LAHORE - Large local refineries are likely to take over small OMCs like Admore, Hascombe and OOTCL amidst oil price de-regulation growing circular debt scenario in energy sector in the country, it was learnt. The BYCO presently is hungry to find new avenues to market its bulk supplies and is eager to acquire Admore. Industry sources have confirmed that there is such deal in the pipeline and BYCO is evaluating this transaction. They said that with the acquisition of Admore, BYCO will become fourth largest oil marketing company in terms of its retail network. According to the 2009 petroleum statistics, Admore has 390 operational retail outlets out of which 83 are in Sindh, 254 in Punjab, 44 in NWFP and 2 in Balochistan and 7 in Pakistan Occupied Kashmir. Interestingly what is happening right now with the small OMCs like Admore is that their sales ratio to retail outlet is low due to non availability of the product. Big OMCs sell their products to these small OMCs and thus market share of small OMCs, despite their ability to sell, remain lower, they said. Experts said that with the support of BYCOs largest refinery complex there will be no product availability issue. If we assume the per retail outlet sales after acquisition improves to 2000-3000 liters a day from 600-700 liters, even lower than industry average, companys market share in retail business (petrol and diesel) will increase to 7-10 percent, they said. For any OMC to expand, the sale is directly proportional to the number of retail outlets. Currently BYCO has more than 50 operational retail outlets. The company needs retail network to market its bulk supplies as it is in the process to build 100,000 barrels per day of refinery, expected to be commission in next few months. If we assume all the retail products will be market through their own network, the company needs more than 2500 retail outlets, stated Farhan Mehmood, an energy expert. He observed that post deregulation, refineries will play an important role specially having their own retail outlets. Thus, besides the fact there will be more competition between the OMCs, such acquisition will support effective marketing of BYCOs products. Moreover, it will also save storage and transportation cost which will reduce product cost in a de-regulated environment. He believes this will increase market share of BYCO at the expense of others. Though it is difficult to determine the exact value of the deal due to limitation of the data, the transaction value could be around Rs3.5-4bn. This is assuming 5% of the total retail network is company owned, 20% dealer owned while 75% are mix financing. Normally in last few years due to intense competition, most of the retail outlets were build on 50%-50% cost sharing (mix financing). For an ideal retail site, the project needs 8-12 months to become operative. Thus, it is better to acquire company which is already established. The average cost varies from Rs20-25mn including land, civil works and equipment. Taken this amount as a proxy, the transaction value arrives around Rs3.5-4bn. He said that there are few risk attached to the new refinery regarding its timing and operation. The refinery needs ample liquidity to run such a huge refinery in times when circular debt remains a big threat to the industry. Salman Abduhoo