Pakistan, Russia oil trade hits snag as refineries lose interest

Pakistan's plans to import more crude oil from Russia have hit a critical roadblock as neither country has made any moves for the purpose

Islamabad: Pakistan’s plans to import more crude oil from Russia have hit a critical roadblock as neither country has made any moves for the purpose nor have the local refineries shown any interest, reported The News International.

The current government’s tenure is about to expire in less than a week, but the government has not indicated that it would be placing another order with the Russian government for Ural crude.

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Earlier, the State Minister for Petroleum Dr Musadik Malik announced that Pakistan planned to import 100,000 tonnes of crude oil every month, reported The News International.

But, since it got the first cargo of 100,000 tonnes in June this year, the government has neither placed any new order for Russian crude oil in July nor August.

Sources in the oil sector said, “For the time being, it seems that Russian crude oil import has stopped because the government was unable to convince the local refineries.” Pakistan Refinery Limited (PRL) was the only refinery to import Russian crude oil in June as other refineries did not apply for it due to their own commitments, according to The News International.

However, the sources said that now all the refineries, including PRL, look like least interested to import crude oil from Russia.

Additionally, the Pakistan government along with the commercial feasibility and long-term contracts of refineries, did not infer upon a long-term agreement with Russia to make the import of its crude oil less expensive and appealing for the local refiners.

Moreover, the Special Purpose Vehicle (SPV) was also not set to take forward Russian crude oil import on a long-term basis, according to The News International.

With this, Pakistan’s plan to import Russian crude oil under a government-to-government (G2G) mechanism hit a snag.

In July, a Russian delegation visited Karachi to discuss the quality and pricing of its Ural grade crude oil but was not satisfied with the progress made by Islamabad in creating the SPV, which is essential for bypassing US sanctions on Russia.

An official aware of the development told The News that the Russians also did not offer any special discount to Pakistan, which had hoped to get a lower price than the prevailing market rates for Ural crude.

Furthermore, according to the oil sector people, the government also did not reveal the cost of the Russian crude oil when its first shipment arrived in June.