close
Thursday March 28, 2024

Pakistan likely to escape Persian Gulf oil volatility

By Munawar Hasan
September 26, 2019
Workers are seen at the damaged site of Saudi Aramco oil facility in Khurais. -Reuters

LAHORE: Oil supplies in Pakistan are likely to escape unhurt due to mid-September attack on Saudi petroleum processing facilities though volatile situation in the Persian Gulf could potentially spark price escalation and imperil vital energy links in days to come, officials and analysts said on Wednesday.

Special Assistant to Prime Minister on Petroleum Nadeem Babar told this scribe there has been no issue as far as oil supplies to Pakistan are concerned. “Hopefully, we will manage developing situation in order to secure oil supplies as per demand,” Babar, who is also chairman of a taskforce on energy reforms, said. “Moreover, it is encouraging that prices in the international market are also coming down gradually. In these circumstances, there may be a relatively small impact.”

The Sept. 14 attacks on Saudi Aramco’s two plants caused a shutdown of 5.7 million barrels per day of oil production – half of the world’s top crude exporter’s output.

Crude price in the international market increased sharply to $71.62 per barrel from $64.83 per barrel within 24 hours of Aramaco incident. The price escalation was the highest jump in nearly three decades.

Shahid Sattar, ex-member of energy at the Planning Commission was worried about upward trend in oil prices. “In view of a short-lived bullish trend lately, we expect about 10 percent jump in price of petroleum products by the start of October,” Sattar warned.

“This potential increase in price, however, should not be allowed to happen and instead should be absorbed through adjustment of levies,” he stressed. “Hence, I would suggest that government should bear the financial impact of brief upward trend in oil market and should not pass it on to consumers, who are already braving the severe impact of inflationary pressure,” Sattar said.

Overall, the outlook for energy supplies in short-term are stated to be in a positive range despite a brief disruption from Saudi Arabia following an unprecedented onslaught on one of the world’s biggest petroleum complex.

“Initially, it looked like having an impact on Pakistan energy security given the scale and extensive damage to oil infrastructure,” an official of ministry of petroleum said. “Being a third top importing country after China and UAE in general category, Saudi Arabia fulfils about 50 percent of Pakistan’s oil demand.”

Similarly, the official added that any cut in supplies mean growing financial burden on the country due to cut in supplies of petroleum products on deferred payments. Saudi Arabia began supplying oil to Pakistan on deferred payments in July.

Pakistan starts receiving monthly oil supplies worth $275 million from Saudi Arabia with effect of July 1, 2019, a Saudi embassy in Pakistan said. “These supplies will continue over the next three years, with a total value of $9.9 billion.” The official said as energy supplies from Gulf are now back on track, “we hope that challenges regarding energy security of the country have subsided for the time being”.

“Fortunately, we narrowly escaped from any cut in oil supplies and there is no significant financial impact as well till now.”