PRL clinches long-term oil supply deal with Russia

Also inks agreement for refinery expansion with China’s UEG that will invest $1.5b

ISLAMABAD:

Pakistan Refinery Limited (PRL) has appeared on the international energy map as it has struck a long-term oil supply contract with Russia.

Additionally, it has inked an agreement with the United Energy Group (UEG) of China to embark on a transformative journey with the refinery expansion and upgrade project. The Chinese firm will invest $1.5 billion in the expansion of PRL’s production capacity.

These two developments have connected the refinery with two big countries – China and Russia.

According to sources, PRL is expected to bring first cargo under the long-term crude oil import deal with Russia in December this year. PRL had been nominated as a procuring entity in the purchase of crude oil from Russia as per commitments made at the Pakistan-Russia Inter-governmental Commission meeting in January 2023.

PRL will purchase crude oil from Russia according to commercial terms, as agreed from time to time, without violating the international commitments of Pakistan and the international framework governing such transactions. PRL has already imported 100,000 tons of Russian Urals crude and processed it successfully. It also made a profit on it.

In a recent development, PRL, on the sidelines of the Russian Energy Forum, inked a long-term agreement with its Russian counterparts for the supply of crude oil of mutually agreed specifications.

Read Pakistan seeks long-term oil deal with Russia

Meanwhile, PRL, a stalwart in the refining sector, is embarking on a transformative journey with the refinery expansion and upgrade project. This ambitious project is aimed at propelling PRL into a sustainable future by doubling its refining capacity from the current 50,000 barrels per day (bpd) to 100,000 bpd.

The primary objectives of the expansion project are to meet local demand, switch from basic hydro-skimming to deep-conversion process and produce environmentally compliant Euro V high-speed diesel (HSD) and motor sprit (petrol). In the process, it will do away with the production of loss-incurring furnace oil.

This strategic shift aligns with PRL’s commitment to producing cleaner and environmentally friendly fuels to meet the growing market demand.

Currently, PRL produces 250,000 tons of MS per year. However, with the expansion, the production is anticipated to increase to 1.5 million tons. Likewise, the production of HSD is expected to rise from around 600,000 tons per year to approximately 2 million tons. PRL and UEG have formalised their collaboration through a memorandum of understanding (MoU) signed on October 18, 2023 in China.

Under the MoU, they have expressed the desire to establish a strategic cooperation relationship on the basis of mutual interest in the energy industry in Pakistan. They will enter into good faith negotiations to identify potential cooperation and collaboration opportunities including equity investment in PRL as a strategic investor (with adequate board representation) for the upgrade and growth of the refinery. This strategic collaboration between the two entities is anticipated to have a profoundly positive impact on the energy industry’s growth and development, ultimately contributing to a sustainable and environmentally responsible energy landscape in Pakistan.

Published in The Express Tribune, October 19^th, 2023.

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