Despite Pakistan granting India Most Favourite Nation (MFN) status, tensions still seem to exist as the two old foes seem reluctant to seal a big deal on oil trade in the upcoming meeting on July 12-13 in New Delhi.
“Pakistan is looking to just import petrol while India is expecting a much larger order for which it has offered to lay an oil pipeline, a project that would be completed in a few months,” said a government official.
India wants to provide over 50 million tons of oil annually to meet the entire fuel requirements of its neighbour but Pakistan does not want to rely on its old rival.
A senior official said that Pakistan could import diesel, jet fuel and furnace oil but only in small quantities, if any, to avoid over reliance on India due to security reason. “If Pakistan hands India the contract for high-speed diesel and jet fuel, they will also be giving them the trigger to halt Pakistan’s entire security system.”
Officials from both the countries are scheduled to meet on July 12-13 in New Delhi and expected make some breakthrough in petrol. The two sides will also discuss the option of LNG import of 200 million cubic feet from India, a move that may decrease the costly freight charges that will be paid if it is imported from any other country.
A senior official said that experts of the two countries will finalise imports, price and transportation charges.
“The two countries want to complete the oil trade deal before implementation of MFN status to India,” a senior government official said. An official said that Pakistan is expected to complete the process of implementing Most Favoured Nation (MFN) status to India by December 2012 after getting the final nod from the Cabinet.
“During talks held in Islamabad, Pakistani team was of the view that small quantity of diesel and furnace oil could be imported from India as goodwill gesture,” sources said.
The other reason the country is reluctant to import Indian diesel is its steep price amid high quality.
“Indian refineries are producing diesel euro-4 quality whereas in Pakistani refineries are producing euro zero quality,” official said.
India refineries located in the south are producing furnace oil with an aim to export it to Sri Lanka and Singapore. “Furnace oil would be costly due to the long distance of these refineries from Pakistan border,” official said. Pakistan is not a permanent exporter of jet fuel and at present, its export is closed. Therefore, it is not possibility that Pakistan would import jet fuel from India.
“The other reason is that Pakistan has long-term diesel supply contract with Kuwait Petroleum Corporation (KPC) and certain quarters in the government believe that oil imports from Gulf countries should not be stopped.
On the other hand, a senior official from the petroleum ministry said that Pakistan had expressed the desire to import furnace oil, diesel and petrol from its neighbour. “We want India to deliver diesel through Karachi and furnace oil and petrol via the Wagah border to meet requirements of Punjab.”
Pakistan consumes 6.9 million tons of diesel per year, of which domestic oil refineries produce 3.2 to 3.4 million tons while the rest is imported.
Furnace oil demand stands at about nine million tons, of which domestic refineries produce about 2.5 million tons while the remaining is imported.
Published in The Express Tribune, June 30th, 2012.
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