlets, scholarships for deserving students, and the Citizen Police |
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| Liaison
Committee. |
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| Organization |
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| Steps
have been taken to improve the motivation and morale of the |
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| employees
with focus on employee compensation, training & |
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| development
and performance appraisals. A more structured business |
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| planning
and reporting system has been initiated. |
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| Relationships
with the employees have remained cordial. |
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| The
agreement with the Collective Bargaining Agent (CBA) was concluded |
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| for
a three-year period January 2000 to December 2002. |
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|
| Auditors |
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| The
Board of Management wishes to record its sincere thanks to the |
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| retiring
auditors Messrs. Taseer Hadi Khalid & Co., who have been the |
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| Company's
joint auditors since 1991. Messrs. A. F. Ferguson & Company |
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| have
been appointed joint auditors along with Messrs. Sidat Hyder Qamar |
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| &
Company for the year ending June 30, 2001. |
|
|
| Board
of Management |
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| In
February 2000, the Ministry of Petroleum & Natural Resources |
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| reconstituted
the Board of Management of Pakistan State Oil, giving |
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| the
Board autonomy to run the Company on professional and |
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| commercial
terms. |
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| The
Board welcomes the new members, Mr. M. Salim, Mr. Shaukat R. |
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| Mirza,
Mr. Mohammad Iqbal Awan, Mr. Istaqbal Mehdi, Mr. Nisar A. |
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| Memon,
Mr. Kamran Mirza, Mr. Arshad Said and Mr. Asad Umar. |
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| The
Board wishes to record its appreciation for the services rendered to |
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| the
Company by the outgoing members, Dr. Shahid K. Hak, Mr. Asadullah |
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| Khawaja,
Mr. S.A.Q. Razvi and Mr. Abdus Sattar. |
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| Outlook
and Challenges |
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| The
Company is faced with the challenge of declining market share of key products
due to strong competition, shift towards CNG in motor |
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| vehicles,
substitution of fuel oil for power generation with natural gas and threats
from the smuggled and counterfeit products. The steps |
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| being
taken by management to address the challenges are expected to yield favorable
results. |
|
|
| The
government has taken a number of steps towards deregulation and privatization
of Oil and Gas Sector. These include restructuring |
|
| of
the boards of public sector corporations for good governance and phased
deregulation. There have been extensive consultations |
|
| between
the government and the industry towards implementation of these policies.
These initiatives from the government and the |
|
| consultative
processes are laudable and will lead to greater efficiencies of the industry
and improved quality of services to the customers. |
|
| It
will also open up substantial opportunities for investment in the
privatization and future growth of the Oil and Gas Sector. |
|
|
| Given
an autonomous Board of Management, a better trained professional and
effective employee team and strong infrastructure, PSO |
|
| is
well positioned to take advantage of the opportunities opening up due to
deregulation of the Petroleum Sector with potential for |
|
| enhanced
future earnings. |
|
|
| The
Board of Management is grateful to the Ministry of Petroleum & Natural
resources for their support in the conduct of our business. |
|
| The
Board also acknowledges the support and cooperation received from our
Dealers, Agents, Contractors, Transporters and Suppliers |
|
| of
goods and services. The Board expresses its appreciation to the employees of
the Company for their dedication and hard work, and |
|
| wishes
to thank the shareholders for their continued support and understanding. |
|
|
|
M. Salim |
|
Shaukat R. Mirza |
|
|
Chairman |
|
Managing Director |
|
|
| Karachi:
November 13, 2000 |
|
|
|
| Corporate
Governance at PSO |
|
|
| In
February 2000, the Ministry of Petroleum & Natural Resources
reconstituted the Board of Management of Pakistan |
|
| State
Oil, giving the Board autonomy to run the Company on professional and
commercial terms. The Board |
|
| comprises
of ten members, two representing the Ministry of Petroleum, two representing
the financial institutions |
|
| NIT/ICP
and six from the private sector. Only one of the directors, the Managing
Director is the executive director while |
|
| all
others are non-executive directors. The board met 3 times during the period
February-June 2000. |
|
|
| The
Board is responsible for the management and control of the company business.
It meets periodically to comply |
|
| with
the statutory requirements of company law, the Memorandum and Articles of
Association of the Company and |
|
| requirements
of the shareholders. The Board delegates appropriate authority to the Chief
Executive/Managing |
|
| Director.
The Board is assisted by two Board Committees in its decision making process,
the Board Audit Committee |
|
| and
the Board Human Resources Committee. |
|
|
| The
Board Audit Committee reviews, amongst other areas, Management policies and
practices to ensure adequacy of |
|
| the
Company's system of internal controls. It reviews and evaluates major
projects and programs as directed by the |
|
| Board.
It also reviews business ethics violations, conflict of interest issues and
irregularities and management's |
|
| compliance
with Company's relevant policies. The committee met once during the period
February-June 2000. |
|
|
| The
Board Human Resources Committee is responsible for developing a sound
organizational plan for the Company, |
|
| and
effective employee development programs, compensation, benefits plans and
policies that would help attract and |
|
| retain
high quality people. The committee held two meetings during the period
February-June 2000. |
|
|
|
| Policy
statement on Business Ethics |
|
|
| The
policy of Pakistan State Oil Company Limited (PSO) is one of strict
observance of all laws applicable to its business |
|
| following
the course of highest integrity. |
|
|
| We
do care how we get results. We expect compliance with our standard of
integrity throughout the organization. |
|
| We
will not tolerate an employee who achieves results at the cost of violation
of laws or unscrupulous dealings or who |
|
| thinks
it best not to tell higher management all that he is doing, not to record all
transactions accurately in his books |
|
| and
records, and to deceive the Company's internal and external auditors. |
|
|
| We
expect candor from all employees of PSO, and compliance with accounting rules
and controls. Our system |
|
| of
management must be based on honest book-keeping, honest budget proposals, and
honest economic evaluation |
|
| of projects. |
|
|
| It
is PSO's policy that all transactions shall be accurately reflected in its
books and records. This, of course, means that |
|
| falsification
of its books and records and any off-the-record bank accounts are strictly
prohibited. |
|
|
|
| Board
of Management |
|
|
| M. Salim |
|
Mr. M. Salim has held
numerous senior |
|
| Chairman |
|
level assignments in the
oil & gas |
|
|
|
corporate sector. He
retired as |
|
|
|
General Manager ESSO
Pakistan. His later |
|
|
|
assignments included
Chairman & Chief |
|
|
|
Executive of NRL, PERAC,
POL and |
|
|
|
Occidental Pakistan. |
|
|
| Shaukat
Raza Mirza |
Mr. Mirza was formerly
President of Exxon |
|
| Managing
Director |
Chemical Pakistan, later
renamed as |
|
|
Engro Chemical. He is a
director on the |
|
|
|
Board of several
companies. |
|
|
|
|
|
|
| G.A. Sabri |
|
Mr. G.A Sabri is
currently Director General |
|
|
|
(Oil), Ministry of
Petroleum & Natural |
|
|
|
Resources. He has over 25
years |
|
|
|
|
experience with the
Government in |
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|
|
various capacities. |
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|
|
|
|
| Mohammad
Iqbal Awan |
Mr. Awan is currently
Financial Advisor |
|
|
|
in the Ministry of
Petroleum & Natural |
|
|
|
Resources. He has 24
years experience in |
|
|
|
various capacities in the
Government. |
|
|
|
|
| Istaqbal Mehdi |
|
Mr. Mehdi is currently
Chairman and |
|
|
Chief Executive of NIT
and holds |
|
|
|
additional charge of
Managing Director |
|
|
ICP. Prior to this
assignment, he was chief |
|
|
of the Expert Advisory
Cell. |
|
|
|
|
|
| Nisar
A. Memon |
Mr. Nisar A. Memon was
formerly |
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|
|
Country Manager of IBM
Pakistan. |
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|
|
He has also been
Caretaker Federal |
|
|
|
Minister for Information
& Broadcasting, |
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|
|
President of Overseas
Chamber of |
|
|
|
|
Commerce & Industry
and American |
|
|
|
Business Council. |
|
|
|
|
|
| Kamran Mirza |
|
Mr. Kamran Mirza is
currently Chairman |
|
|
|
and Managing Director of
Abbott |
|
|
|
|
Laboratories. He has also
served as |
|
|
|
President of American
Business |
