ISLAMABAD : Pakistan’s oil marketing industry is facing mounting challenges, including unresolved sales tax (GST) issues and stalled refinery upgradation, as neither the government nor the International Monetary Fund (IMF) has agreed to extend the concessions required for these reforms.
Against this backdrop, Mountain Ventures has conducted a detailed market performance review of Oil Marketing Companies (OMCs) for 2025, highlighting both growth trends and structural weaknesses in the sector.
According to the report, Pakistan’s oil marketing sector posted solid volume growth during 2025, with combined sales of gasoline, gasoil and hi-octane increasing by around 10 percent year-on-year to 15.4 million metric tonnes, from 14.0 million metric tonnes. This growth was supported by rising vehicle penetration and stable underlying demand.
Despite higher volumes, industry economics continued to tighten due to regulated pricing, persistent discounting and rising capital requirements. The sector remains highly fragmented, with 45 licensed OMCs operating nationwide, even as a small number of players increasingly dominate volumes. This imbalance has weakened pricing discipline and constrained the industry’s ability to invest in storage, digitisation and retail infrastructure, particularly among sub-scale operators.
Uncertainty surrounding the Infrastructure Development Cess (IDC) and recoverability of sales tax claims has further elevated working-capital requirements. Meanwhile, regulators have placed greater emphasis on digitisation and enforcement, signalling a shift toward compliance-linked margin relief rather than uniform margin increases.
Operationally, owned storage capacity and retail network quality have emerged as key constraints on sustainable growth. Expansion of retail outlets is increasingly limited by gasoline storage availability, making network optimisation more important than simple footprint expansion.
The entry of global players such as Aramco, Gunvor and Wafi Energy, along with the launch of Aramco and Caltex brands, is expected to reshape consumer expectations. While fuel pricing remains regulated, these players are likely to differentiate through stronger branding, tighter operational controls and consistent retail standards. Their presence is intensifying competitive pressure on existing OMCs to upgrade networks and professionalise dealer operations, reinforcing a gradual shift toward fewer but better-managed retail networks.
Structural change in the sector now appears increasingly likely. Consolidation, rationalisation and capital discipline are expected to play a larger role in shaping the next phase of the industry, with outcomes determined less by demand growth and more by scale, balance-sheet strength and execution capability.
Over the past two decades, Pakistan’s fuel demand mix has shifted steadily in favour of gasoline and away from gasoil. In the mid-2000s, diesel consumption far exceeded petrol usage, reflecting a transport system dominated by commercial vehicles, freight and diesel-based power generation, supported by subsidies. Since then, petrol demand has grown sharply, driven by rising motorcycle and passenger car ownership, urbanisation, ride-hailing services and consumer preference for petrol vehicles. In contrast, diesel demand has grown slowly and, in some years, stagnated or declined, partly due to increased smuggling.
Forward projections reinforce this structural shift, with petrol demand continuing to outpace diesel, signalling a transport-led and increasingly consumer-centric demand base. This trend has important implications for refinery configuration, retail network strategy and long-term OMC positioning.
The report stresses that the government must urgently address the issue of outstanding and ongoing sales tax claims. One possible solution could be reimbursement through the Inland Freight Equalisation Margin (IFEM); however, this would further complicate IFEM, which has already become a catch-all mechanism for costs that cannot be addressed through structured policy measures.
OMCs facing constraints due to insufficient gasoline storage—particularly in provinces targeted for expansion—may look toward acquiring smaller OMCs to bridge this gap. Smaller players with storage facilities and retail outlet licences (K-Forms) at high-traffic locations are likely to become attractive acquisition targets, while outlets in sub-prime locations and weaker brands are expected to command limited value.
At the national level, the report notes that ample storage capacity already exists across OMCs, refineries and pipeline systems. It suggests that OGRA should review its policy of linking retail network expansion to mandatory new storage, and instead encourage investment in areas such as EV charging infrastructure, digitisation, fuel quality testing and improved facilities for motorists.
Fuel adulteration, short measurement and overcharging at retail outlets have evolved from isolated malpractices into a systemic issue, eroding consumer trust and industry credibility. These practices result in engine damage, operational inefficiencies and direct financial losses for consumers. Addressing the problem requires not only regulation but also transparency, accountability and effective enforcement to restore confidence in the fuel supply chain.
Smuggled fuel, along with legally and illegally imported solvents used for adulteration and cross-selling, continues to undermine OMC profitability and cause significant losses to the national exchequer. According to estimates, Pakistan loses between Rs300 billion and Rs500 billion annually due to fuel smuggling.
While dealer margins remain a subject of debate, the financial health of dealer networks is emerging as a critical factor in OMC performance. Low throughput and rising operating costs have led to longer settlement cycles and increased reliance on credit support from OMCs. Financially stressed dealers often struggle to maintain site quality, compliance and investment in digitisation, affecting brand perception and regulatory outcomes. As compliance costs rise, dealer quality is becoming a key differentiator in network optimisation and consolidation decisions.
Although fuel imports are an integral part of the energy mix, importing provides certain advantages to OMCs compared to procuring from local refineries. If the government intends to encourage domestic refining, the report argues that policies must be reviewed to ensure a level playing field, including refinery upgrades to Euro-V standards, rationalisation of temperature-related rules and greater flexibility in refinery credit terms and pricing. Ends
