Pakistan will decide on crude oil imports from Russia after Pakistan Refinery Limited (PRL) submits a report to the petroleum division on the refinement of a test cargo of URAL crude from Moscow.
An Energy Ministry official told a national daily, “The PRL will submit to the government the yields of URAL crude (production of petrol, diesel, FO, Light Diesel Oil (LDO), and kerosene oil in terms of percentages), its quality, and more importantly how commercially viable it is for Pakistan’s economy”.
The report stated, “The test cargo will also help the government’s relevant functionaries to know exactly the traveling cost per barrel, refining cost, margin of refineries, and how smooth the payment mechanism will be. Pakistan will pay in yuan through the Bank of China”.
According to the official, a Russian vessel carrying 750,000 URAL crude oil is on its way to Pakistan and will arrive either in end-May or in the first week of June.
After the test cargo’s crude is refined, Russia offered Pakistan a mixture of URAL, SKOL, and ESPO for an import deal under the government-to-government (G2G) agreement. Russia is running low on SKOL and ESPO crude oil, which is why it has offered blended crude oil as part of the long-term agreement to be signed under G2G mode.
He said the URAL crude will produce 50 percent Furnace Oil and 15-20 percent petrol. Pakistan refineries have also been experiencing ullage issues as a result of non-lifting of furnace oil, and from July 2022 to the present, refineries have exported 135,000 tons of furnace oil to Dubai at a cost of 75 percent of the crude oil, resulting in a 25 percent loss.
The government should decide how much crude oil Pakistan will import each year under a long-term agreement. PRL has a daily capacity of 50,000 barrels. The official said under the G2G agreement, Pak-Arab Refinery Company (PARCO) and National Refinery Limited (NRL) must be included for using the Russian crude.
Pakistan’s refineries, such as PARCO, PRL, and NRL, have long-term agreements with Saudi Aramco and ADNOC for crude oil imports. The country gets 80 percent of its crude from Saudi Aramco and ADNOC. There is still 20 percent of space available to accommodate Russian oil, and the question now is how much of that 20 percent the government will decide to use for Russian crude.
The official added that a commercial analysis of Russian crude was conducted in favor of Pakistan’s economy, but that it would be cross-checked after refining the Russian oil. The shipping cost of Russian oil has also been estimated at around $15 per barrel, but this will be confirmed once it arrives at the Pakistan port.
He also said Pakistan will most likely pay the price of crude in Chinese Yuan and the Bank of China may play a role in transactions.