Talks start with Russian team for oil, gas import

ISLAMABAD: After the G7 imposed a price cap on the Russian oil in the wake of invasion of Ukraine, Moscow under its new policy “Look at Asia” Wednesday initiated talks with Islamabad on provision of crude oil, finished products, LNG and change in IGA for flagship project of $3 billion Pakistan Stream Gas Pipeline (PSGP) Project.  

“The importance of talks between the two countries can be gauged by the fact that an 11-member media team from Russia also arrived here Wednesday night to cover the crucial talks,” senior officials, who are part of the talks, told The News. Some technical experts arrived here on January 16, some on January 17 and the last batch with Shulginov Nokolay, head of the Russian Side of the Commission and Minister of Energy, Wednesday night.

The first day of talks under the 8th Inter-Governmental Commission (IGC) started with the opening statement from Dr. Kazim Niaz, Secretary Economic Affairs, followed by the statement of Israfil Ali Zade Rauf, Deputy Director, Ministry of Economic Development of Russia (Deputy Chair of the Commission). Both sides started technical talks on trade and investments in the area of agriculture, energy, customs, industry, education, science and technology, information and communication technologies, communication, roads and postal service, railways and finance.

Factually, the technical talks, the officials said, between the two sides were initiated on January 16 (Monday) as some technical experts from Russia had arrived earlier.

On the first-day of talks, they disclosed, Pakistan asked for a maximum discount of 30-40 percent in crude oil while the Russian side offered a discount of 10-15 percent. However, Russia hinted at an increase in discount depending upon the crude volume Pakistan would purchase.

The Russian side also sought an assurance of continuity of government policies keeping in view the ongoing political instability in Pakistan and the fate of incumbent government if the elections were held soon. Pakistan’s ‘powerful’ figures assured the Russian side of continuity of current policies.

“Once the crude oil volume is decided, the Russian side will come up with the discount in percentage terms. Technical experts from both sides are discussing issues like crude oil volume, shipping cost, insurance cover and mode of payment along with the IGA, which is to be signed for the import of crude, finished products, for LNG. However, Russia will extend no discount on finished products such as Mogas (motor gasoline), diesel and other POL products,” said the senior officials.

“Russia also has huge tankers or ships to provide crude to its clients. Pakistan National Shipping Corporation (PSCC) may be asked to use its vessels to bring the crude from Russia. However, the traders currently take 6-7 percent premium on one cargo which helps increase the shipping cost of transporting the Russian crude to the destination. If the insurance cover is included, then the landed cost would be figured out. More importantly, Russia wants the payment in rubles. And the rubles are linked with gold.”

According to State Minister for Petroleum Musadik Malik, Parco can process the Russian blended oil by up to 30 percent, Pakistan Refinery Limited 50 percent and the state-run Pakistan Refinery and Pak-Arab Refinery 50pc and 30pc, respectively. The Cynergico Refinery can process the maximum. As for the LNG import, the private companies have some LNG to be offered to Pakistan but after 2025-26 on a long-term basis. However, Russia has expressed grave concern over the changing stances by the Pakistan government with regard to the structure of Pakistan Stream Gas Pipeline.

Both sides, on the request of Islamabad, amended the IGA signed in Moscow on May 28, 2021, with Pakistan having 74 percent shares and Russia 26 percent.

The PTI government had taken the decision to have 74 percent shareholding in PSGP after the finance ministry assured the Supreme Court that it will provide the GIDC amount when there will be a call from the petroleum ministry on any projects, which include TAPI, IP gas line and North-South Pipeline that has now been renamed as PSGP. However, in the PTI government tenure, during the shareholding agreement talks with the Russian experts, the finance ministry officials had said that they had no amount with them to finance 74 percent of the shareholding, rather the Finance Division officials asked the Russian side to help arrange funding through the Russian banks to finance 74 shareholdings of Pakistan in the project.

The Russian banks’ representatives also held meetings with the Pakistan side during the PTI government era. Islamabad requires to provide almost $2 billion against its shareholding and Russia needs to come up with $700-800 million investment as per its 26 percent shares. “Now the incumbent regime wants Russia to change the existing amended IGA and complete the project on a BOT basis.”