Russian oil import face, port, refinery, currency constraints

Karachi: attempt to make Russian oil account for two-thirds of its oil imports might not materialize as anticipated, according to officials and analysts. The country, facing a foreign exchange crisis and high inflation, aims to import 100,000 barrels per day (bpd) of discounted Russian oil to reduce its import bill. However, obstacles like a scarcity of foreign currency, limitations at refineries and ports, and lower quality refined products compared to Saudi Arabian and UAE crudes are hindering its progress.

While Pakistan seeks to address its foreign exchange crisis, increased shipping costs and the need to import more gasoline and gasoil to compensate for the lower output of Russian oil put further pressure on its struggling economy. Additionally, the shortage of Chinese yuan to pay for Russian crude, as Pakistan relies on the yuan for trade with China, poses another challenge.

Transportation costs for Russian crude are higher due to longer distances traveled and port constraints. Pakistan’s ports cannot handle large vessels from Russia, necessitating costly lightering operations in Oman.

Despite these challenges, importing Russian crude is still cost-effective for Pakistan, as it remains cheaper than Saudi Arab Light crude for its refineries. However, the quality of Urals crude, the Russian variety, poses limitations for Pakistan’s refineries in producing gasoline and diesel.

Pakistan Refinery Ltd (PRL) needs to blend Urals crude with Middle Eastern crude to fully process the first cargo, leading to delays. PRL has no immediate plans to upgrade its refinery to process fuel oil into higher-quality fuels.

Although the benefits of discounted Russian crude are evident, liquidity issues and technical challenges may limit Pakistan’s appetite for further imports. Analysts anticipate that Russian imports into Pakistan will remain relatively modest, potentially not exceeding one cargo per month.

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