THE WALL STREET JOURNAL/DOW JONES NEWSWIRES: Shell Pakistan Urges Govt To Increase Retail Oil Prices (ShellNews.net)

DOW JONES NEWSWIRES

Posted 24 September 2004

KARACHI -- Shell Pakistan (SHEL.KA) said Thursday that the government should increase retail petroleum prices because the recent freeze on prices wasn't sustainable due to rising global oil prices and revenue shortfalls from a key petroleum tax.

"It is prudent for the government to pass on the increase in oil prices to the consumers," said Shell Pakistan's chairman Farooq Rehmatullah at a news conference. Shell Pakistan is a unit of Royal Dutch/Shell (RD, SC).

He said the government has reduced the petroleum development levy - the key tax on the sale of petroleum products - to zero in order to avert a price increase on the domestic market.

"International prices have continued to increase even during the last fortnight," said Rehmatullah, adding the freeze on retail prices isn't sustainable.

Rehmatullah said the government hasn't collected any revenue from the petroleum tax which had aimed to raise 37.5 billion Pakistani rupees ($1=PKR59.35) during the fiscal year ending June 2005.

He said the oil industry was in talks with the government about passing on oil increases to domestic consumers.

Since May, Pakistan has resisted that, to avoid political repercussions at a time when it's trying to control soaring food-price inflation.

Rehmatullah, who also spoke about the financial results of the year ended June 30, said the company reported a 20% rise in August's net profit to PKR1.5 billion - mainly on the back of improved margins arising from a better petroleum product mix such as better sales of key motor gasoline and jet fuel.

He said Shell Pakistan won a tender to supply aviation fuel to coalition forces in Afghanistan, which was a key factor for turnaround in the last quarter of the last fiscal year. Rehmatullah said those sales accounted for 10%-15% of its total aviation fuel sales of 400 million liters in the past year.

He said sales of motor gasoline and diesel products were growing well this financial year because of the strong economy, and fuel oil sales have also risen because a shortage of water at the reservoirs has reduced hydroelectric power.

Rehmatullah said long-term fuel oil was unlikely to be a growth product, however in the current financial year demand for the fuel is likely to witness a "steep rise."

-By Saeed Azhar, Jones Newswires; +9221-587-284; saeed.azhar@dowjones.com