Pakistan eyes US crude to cut Trump tariffs
Pakistan's largest refiner, Cnergyico, is buying more US crude as Islamabad seeks to diversify the country's energy supplies after disruption caused by the Iran war exposed its dependence on Gulf routes.
Pakistan also wants to increase imports from the US to help narrow its trade surplus and secure reductions in trade tariffs imposed by President Donald Trump.
Cnergyico, which first bought US crude last year, is also considering spot purchases against longer-term contracts with Vitol and other suppliers based on "pricing, reliability and supply security," Vice Chairman Usama Qureshi told Reuters.
Cnergyico imported about 8.1 million barrels of US crude over nine months, including 7.1 million worth about $750 million in the fiscal year ended June, Qureshi said.
Refiners' purchases lead US import increases
Pakistan's US import payments rose by $914 million to $3.27 billion in that fiscal year, central bank data shows, making Cnergyico's purchases- pitched the facility last month to allow Pakistani buyers to defer payments to US exporters for up to three years.
Pakistan mainly imports oil from Saudi Arabia and the United Arab Emirates, with about 90% of its oil and liquefied natural gas imports passing through Hormuz before the war.
Rising fuel costs have put pressure on the Pakistani government to act, as a new round of protests against inflation and fuel prices erupted this week. Islamabad has also sought alternatives including Saudi crude via Yanbu, located on Saudi Arabia's Red Sea coast.
Qureshi added that Cnergyico was evaluating a second offshore mooring linked to its storage network to import and export refined products on large tankers outside Karachi's constrained ports, as part of a $1.2 billion upgrade to meet Euro V standards, cut furnace-oil output and expand capacity to about 200,000 barrels per day.
Fawad Basir, Head of research at KTrade Securities, said Middle East disruptions highlighted the risks of relying on a single supply route. Using Very Large Crude Carriers for US crude could cut freight costs by 25% to 30%, while a second Single Point Mooring would speed vessel turnaround.
Government urges plant upgradation
Last week, the government asked oil refineries to accelerate their multibillion-dollar modernisation plans under the amended brownfield refining policy and has set a six-year timeframe for project completion while offering an additional incentive to the refineries that upgrade plants within three years, sources say.
At a meeting, Petroleum Minister Ali Pervaiz Malik conveyed the federal cabinet's decision to the heads of oil refineries with the directive to finalise and sign upgrading agreements at the earliest.
The meeting was attended by Petroleum Secretary Hamed Yaqoob Sheikh, Additional Secretary Petroleum Zafar Abbas, Attock Refinery Chief Executive Officer Adil Khattak, National Refinery CEO Asad Hasan, Cnergyico Pk Vice Chairman Usama Qureshi, Pak-Arab Refinery Managing Director Irteza Qureshi and Pakistan Refinery MD Mohsin Mangi.
Officials said the minister told refinery executives that the cabinet had approved changes to the Pakistan Oil Refining Policy for Up-gradation of Existing (Brownfield) Refineries, 2023, aimed at removing hurdles that delayed the signing and execution of agreements.
According to the cabinet's decision, the overall project implementation period will be slashed to six years, however, the incentive will continue for seven years. Refineries that complete the upgrade projects within three years will be entitled to an additional benefit of 0.5%.