Govt plans to adopt new crude price benchmark

ISLAMABAD: The government has planned to introduce a new benchmark for determining the basket price of local crude oil that is supplied to refineries across the country, officials say.

The Ministry of Petroleum and Natural Resources is seeking to replace the Lower Zakum spot price with the Das blend being published by Platts Global Alert for setting the basket price of local crude oil that is processed by refineries in the country.

Government keeps petroleum prices unchanged for July

In 2013, Abu Dhabi, which has about 6% of world’s proven oil reserves, introduced a new crude blend called Das to improve shipping flexibility as the United Arab Emirates strived to boost production.

The new blend has qualities similar to Saudi Arabia’s Extra Light grade, which has a density of 37.8 degrees on the American Petroleum Institute scale and sulphur content of 1.1%, according to a survey of crude specifications published by the US Energy Administration.



Under the provisions of different crude oil sale and purchase agreements, the Lower Zakum spot price published by Platts Global Alert was amongst the basket prices adopted to determine the price of local crude oil in Pakistan.

However, Platts Global Alert, which provides price discovery and market commentary, stopped announcing the Zakum crude price from August 2014.

At present, two crude price benchmarks are applicable including the Murban and Das blend, which are close alternatives to Zakum.



The Murban price stood at $42.70 per barrel compared to $42.24 per barrel for the Das blend, which was lower by $0.46 on April 27, 2016.

According to a petroleum ministry official, oil refineries and exploration and production companies had requested for an alternative crude basket price in the absence of Zakum spot price.

After discontinuing the Zakum price, Platts Global Alert introduced the Das blend spot price, which is a blend of Umm Shaif and Lower Zakum and is similar to the quality and price of Zakum.

The Ministry of Petroleum said the price of Das blend was lower than Murban and it appeared to be the most comparable crude to the Lower Zakum in the given circumstances.



Hence, refineries, exploration and production companies and the Pakistan Petroleum Exploration and Production Companies Association recommended the replacement of Lower Zakum with the Das blend.

The ministry took up the matter with the Ministry of Finance that called for placing the matter before the Economic Coordination Committee (ECC) for approval.

Published in The Express Tribune, August 4^th, 2016.

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