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Tuesday February 07, 2023

Russia to sell discounted oil to Pakistan: minister

Pakistan secured a strong commitment from Russia for sale of the crude and other POL products at reduced prices under a government-to-government (G2G) arrangement

December 06, 2022
Minister of State for the Petroleum Division Musadik Masood Malik addressing a press conference in Islamabad on December 5, 2022. PID
Minister of State for the Petroleum Division Musadik Masood Malik addressing a press conference in Islamabad on December 5, 2022. PID 

ISLAMABAD: In a major achievement for the PMLN-led coalition government, Pakistan has secured a strong commitment from Russia for sale of the crude and other POL products at reduced prices under a government-to-government (G2G) arrangement.

A high-powered Russian delegation will visit Islamabad next month to settle modalities and price. The government has also initiated talks with the Russian government for long-term contracts on a G2G basis for the supply of Liquefied Natural Gas (LNG) from its under-construction LNG production plants that are to start operations next year. Besides, Islamabad has already started negotiations with the Russian private companies for the supply of LNG on an urgent basis.

Iran will also donate liquefied petroleum gas (LPG) worth £2 million that reach Pakistan within next 10 days to meet the increasing demand for gas in December and January. This is apart from the imports of over 20,000 million tonne of LPG which the state-run companies, including SSGC, SNGP, and Parco, are importing each month.

Addressing a news conference here on Monday, Minister of State for the Petroleum Division Musadik Masood Malik said Russia had decided to sell crude oil to Pakistan at a discount being availed of by the other countries and the price might be less than that after further negotiations next month,” Malik said, adding that Moscow will also give discounted petrol and diesel to Pakistan.

He further said there were various types of Russian crude but Pakistan will opt for the light crude, as its refineries had the capacity to refine it.Musadik further said as no LNG supplies were available with the state-run companies, so the Russian government arranged their meetings with its private companies.

“We have started negotiations with those companies to get LNG on an urgent basis, the minister said. The government is also to bring two new policies in the petroleum sector that include an indigenous gas-tight gas policy and revival of the already spud wells for oil and gas which were previously economically not viable due to the low price of the POL prices.

It is to be noted that Russia’s Novatek is to launch two LNG reloading hubs in mid of 2023 on the Kamchatka Peninsula in the Far East and the Arctic city of Murmansk to cut transportation costs. These plants would start operations in the same year.

“Since the Russian government is building two LNG production plants, it has invited us to start negotiations from now on making contracts for 2025-26 for LNG procurements,” Musadik said. “We already have contracts with Qatar for LNG which has proved a lifeline for us. Keeping these agreements in mind, we will try to sign new contracts on a government-to-government basis, and negotiations have already been commenced,” said the minister.

“We have also discussed pipeline projects with the Russian government. We have requested them to give us a little flexibility, as we are facing various constraints, and assured them that we are committed to executing these projects,” Musadik said.

Russia has also expressed keen interest in developing gas pipelines in Pakistan. He said Pakistan had two agreements with Russia out of which one was the Pakistan Stream Gas Pipeline (PSGP) formerly known as the North-South gas pipeline and the other was an international gas pipeline.

PakStream — 1,122 kilometers gas pipeline — is being developed with the Russian support from Port Qasim (Karachi) to Kasur (Punjab) to increase the country’s capacity to transport imported gas from the port city to the load center of Punjab. He said in January 2023, a Russian inter-governmental delegation headed by its energy minister would visit Pakistan in January 2023 to further discuss all these avenues and transform them into an executive summary and their proper agreements could be signed.

“Keeping in view our national interests, and like a nation of integrity, we will go forward to meet the country’s demands and we will solve the energy problem,” said the minister. He said Pakistan’s local gas reserves were depleting by 8 to 9 percent annually, and this year despite this decline, more gas was available in November, December, and January compared to the previous year. He said they were tracking it on a daily basis.

The minister said the government had directed the gas companies to ensure gas supply during cooking hours 6:00am to 9:00am; 12:00am to 2:00pm and 6:00pm to 9:00pm. Meanwhile, the Economic Coordination Committee (ECC) of the cabinet, in a hurriedly called meeting on Monday, approved import of 450,000 metric tonnes (MT) of wheat on a government-to-government (G2G) basis from M/S Prodintorg of Russia for $372 per metric tonne at the Gwadar Port.

The ECC also granted another approval for the lowest bid offered by M/S Cereal Crop Trading for $372 per metric tonne for the supply of 130,000 metric tonnes of wheat at Karachi Port. In principle, the ECC approved that the Trading Corporation of Pakistan (TCP) may be allowed to import the remaining tender quantity of 370,000 metric tonnes out of the total required quantity of 500,000 metric tonnes through a matching process allowed under Public Procurement Regulatory Authority (PPRA) exemptions.

Federal Minister for Finance and Revenue Ishaq Dar presided over the meeting of the Economic Coordination Committee (ECC) of the Cabinet on Monday. According to details, the TCP sought advice on the seventh international wheat tender for the import of 500,000 metric tonnes of wheat, and the rates for the import of wheat through Gwadar Port were included in the tender documents.

On Nov 18, 2022, the TCP issued the seventh tender on a CFR basis at Karachi and/or Gwadar ports for shipments from Dec 16, 2022, to Feb 8, 2023. The tender was opened on Nov 30, 2022, and 10 international bidders participated, out of which nine bidders offered rates and one extended its regret.

The estimated cost of imported wheat, as calculated by the TCP for Karachi Port, is Rs91,121/MT or Rs3,645/40 kg, whereas the cost at Gwadar Port is estimated at Rs91,623/MT or Rs3,685/40 kg.

As provided under PPRA exemptions for the subject imports and to complete the tendered quantity, the matching process was finalised by the TCP. Offers from M/S Cereal Crop Trading LLC for 130,000 MT, M/S Agrocorp International for 120,000 MT, and M/S Aston for an additional 190,000 MT of wheat have been received to award the tendered quantity of 500,000 MT.

The TCP has also received revised offers from M/s. Prodintorg, Russia, on a G2G basis at $372/MT for the supply of 450,000 MT in CFR bulk at Gwadar or Karachi Ports for the shipment period from Feb 1, 2023, to March 31, 2023.

The PASSCO has called for tenders for inland transportation rates from Gwadar Port, which is due to open on Dec 14, 2022. It is pertinent to mention that against the total allocation of 2.6 MMT of imported wheat allowed by the cabinet, 980,152 MT have already arrived, whereas the TCP has awarded tenders for 685,000 MT (300,000 MT under G2G and 385,000 MT through open tendering). Therefore, with the current tender quantity of 500,000 MT and an offer under G2G for 450,000 MT, the entire allocation of imported wheat of 2.60 MMT would be completed.

According to an official notification, the Ministry of National Food Security and Research submitted a summary on the award of the seventh International Wheat Tender 2022, which opened on Nov 30, 2022. Keeping in view the results of the seventh international tender and G2G offer, the ECC approved the lowest bid from M/s Cereal Crop Trading LLC at $372/MT for a supply of 130,000 MT at Karachi Port for the shipment period from Dec 16, 2022, to Feb 8, 2023, and also approved the offer of M/s Prodintorg, Russia, on a G2G basis at $372/MT for the supply of 450,000 MT at Gwadar Port for the shipment period from Feb 1, 2023, to March 31, 2023.

Any additional costs for inland transportation from Gwadar Port will be borne by the PASSCO and recovered from provinces at the time of wheat stock release. The ECC also approved the proposal of the Finance Ministry to change the title of the revolving fund account for CPEC Independent Power Producers from “Pakistan Energy Revolving Fund” to “Pakistan Energy Revolving Account.” 

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