Govt eyes Russian crude oil at $50/barrel

ISLAMABAD: Top officials of the Petroleum Division are trying to procure Russian crude oil at close to $50/barrel, $10/barrel below the cap price imposed by G7 countries on Russian oil in the wake of the war on Ukraine, sources said.

The current Brent crude price stands at $82.78/barrel.

However, Russians are more interested in completing all the prerequisites before to inking an agreement that includes the mode of payment, shipping cost with premium, and insurance cost. Following that the country would respond about the discount in base price of the crude oil, senior officials involved in the virtual talks with their counterparts in Russia told The News

They said that the shipping of crude oil from Russian ports will take 30 days owing to which the per barrel transportation cost would incur at $10-15/barrel. However, the talks between Moscow and Islamabad are going in a positive direction with the hope that the GtG deal on Russian crude import will be inked soon before the end of the current month of March.

To a question, they said, the government has decided not to divulge the mode of payment to Russia against the import of crude oil. However, the authorities are weighing their options to either use Pakistan National Shipping Corporation (PNSC) ships for transporting crude from the Russian port or to use the Russian tankers.

“We also have to keep in mind the landed cost of Russian crude as the crude vessel will arrive in 30 days, owing to which per barrel shipping cost would hover at $10-15,” the official said, adding that Moscow has not agreed on the discount yet. “We fear that the maximum discount would be offset by the shipping cost of the crude oil.”

However, state minister Musadik Masood Malik said in his televised presser that Pakistan would get a 30 percent discount on crude oil prices.

The government would import one Russian crude oil ship to test the landed cost as compared to the existing cost of crude being imported from ADNOC of UAE and Saudi Aramco. To this effect, the secretary of Petroleum Division is in Karachi to further deliberate with the top management of PARCO, PSO, Pakistan Refinery Limited and other refineries regarding the import of Russian crude oil to process it for finished products.

In case, the test ship’s cost is found lowered enough to bring down the prices of petroleum, oil and lubricants, Pakistan would give a green signal for cargos of Russian oil in a month which may be 2-4 in number.

Since Pakistan is facing a US dollar liquidity crunch, it would pay Russia in the currencies of friendly countries that include China, Saudi Arabia, and UAE.

The officials said that the ship carrying Russian crude will have the NICL (National Insurance Company Limited) and Pakistan Reinsurance Company Limited (PakRE) will reinsure the asset (ship with crude oil).

The State Bank of Pakistan (SBP) which earlier showed hesitance for any transaction with Russian banks keeping in view the G7 regulations and the US and EU countries, has now shown a willingness to talk with the Russian counter bank over a payment mechanism for oil import in three currencies other than dollars.