Friday September 29, 2023

Russian crude likely to reach Pakistan by first week of June

May 29, 2023

ISLAMABAD: A shipment carrying 750,000 barrels or 100,000 tonnes of discounted Russian crude oil is set to dock at Oman port any time soon as it was spotted last week in Egypt waiting to cross the Suez Canal.

The 193.30 km (120.11 mi) long Suez Canal Canal is a popular trade route between Europe and Asia, which is an artificial sea-level waterway connecting the Mediterranean Sea to the Red Sea through the Isthmus of Suez and dividing Africa and Asia, a senior Energy Ministry official told The News.

The Russian vessel carrying 100,000 tonnes of oil will anchor at Oman port at any time soon from where a small vessel will transport the black gold at Port Qasim, Karachi, in two trips, each carrying 50,000 tonnes in around 10 days. However, it is expected that the Russian crude will hit the Pakistan’s ground by the first week of June.

Pakistan Refinery Limited (PRL) will refine the whole URAL crude from Russia by blending it with the crude imported from UAE and Saudi Aramco.

Interestingly, PRL is already expecting the routine crude oil consignment of 70,000 tonnes by June 2, 2023. In such a situation, the Russian crude oil transportation will be arranged in a way that PRL will not face storage issues.

Pakistan imports 70 per cent crude oil for its consumption, which is refined by Pakistan Refinery Limited (PRL), National Refinery Limited, Pak Arab Refinery Limited, and BYCO petroleum while the rest of the 30 per cent is locally produced, which is refined by local refineries, including Attock Refinery Limited (ARL).

Pakistan Refinery Limited (PRL) has been assigned to refine the URAL— Russian crude of the test cargo and will submit its report to the government (petroleum Division) about the quality, yields of URAL crude (production of petrol, diesel, FO, light diesel oil, and kerosene oil in terms of percentages), its quality, and commercial viability with regard to local economy.

The test cargo will also help the government’s relevant functionaries to know exactly the travelling cost per barrel, refining cost, margin of refineries, and payment mechanism as the payment against crude oil will be made in yuan through the Bank of China.

To a question, the official said commercial analysis of Russian crude has been conducted in favour of Pakistan’s economy but it will further be cross-checked after refining the Russian oil. The shipping cost of the Russian oil has also been estimated somewhere at $15 per barrel, but it will be finalized after it arrives at the local port.

The official said that Russia had also offered Pakistan a mixture of URAL with SKOL and ESPO, after the test cargo's crude was refined, for an import deal under GtG agreement. Russia is short of SKOL and ESPO crude oil, which is why it has offered the blended crude oil under the long-term agreement to be signed under GtG mode.

The official said, as per estimation, URAL crude will produce 50 percent furnace oil and 15-20 percent petrol. Pakistan refineries have also been facing ullage problems because of the non-lifting of furnace oil and from July, 2022, onwards, refineries have exported furnace oil of 1,35,000 tonnes to Dubai at a 75 percent cost of the crude oil meaning at 25 percent loss.

The local refineries currently produce the average production of Motor Spirit (Petrol) at 30 percent and furnace oil at 45 percent by using the crude of Saudi Aramco and ADNOC. Russian crude is reported to be coming to Pakistan at $50-52 per barrel against the price cap of $60 per barrel imposed by G7 countries, so at this cost, the furnace oil cost may go in a positive trajectory. Pakistan had earlier desired to get Russian crude price with a discount close to $50 per barrel, $10/barrel below the cap price imposed by G7 countries on Russian oil in the wake of the war on Ukraine.

Under a long-term agreement, the government will have to decide the volume of crude per annum Pakistan will import. Pakistan Refinery Limited has the capacity to refine 50,000 barrels per day.

“We have to include PARCO (Pak-Arab Refinery Company) and NRL (National Refinery Limited) to utilize the Russian blended crude oil under the GtG agreement,” the official said.