Shell Pakistan (SHEL.PSX) said on Wednesday that its parent company, Shell (SHEL.L) unit Shell Petroleum Company, would be exiting Pakistan with the sale of its 77% shareholding in the local business.
The move came after Shell made several announcements about its global operations and after Shell Pakistan (SPL) suffered losses in 2022 due to exchange rates, the devaluation of the Pakistani rupee, and overdue receivables, and as the country faces a financial crisis and economic slowdown.
“To support its intention to high-grade and simplify its portfolio, Shell Petroleum Company Ltd … has initiated a sales process to sell its 77.42% shareholding in Shell Pakistan Ltd,” a spokesperson for Shell Pakistan said in an email to Reuters.
That includes “all of SPL’s Downstream businesses and SPL’s 26% ownership of Pak-Arab Pipeline Company Ltd (PAPCO),” the spokesperson added. Its Downstream businesses include Mobility and Lubricants.
SPL is listed on the Pakistan Stock Exchange. The company said in a notice to the exchange that the announcement “does not impact SPL’s current business operations, which continue.”
It said in the notice that Shell Petroleum Company had notified its board of directors of its intention to sell the holding in a meeting on June 14.
“Shell has entered into a process and wants to be transparent,” the spokesperson said.
“These decisions are not taken lightly, and Shell’s focus will now be on pursuing a safe and smooth divestment and continuing to deliver safe, reliable operations.”
As Shell exits Pakistan, some multinational companies are facing difficulties in repatriating dividends and making royalty payments.
Mustafa Pasha, chief investment officer at Karachi-based Lakson Investments, said the smoothness of the planned transaction will depend in part on whether the eventual buyer of SPL is an international or domestic company.
“If it’s a domestic buyer, they will probably have to arrange the FX or the payment for the transaction from abroad because Shell will obviously want to repatriate that money and there are FX outflow restrictions. If it’s an international player, the impact of the transaction will be net zero,” said Pasha, referring to the inflows being equal to the outflows.
He said Shell’s decision to exit Pakistan should be viewed through a holistic lens given Shell’s global strategy.
Shell said on Wednesday it is also conducting a strategic review of energy and chemicals assets on Bukom and Jurong Island in Singapore.
New CEO Wael Sawan announced plans to ramp up the company’s dividend and share buybacks while keeping oil output steady into 2030.
Pasha added, “The country-specific difficulties in Pakistan, however, probably made it easier for Shell to choose to exit Pakistan as a market, given the supply-chain issues, regulatory environment, exchange losses, foreign exchange outflow restrictions.” –
