Degree

Master of Business Administration

Faculty / School

Faculty of Business Administration (FBA)

Advisor

Dr. Mohammed Kamran Mumtaz, Assistant Professor, Department of Management

Project Coordinator (Internal)

Yusuf Adnan Faruqi, United Energy Pakistan

Project Coordinator (External)

Umar Murtaza Ghazi, Executive Director, United Energy Pakistan

Client

United Energy Pakistan

Committee Member 1

Dr. AbdulBasad Shaikh, Project Reviewer, Department of Management

Project Type

MBA Research Project

Keywords

Petroleum, Regulatory, Downstream

Abstract / Summary

Pakistan produces petroleum but imports a significant portion of its refined products. United Energy Pakistan (UEP), the country's largest foreign exploration and production company, sits at the start of that supply chain, extracting crude and delivering it to offtakers without capturing any of the value generated further downstream. This report investigates whether that structural gap represents a genuine opportunity for UEP, and if so, what form of downstream participation makes the most sense given the company's capabilities and the realities of Pakistan's petroleum market. The investigation begins with a question rather than an answer. Can UEP create additional value through downstream participation? Five strategic pathways are identified and held open throughout the analysis: remaining upstream only, which is the status quo; full downstream integration as an independent oil marketing company; entering through an equity partnership with an established operator; building a storage-led trading model under the FBR's bonded warehouse framework; and a phased hybrid of the storage and partnership approaches. Each option is assessed against industry evidence, regulatory requirements, capability analysis, and a structured risk and feasibility framework before any preference is expressed. Pakistan's downstream OMC market reached 16.32 million metric tons in FY2025, a seven percent increase over FY2024 and the first annual rise after two consecutive years of decline. Three companies control sixty percent of total volumes, and the top ten account for ninety-four percent. The market is concentrated, capital-intensive, and structurally regulated. Retail prices are determined by the regulator rather than by the market, and the pricing mechanism itself moved from a fortnightly cycle to a weekly cycle and then to daily determination during 2026, which removes price as a competitive variable and transmits international volatility into domestic inventory values continuously. What separates successful participants from distressed ones is logistics capability, supply reliability, and working capital discipline. The competitive landscape is also in motion. Saudi Aramco's acquisition of a forty percent stake in GO Pakistan in May 2024 is the single most instructive recent event for this study. An upstream energy company entered Pakistan's downstream by acquiring equity in an established operator rather than building its own infrastructure, and GO's market share grew from three percent in February 2024 to thirteen percent by February 2025 as a direct result. That precedent is directly relevant to UEP's situation. UEP holds genuine assets for this assessment. It has financial backing from a parent company with a USD 5 billion credit line from China Development Bank, established credibility within Pakistan's petroleum regulatory environment, and an existing commercial relationship with PSO, Pakistan's dominant OMC with a 41% volume share and over 3,500 retail outlets. At the same time, UEP holds no petroleum product storage, no OGRA licence, no distribution infrastructure, and no operational experience in downstream petroleum. These gaps are not cosmetic. They are the defining barriers between UEP's current position and any downstream participation. Two structural barriers identified during the risk assessment bear directly on which options remain available. Petroleum product import entitlement is allocated in proportion to existing market share, which means a new independent entrant cannot secure import volume from a standing start. Separately, the bonded warehousing framework on which a storage-led model would depend was approved in June 2023 and has not yet produced a single established facility, remaining under revision as at August 2026. Both barriers weigh heavily against independent entry and comparatively lightly against participation through an established partner. Refinery data from this study's dataset provides essential context. Pakistan Refinery Limited, 63.56% owned by PSO, posted a net loss of Rs 4.66 billion in FY2025 despite record High Speed Diesel production of 800,000 metric tons, caught between structural HSFO overproduction and collapsed domestic fuel oil demand. Attock Refinery Limited, by contrast, held Rs 88.2 billion in combined cash and short-term investments, carried zero debt, earned an AA credit rating, and generated Rs 12.2 billion in investment income that exceeded its Rs 9.7 billion gross refining profit. These contrasting FY2025 outcomes show that downstream Pakistan rewards financial discipline and structural alignment, and penalises the opposite. The risk assessment in Chapter 9 evaluates each option across six categories using a framework that scores likelihood and severity together and records the speed at which each exposure materialises. It finds that the highest exposures in Pakistan's downstream sector are concentrated in liquidity and counterparty risk rather than in competitive risk, and that the capabilities required to absorb those exposures are accumulated through operating experience rather than purchased with capital. It also establishes that partnership, while reducing operational and regulatory exposure, creates a substantial counterparty exposure of its own that is contractual in character and must be addressed before a transaction completes. The feasibility assessment in Chapter 10 evaluates all five strategic options against eight dimensions and finds that they differ substantially in their risk-return balance, regulatory achievability, and alignment with UEP's actual resource profile. The analytical chapters build the evidence base before any option is ranked. Readers seeking the final recommendation can proceed to Chapter 13. Those who want to follow the reasoning should read Chapters 3 through 11 in sequence.

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