The offloading of the discounted Russian crude oil, arranged under a government-to-government (G2G) deal between Islamabad and Moscow earlier this year, began on Monday, which would be refined at the Pakistan Refinery Limited (PRL).
Officials said that a ship carrying 45,000 metric tons of Russian crude oil reached the Karachi Port on Sunday. They confirmed that the oil started flowing from the ship to the PRL, saying that the offloading process would be completed in 30 hours.
The PRL will refine oil together with Abu Dhabi and Saudi Arabian crude oil, sources said, adding that based on the results, the amount of crude oil purchased from Russia might be increased.
Petroleum sector sources suggested that there would be no problems at the refinery level as the properties of the Russian ‘Urals’ crude oil were similar to those of the crude oil Pakistan imported from Saudi Arabia and Abu Dhabi.
“Earlier in June, a limited amount of Russian crude oil was refined at the refinery,” said a source. “After the completion of the initial deal with Russia and taking into account the refinery results, any increase the purchase of Russian crude oil will be considered.”
In April this year, Pakistan signed a G2G agreement with Russia to purchase 750,000 metric tons of crude oil, which according to analysts also presented a new avenue for the country at a time when its financing needs were great.
The oil would be delivered at the Karachi from Oman in the form of 14 to 15 parcels, with two ships reaching the port every week. The import would also help reduce pressure on the foreign exchange reserves, as the payment would be made in Chinese yuan.
Minister of State for Petroleum Musadik Malik confirmed the payment for the Russian oil in Chinese currency. In an interview, however, Malik did not disclose the commercial details of the deal, including pricing or the discount that Pakistan received.
The discounted rate offers respite as Pakistan faces an acute balance of payments crisis. At the same time, Pakistan’s purchase also gives Moscow a new outlet to redirect its oil from Western markets because of the Ukraine conflict.
Malik played down concerns around the financial viability and concerns about the ability of local refineries to process Russian crude given the country’s historical importation of Middle Eastern petroleum products.
“We’ve run iterations of various product mixes, and in no scenario will the refining of this crude make a loss,” Malik told Reuters, adding, “We are very sure it will be commercially viable. No adjustments (were) needed at the refinery.”
Pakistan imports 650,000 metric tons of crude oil on a monthly basis. The oil imported from Russia makes up for less than 10% of Pakistan’s total demand, according to the sources, adding that the price of the finished product will not be significantly affected.
(WITH INPUT FROM REUTERS)
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