Shell Plc's decision to leave Pakistan is part of broader overhaul, not country specific
Business
The company is exiting its home retail energy businesses in Britain, Germany and the Netherlands
LAHORE (Web Desk) – The news that Shell Plc – the parent company of Shell Petroleum Limited (SPL), or Shell Pakistan – was going to dispose of its shareholding to exit the country sparked a debate and controversy on Wednesday.
On the one hand, there were government critics who cited this move as a sign of distrust the foreign investors have with respect to the policies adopted by the current coalition setup and a failure of Finance Minister Ishaq Dar’s vision.
However, the opposing camp as well as the people with no political affiliation cited a quite different story and mentioned that the decision was part of an overall strategy.
So what is the truth? The answer is that the Shell Plc’s move is not Pakistan specific as the company has decided to go for broader restricting amid tough competition and poor returns when it comes to retail business. Plc stands for Public Limited Company.
Just last week, Reuters had reported that Shell had decided to exit its home retail energy businesses in Britain, Germany and the Netherlands due to their poor returns.
According to Reuters, Shell launched a strategic review of its European retail businesses in January, citing "tough market conditions", shortly after CEO Wael Sawan took office.
"That review has now concluded and as a consequence, we intend to exit those businesses. A sales process is already underway, with the intent to reach an agreement with a potential buyer in the coming months," Shell said in a statement.
The news agency had earlier reported last month that three of Britain's largest power providers had expressed interest in acquiring Shell's UK retail business.
Hence, the poor returns or tough market conditions and the resultant months-long detailed review for a new line of action are not limited to Pakistan.
In fact, Shell Petroleum, the energy giant, under Sawan’s leadership is pivoting from retail to exploration and production. Hence, Pakistan isn’t an exception.
Meanwhile, there is another aspect. Why Chevron [Caltex] is reentering the Pakistani market if the market conditions are so bad here?
Caltex is a petroleum brand name of Chevron Corporation used in the Asia-Pacific region, the Middle East, and Southern Africa.
Once a popular oil marketing company (OMC) in Pakistan, Caltex had gradually fizzled out of sight. However, it is now planning to open 400 retail stations across the country by 2030.
SPL had said on Wednesday that the parent company Shell Petroleum Company – which owns 77 per cent shares in the local entity – would be exiting the country, without explaining how much shareholding would be disposed of.
The move comes as the company suffered significant losses in 2022 due to exchange rates, the devaluation of the Pakistani rupee and overdue receivables.
However, it explained that “the announcement does not impact SPL’s current business operations, which continue,” and expressed the commitment to continue delivering safe and reliable operations for customers and partners.
The SPL is a subsidiary of the UK-based Shell Plc, which in turn is owned by Royal Dutch Shell Plc – one of the world’s largest energy and petrochemical companies.
