In a major development, the first-ever Russian oil ship ‘Pure Point’ carrying 45,142 metric tons of crude successfully anchored at oil tankers’ berth OP2 of Karachi Port Trust (KPT) on Sunday.
As per the details, Pakistan Refinery Limited (PRL) will initially refine the Russian crude in a trial run. After refining, the company will submit the test report to the government on the Russian crude’s quality, yields, and commercial viability.
The PRL’s test report will help the government assess the transportation and refining costs and margins for refineries.
Experts believed that the report is crucial to identify whether the import of Russian oil is viable for Pakistan, a net importer of petroleum products.
“It is expected that the price of Russian oil will be more or less the same with the current petroleum rates,” Amreen Soorani, Head of Research at JS Global Limited, told Business Recorder.
“The cost of logistics and refining needs to be assessed before concluding. However, it will take a long time. It took over three months for the first cargo to reach Pakistan,” she said.
The analyst believed that the logistics cost is expected to be higher than crude imported from Middle Eastern countries.
“However, it is a positive development as Pakistan, while exploring newer avenues, would be paying for Russian oil in Chinese yuan, which will help alleviate pressure on the US dollar kitty,” she said.
Abdullah Farhan, Deputy Head of Research at IGI Securities, echoed similar views, saying that saving US dollars is a major positive for Pakistan.
“The main purpose of purchasing crude from Russia is to save cost,” Farhan told Business Recorder. The government has not disclosed the pricing mechanism of the purchase. However, he said Russian crude is available at a 15-20% discount.
“The current cargo is a trial run, with not enough details available at the moment. However, if larger quantities are purchased, this would help achieve economies of scale, which will bring the rate down,” he said.
Meanwhile, other experts said the freight cost of Russian crude would play a crucial role in assessing the feasibility of the product.
“Freight cost of Russian crude, which is not disclosed yet, is expected to be higher than that of the GCC oil imports,” Iqbal Jawaid, an analyst at Arif Habib Limited (AHL), told Business Recorder.
“If the cost is higher, then a positive impact cannot be passed on to the consumers. In case of lower freight charges, it becomes a different story,” he said.
Earlier, Petroleum Minister Musadik Malik Malik on Monday played down concerns around the financial viability and concerns about the ability of local refineries to process Russian crude.
“We’ve run iterations of various product mixes, and in no scenario will the refining of this crude make a loss,” Malik told Reuters. “We are very sure it will be commercially viable.”
Earlier this year, cash-strapped Pakistan, in its bid to diversify oil import sources, signed an agreement with the Russian Federation, a major producer of crude oil, to buy crude at discounted rates.
Under the deal, Russia sent the first oil tanker carrying 100,000 metric tons of crude that had arrived at Omani port a few days back.
However, the authorities decided that crude oil to be transported to Pakistan through smaller ships as South Asian country ports don’t have the capacity to accommodate heavy ships carrying more than 50,000 tons of liquid cargo.
The second shipment of Russian crude oil from Omani port to Pakistan is expected to be completed in the next few days.