Shell will exit its Pakistan business by selling its shares. It was announced on Wednesday by Shell Pakistan (SHEL.PSX) that its parent firm, Shell (SHEL.L) affiliate Shell Petroleum, will be selling its 77% stake in the Pakistani business.
In light of the worldwide financial crisis and economic slump that Pakistan is experiencing, this decision was made after Shell made various disclosures regarding its global operations and after Shell Pakistan (SPL) experienced losses in 2022 as a result of exchange rates, the devaluation of the Pakistani rupee, and outstanding receivables.
According to a statement sent to Reuters by a representative of Shell Pakistan, “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.”
This includes “all of SPL’s downstream businesses” and “SPL’s 26% ownership of Pak-Arab Pipeline Company Ltd. (PAPCO),” the representative clarified. Mobility and lubricants are two examples of its downstream operations.
On the Pakistan Stock Exchange, you may find SPL. In a filing with the exchange, the company stated that this news “does not impact SPL’s current business operations, which continue.”
Shell Petroleum Company informed its board of directors at a June 14 meeting that it intended to sell the holding, according to the notification.
The company has started a procedure and “wants to be transparent,” the representative stated. These are not rash judgments, and Shell is committed to ensuring a seamless divestment and maintaining its record of dependable service throughout this time.
Since Shell is leaving Pakistan, it has become more difficult for several multi-national corporations to remit dividends and royalties back to their home countries.
Mustafa Pasha, chief investment officer at Karachi-based Lakson Investments, has remarked that whether the final buyer of SPL is an international or domestic company will affect the smoothness of the planned deal.
Since Shell will want to repatriate the funds and FX outflow limits apply, a domestic buyer will likely have to provide foreign exchange or payment for the transaction. As Pasha put it, “if it’s a global player, the impact of the transaction will be net zero,” with inflows equaling outflows. Given Shell’s global strategy, he said, the company’s choice to leave Pakistan must be seen in context.
On Wednesday, Shell announced it was conducting a strategic review of its energy and chemicals assets on Singapore’s Bukom and Jurong Islands. Wael Sawan, the company’s new CEO, said they would maintain oil production levels through 2030 while increasing dividends and share buybacks.
Pasha elaborated, “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, and foreign exchange outflow restrictions.” –