A conversation with Mr. Mumtaz Hasan Khan, CEO & Chairman of Hascol Petroleum Limited.
My work experience expands over 47 years. I began my career in May, 1963 with Burma Shell Oil Storage and Distribution Company. I worked there for nearly 13 years. In February, 1976, I joined Pakistan Services Limited as the Managing Director. PSL was the owner company of four international hotels in Pakistan. I left PSL in July, 1980 and the following month I moved to London. There, I decided to start my own business and established Hascombe Limited and began trading in Crude Oil and Petroleum products. Hascombe Ltd. is Hascol of today. I am also a Trustee of the Foundation of Museum of Modern Art (FOMMA).
Can you please tell us something about Hascol?
Hascol Petroleum Ltd. was incorporated in the year 2001. The company has been engaged in the purchase, storage and sale of many petroleum products. The product line of the company includes fuel oil, high speed diesel, gasoline, Jet A-1 and lubricants. In February 2005, Hascol was granted a full marketing license by the Government of Pakistan. Since then, Hascol has been engaged in developing a retail network under the brand name HASCOL. By the end of March 2012, Hascol will have commissioned as many as 200 retail outlets throughout Pakistan, covering all four provinces. The number of retail outlets will increase to 250 by the end of 2012.
Why do the prices of petroleum products keep on increasing in the country?
Well, the government has two options; either to subsidize the oil prices and pay out of the budget or increase prices for the consumers. The first option is practiced in various countries like Nigeria, United Arab Emirates, and Saudi Arabia. The government does not offer subsidy here as we are not a surplus country and we import our oil at prevailing international prices. Internationally, the oil prices keep fluctuating frequently and the government passes on the impact of same international prices to the consumers.
How is your business affected by the escalating prices?
The rising price of oil affects us in numerous ways. First of all the working capital requirements increase. For example, we were buying oil for $50 a barrel in the past and now the cost has increased to $100 a barrel indicating a steep rise in our cost of borrowing. The government does not compensate us by increasing our margin. When we started the business the government assured us that we will have 3.5 % of the retail price as our margin. However, nowadays we have less than 2% as our retail margin. Our margins have drastically declined while our cost of doing business has escalated. As a result of these factors the business model is not as good as we envisaged it to be.
Where do you import the oils/ oil products from?
We are buying all our oils from Middle Eastern countries. Crude oil is being imported from countries like Saudi Arabia, UAE, Iran and Kuwait etc.
In your opinion, what is the significance of advertising?
Well, in our business advertising is not required. Oil is the basic need and the quality and price you get from PSO, SHELL, TOTAL is the same. However, we advertise on some special occasions.
Have you ever faced a difficult time in your career?
Obviously, we all face difficult times in our lives and this is equally true in case of an individual’s professional life. One such professional challenge which I came across was when we were supplying oil to Pakistan back in 1991, the gulf war erupted following the invasion of Kuwait by the former Iraqi ruler, Saddam Hussain. The Pakistan government had placed an order with us for supplying a large quantity of oil but after a while the government suddenly, informed us that it did not have enough capital. Therefore, instead of a normal 30 day credit, they required a 180 day credit while our suppliers were only offering a 30 day credit. We had nothing to do with the war but in wake of what happened in gulf we were also challenged by a difficult situation as we were required to arrange a huge amount of US$ 300 million of extra credit lines. It was an extremely difficult task because Pakistan’s credit rating was very low and nobody was prepared to lend money for Pakistan. That was a difficult situation but by the grace of God, we successfully managed it.
What do you think is the secret to your success?
The secret to my success consists of four key factors. Firstly, no goal can be achieved without hard work. Secondly, one must be honest in conducting business transactions. The third important factor is the preparation of a realistic business plan. The last factor of success is choosing the right team. It is imperative for any successful business to choose the right team as without a great team no business plan can be successfully executed.
What are your future plans?
Hascol has plans to market LPG as an automotive fuel through its retail network. Relevant license required for the purpose has been obtained from OGRA and the supply arrangements have also been made with some of the well known LPG marketing companies in Pakistan. We recently did some advertising as we are the first company to start LPG marketing in Pakistan.