ISLAMABAD:
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.
COMMENTS (30)
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The Article states "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." . Mr. Zafar Bhutta should take notice that Pakistan's Total Consumption of Petroleum and its Products is about 20-22 Million Tonnes with a Domestic Refining Capacity of about 12-14 Million Tonnes. As such the quantity of Imported Petroleum Products should be about 8-10 Million Tonnes. . Cheers
@lexmarked: this is a society in denial ! What else can you expect from them ?
Only in Pakistan that business and trade is done "....as goodwill gesture" ! Saudi Arabia and UAE should give free oil..."....as goodwill gesture" India should give Sir Creek, Siachen, Kargil, Kashmir to Pakistan"....as goodwill gesture"
“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.” This is the crux of the whole story, future expected outcome and / or a lesson to be learnt from such deals. Cross-Trade b/w india and pk, being a born rivals, on such a sensitive item (ENERGY) is not a viable option on Pk's end. Pk should never rely on India on Energy Trade. However, trade may be fine in case of electricity only. POL / LNG trade may be like handing over Pk's nerves to India and the latter may put pressure on Pk any time they want. Strategically speaking its ruthless. Finally, i would say that even if Pk goes for such a deal then the imports from India must serve as surplus and not on the prime consumption list.
@lexmarked:
Actually I don't want even call centre workers from Hindustan. I am of the personal belief that a country known mainly as a global hub for AIDS and poverty cannot be considered a supplier of anything particularly valuable.
FYI - if you care to look beyond the tacky office buildings in Bombay, you'll see that the percentage of Hindustanis below the poverty line is considerably higher than that of Pakistanis - and this being at a time of apparent success for you guys and apparent hardship for us. I'm sure Bollywood has told you a different story altogether, but try taking a dose of reality from time to time.
Hasan
@Its (still) Econonmy Stupid: Vienna,June 30,2012 Contrary Sir, it was clever very clever to route public funds into private hands.Count ten percent provision of commission both ways earning even selling scrap for peanuts on books helps.It makes public stupid that is all. Who cares? Taravadu Taranga Trust for Media Monitoring TTTMM India --Kulamarva Balakrishna
@Hasan: 'If we have to export anything from Hindustan as a gesture of peace, let’s bring in a few call-centre workers and put them on a minimum wage.' Your begging to International cricket teams to come and play in Pakistan have all REFUSED you and you want Indian call-centre workers. Even with your minimum pay, you are completely broke. The only pay they will get is forced conversation.
@khan: ANOTHER HOLIER THAN THOU BRAGGING......big boasting does not change the truth my dear. You are well aware how acute is the energy (particularly electricity) shortage in India? But kudos to your love for nation....you would not accept this in this forum.. But it is equally OSTRICH LIKE ATTITUDE.
@Hasan If we have to export anything from Hindustan as a gesture of peace, let’s bring in a few call-centre workers and put them on a minumum wage
I am not sure the call centre workers will be thrilled to come to Pakistan to work even if you were paying maximum wage
@Hasan: Good job Hassan, you brought Kashmir into the discussion when the topic is oil imports!!!
I think it's a valid to not be over dependent on one source of finished petroleum product but then there are ways to mitigate that. No one is talking about that.
@Affan: A Pakistani company purchased an old refinery in Canada for 2 million dollars and contracted another company to dismantle and reassemble in Pakistan for $800,000. Last month the company sold refinery pipes as a scrap metal because Paksitani company failed to pay balance of the pyament and storage cost due to delay. A court approved the sale and future refinery capacity of crude disappeared at tremendous loss to Pakistani taxpayers. It is one thing to talk about increasing refining capacity and it is something else when you have the money to pay for it. Those days where it was assumed that of loan forgiveness will be awarded are gone.
Vienna,June 30,2012 One page is no news,because only a wall has a single page format.A sheet naturally has two pages. Pakistan should approach taking the two pages route of a single sheet for success. The needy Pakistan is not in a position to think of its imaginary bargaining power and the ability to show any "gesture". It should realize that.If its direction remains old, a day will the GULF may not be able to bridge the gulf on essentials, that means deprivation of security. It is time to learn from Abu Jundal aka Sayed Zabiuddin Ansari handed over to India by the keeper of Holy Places episode. Security is better served by seeking peace with India.Do know if you tear a single page the other page also would be torn out beyond your intention and control. Taravadu Taranga Trust for Media Monitoring TTTMM India --Kulamarva Balakrishna
The American's have an abundance of cheap natural gas and you turned down their offer - now your turning down India. I guess your not all that serous about obtaining fuel.
@Ali: MFN status has not yet been given to India. They are making false claims.
It's a Shame that Pakistani hasn't made the capex investments to refine in house .
@Hedgefunder: Pakistan has declared its intentions ONLY to give MFN status to India, has actually not notified it.
India has similar apprehensions against Pakistan for Iran-Pakistan-India pipeline and TAPI pipeline. These apprehensions can not vanish until Pakistan comes clean on Terrorism and Mumbai 26/11.
Why this self importance about MFN ? Do they really think that India really needs or cares about it ? Keep living in same illusions ! India really could not give a toss about MFN !
@Prasad Babu: business is not done with an eye on goodwill...it has a strong component of profit attached to it....and with peanut trade, you will earn peanuts..so better the talk extend no matter how long, but if a business begins it should be with an eye on profit...
India is not Gulf... they import oil like us... first oil goes to india refine thr n thn to Pakistan. stupid stupid decision by PPP government.. btr to contract wth gulf country.. they hve huge refining capacity.. Pakistan refineries xpanding n new will come.. Y INDIA??????
Most FAVOURED nation status, not most favourite. Please.
Pakistan doesnt trust India with little oil but wants India to trust them for central asian oil/gas pipelines?
double standards i say
It would be foolish on Pakistan's part to totally rely on India for their oil demands, considering the love loss between the two countries
all the problems seem to be on the pakistani side, low quality petrol / diesel, no infrastructure, contracts with kuwait, security concerns.... so the onus lies with Pak to solve this issues and step forward. India seems to have all things ready and settled smartly.
Import and export will be done by respective nations depending on cost benefit and strategic reasons. It would be unrealistic for aam aadmi and media on both sides to expect earth shaking breakthrough on trade between neighbors having so much misgivings. A single drop in trade will lead a path for bigger trade deals.So, lets just relax and don't turn hyper, even if trade talk fails. Talking is the only way forward for both of us...
I am an Indian and I don't hesitate to say it would be stupid on part of Indians to expect Pakistan to import a very large amount of oil from India. Baby steps...
The again Indian politicians are pretty stupid.