Pakistan can save $6bn annually by using PNSC as its mainstay in oil freight

Islamabad : Pakistan can save around $5-6 billion annually merely by using the Pakistan National Shipping Corporation (PNSC) as the mainstay of its international maritime trade and allowing the national flag carrier to buy more oil carriers and tankers to increase its capacity of transporting liquid freight, said former PNSC executive director Commodore (r) Syed Muhammad Obaidullah on Thursday.

During a webinar organised by the Institute of Policy Studies here, Commodore (r) Obaidullah, who is also the founding director of National Maritime Policy Research Centre, explained reasons of the current oil crisis in the world during the current coronavirus (COVID-19) pandemic and said the chaos started with the conflict between Russia and the Kingdom of Saudi Arabia over oil supply.

He said though the conflict got resolved due to the intervention of the US president, the outbreak of COVID-19 pandemic soon rendered the resolution almost irrelevant. The expert said with no air operators, no transport and no rail services in function and the lowest level of industrial productivity that followed, the demand for oil reduced significantly.

"The development had a severe impact on the oil markets around the globe in general, and the US oil market (WTI) and Canadian oil market in particular, owing to storage capacity issues at both suppliers’ and buyers’ end. The oil prices in these markets as a result fell into negatives, affecting a number of industries globally, including the shipping industry," he said.

Speaking of any advantages of reduction in oil prices for Pakistan, Commodore (r) Obaidullah opined that the situation may not benefit the country at all.

He said Pakistan bought crude oil of Brent and Dubai crude, which though stood at around $15-20 per barrel at present, the very low demand of oil within the country following the pandemic may not let it gain much.

"Three of its five oil refineries are shut down due to exhaustion of their storage capacities and low market demand. Another crisis for them is the new regulation of International Maritime Organisation introduced in January 2020, which requires diesel to have Sulphur content of 0.5% instead of 3.5% - inability of which has hindered the processed oil exports of Pakistani refineries considerably," he said.

Explaining the situation at length, the former PNSC executive director said Pakistan had been importing three types of oils, including crude oil (11 million tons annually), processed oil (12.5 million tons annually) and liquefied natural gas (3-4 million tons annually).

He, however, said the situation was changing slightly as most independent power producers in the country had shifted to LNG already.

Commodore (r) Obaidullah said the Pakistan National Shipping Corporation had been earning more than $2.5 billion as net profit annually continuously for the last 20 years despite the slump in the global shipping sector.

He said the corporation initially was same as other trembling state-owned enterprises till 2000s and its share price was only Rs 1.50, but it rose to Rs 150 within just one year owing to some good decisions taken by the management of that time.

The former PNSC executive director lamented that the present international trade volume of Pakistan is around 100 million tons annually and only 15 per cent of it was being carried by the PNSC.

He said in case of oil and energy transportation, he bemoaned, 100 per cent freight of the country was being handled by international carriers, which was costing the country around US$5-6 billion annually.

"The country can save this enormous amount, which is equivalent to the recent IMF's Extended Fund Facility that Pakistan is set to get in 39 months, merely by assigning the carrying of its international trade to the PNSC as well as by letting the corporation buy more crude oil carriers and processed oil tankers in order to increase its carrying and transporting capacity," he said.