ISLAMABAD: Pakistan and Russia are on the brink of finalizing a deal on crude oil imports after the Russian delegation arrived in Karachi to fine-tune the agreement.
According to an official source, the hurdles are expected to be removed this time, and the deal is likely to go through smoothly.
However, the Energy Ministry has not disclosed the mode of payment and discounts on crude oil prices.
Last month, the technical teams of the Operational Services Centre (PSC) had discussions with the Pakistan State Oil (PSO) team, but they ended without any progress on the constitution of the Special Purpose Vehicle (SPV) responsible for importing crude and payments.
The Russian delegation is expected to finalize the government-to-government agreement, including the mode of payment. Russia is seeking payment in China’s Yuan or Ruble, but Pakistan wants to pay in rupees.
Once the deal is finalized, Pakistan will place an order with Russia for the purchase of crude oil, and the Russian ship will reach in 26 days, most probably by mid-May. The present Brent price in the international market hovers at around $85.16 per barrel, whereas Russian crude oil is available at $47-48 per barrel.
However, according to top officials, the central bank is asking some local banks to open letters of credit (LCs) for importing Russian oil, but they are hesitant to do so because of the G7 countries’ regulations.
The regulations require following the price cap of $60 or below per barrel and making payments under Society for Global Interbank Financial Telecommunications.
Pakistan refineries and crude oil
PSO has never imported crude oil as it only imports finished petroleum products from different sources and diesel from the Kuwait Petroleum Company (KPC). Refineries have been importing crude oil under long-term agreements from Abu Dhabi National Oil Company (ADNOC) and Saudi Aramco.
However, in the case of Russian crude, oil refineries will not be involved in the import; however, it will be an SPV with representatives from PSO and PSC.
Relevant officials hinted that Pakistan might get Russian crude at a discount close to $50 per barrel, $10 per barrel below the cap price imposed by G7 nations on Russian oil in the wake of the war on Ukraine.
Pakistan oil refineries will only be able to extract just 10 percent MS out of Ural crude oil and 50 percent furnace oil, and the refineries are already faced with the ullage of furnace oil.
In Pakistan, the only consumption of furnace oil depends upon running RFO-based power plants. Industrial sources suggest that the government conducts a commercial analysis to determine whether the import of Russian oil will benefit Pakistan’s economy and to what extent.
