• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 3 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 11 mins Bad news for e-cars keeps coming
  • 24 mins How Far Have We Really Gotten With Alternative Energy
  • 13 days What fool thought this was a good idea...
  • 1 day The U.S. Is Determined to Revolutionize Its Microchip Industry
  • 11 days A question...
  • 16 days Why does this keep coming up? (The Renewable Energy Land Rush Could Threaten Food Security)
The War for Profitability Within the Wind Industry

The War for Profitability Within the Wind Industry

Major wind energy companies are…

Hess Shareholders Approve $53 Billion Chevron Deal

Hess Shareholders Approve $53 Billion Chevron Deal

Hess shareholders approved Chevron's $53…

Osama Rizvi

Osama Rizvi

Osama Rizvi is an Economic and Energy Analyst with a special focus on commodities, macroeconomy, geopolitics, and climate change. He has written for various print…

More Info

Premium Content

Pakistan Has Bought Its First Russian Oil Cargo. Now What?

  • Pakistan has bought its first discounted Russian oil cargo, potentially reducing its reliance on Middle Eastern oil producers.
  • The move presents technical challenges, such as adapting refineries to process the heavy-grade sour Russian oil.
  • The purchase could also have diplomatic implications, potentially complicating negotiations for a bailout with the IMF and straining relationships with long-term vendors Saudi Arabia and UAE.
Oil

Pakistan has placed its first order for discounted Russian crude oil, a move that could potentially reduce the country's reliance on Middle Eastern oil producers. The order amounts to around 100,000 barrels per day (bpd) of Russian crude oil, which does not include related products. In 2022, Pakistan imported 154,000 bpd of oil, with most of it coming from Saudi Arabia and the UAE. The introduction of Russian crude could have a significant impact on the supplies from Middle Eastern producers, which may not be welcomed and could lead to future issues. It's worth noting that Pakistan imports around 500,000 bpd of oil.

Pakistan

Pakistan and Russia had already planned to finalize a deal when representatives from both countries met. At that time, the Petroleum Division aimed to secure the deal at a price close to $50 per barrel, lower than the price cap. Shipping crude oil from Russian ports was estimated to take around 30 days, with resulting transportation costs of $10-15 per barrel. The payment method for crude oil imports from Russia had not been disclosed, but options included Pakistan National Shipping Corporation ships or Russian tankers for transportation.

However, the introduction of discounted Russian crude oil presents several technical challenges that still need to be addressed. The most significant issue is adapting refineries to process the heavy-grade sour Russian oil, which is different from the sweeter and lighter oil currently being imported from the Middle East. In addition, given the distance, freight rates may also be higher.

There are also important diplomatic considerations. Pakistan is currently trying to meet all the conditions to secure a bailout from the International Monetary Fund (IMF). According to the IMF's latest report, the country is already facing high levels of debt distress, and the specter of a sovereign default is ever-present. Pakistan's economy is expected to grow by only 0.5% this year, compared to 6% last year. Inflation remains at multi-decade levels, and people have died in stampedes attempting to obtain free wheat/flour. Importing discounted Russian oil might delay or obstruct the ongoing negotiations with the IMF.

Furthermore, the introduction of Russian oil could deteriorate relations with the country's long-term vendors, namely Saudi Arabia and the UAE. Pakistan enjoys many benefits in terms of external financing from Saudi Arabia in the form of delayed oil payments, debt rollovers, and other assurances that endorse the country's case with International Financial Institutions (IFIs). However, things seem to be changing of late, as Saudi Arabia has given a clear message of "no more easy money" and has refused to provide further interest-free loans or bailouts.

Pakistan's dependence on energy imports is a major issue, as it amounted to a staggering $23.3 billion during the last fiscal year, accounting for almost 30% of total imports. In the current fiscal year, the figure has already reached $7.7 billion. Recently, the government of Pakistan increased the price of petrol by Rs. 10, a 3.5% increase overnight. In one year, the price of petrol has increased by more than 100%.

In conclusion, while the purchase of discounted Russian crude oil may be welcomed by the people of Pakistan if it translates to lower prices at the pump, several technical and non-technical challenges still need to be addressed. The most important challenge is for the country to navigate the complex geopolitical quandary it is currently in.

By Osama Rizvi for Oilprice.com

ADVERTISEMENT

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • Mamdouh Salameh on April 20 2023 said:
    This item of news won’t warrant a mention in normal circumstance as many countries around the world are buying Russian oil and other crudes every day.

    But Pakistan receiving Russian oil at a discounted price when the demand for Russian crude is breaking records not only signals Russia’s generosity but also a determined attempt by it to woo Pakistan away from its ally the United States and bring it closer to the Chinese-Russian alliance.

    Since the start of the Ukraine conflict, there has been a growing trend of countries taking the opportunity to distance themselves from the US-led West by refusing to condemn Russia and by also welcoming the transitioning of the current World Order from a unipolar system led by the United States to a multipolar one being ushered in by the Chinese-Russian strategic alliance and also the emerging new global financial system being spearheaded by the yuan and the petro-yuan. Their motivation is that by weakening the US and its financial system, they will be also undermining the United States’ ability to impose sanctions on any country which doesn’t toe the Western line.

    Saudi Arabia, UAE, South Africa and India are among countries leading the process of distancing themselves from the United States and its NATO alliance because they are starting to see the West’s true colours through the ugly face of capitalism, warmongering, sanctions and self-serving green policies.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News