Pakistan-Russia crude talks show progress but no deal in March

ISLAMABAD: A two-day Pakistan-Russia technical talks on the import of crude oil ended on Wednesday, without signing of a formal commerce deal as some issues still need to be resolved.

A formal commercial deal is expected to be inked somewhere in April, 2023, instead of the current month on issues with regards to making SPV (special purpose vehicle), and a mode of payment that needs further deliberations, a senior official of Energy ministry told The News.

The technical team of the Operational Services Center (PSC), a state-owned company of the Russian government came to Karachi on March 20, 2023, and held two days of talks with officials of Pakistan State Oil (PSO) which is a nominated state-owned company on behalf of Pakistan for talks and signing of the Russian crude oil import deal.

“This means the test cargo may now reach Pakistan in May, not in April as the signing of the formal GtG [government to government] agreement is most likely to be inked in April. The ship carrying Russian crude will take at least 30 days to reach Pakistan’s port,” the official said.

During the two-day talks, the official added, Russians questioned seriousness of the government of Pakistan if it’s interested to buy the crude as “Pakistan has so far not constituted an SPV (special purpose vehicle), which will be responsible to import crude and give it to the refineries. The same SPV will also be responsible for payment in any agreed currency.”

Now the test cargo may be having Ural crude that will reach Pakistan somewhere in the initial days of May. However, test cargo will not be having the crude oil that has been asked for by refineries.

“Our refineries had shared their specifications for which the Russian side needs to provide the required blended crude at par with Sokol but it will have some additional cost. Moscow wants the commercial deal first then it will provide the required blended cargo.”

The test cargo of URAL will help Pakistan’s authorities assess the landed price if compared with the cost of crude oil from ADNOC and Saudi Aramco.

“The current price of Brent crude has come down to $73 per barrel whereas the Russian crude oil price remained at $52 in February 2023, which has further lowered between $42-48 in the international market,” industrial sources told.

However, under GtG deal, Petroleum Division’s top notches want to lock the deal 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, the sources revealed.