The recent arrival of Russian crude oil in Pakistan has garnered significant attention, from top government officials to the media. However, despite the celebrations, experts in the oil industry suggest that the expected reduction in petroleum product prices, especially diesel and petrol, may not be achievable in the near future.
First Cargo of Russian Crude Oil
Pakistan Refinery Limited (PRL) recently received its first cargo of 45,000 tonnes of Russian crude oil, with the unloading process commencing on Monday. The Karachi Port Trust estimates that the complete discharge will take approximately twenty to thirty hours.
Challenges with Russian Crude Oil
Industry insiders highlight that although the introduction of Russian crude oil is being hailed as a remarkable achievement, its commercial viability remains uncertain. The heavy nature of the oil means that it will yield 50% furnace oil, 32% high-speed diesel, and 18% other byproducts. In comparison, domestic refineries can extract 50% high-speed diesel and 25% furnace oil from Arabian crude oil.
Potential Economic Disruption
The influx of Russian crude oil could disrupt the existing economic pattern of petroleum products derived from crude oil. However, for it to be more commercially viable, oil prices need to be at a significantly discounted level. The current arrival of Russian crude oil is considered a trial run, and its refining report will be assessed by the government to determine its economic feasibility for the country.
Addressing Political Narratives
Some speculate that the government’s decision to purchase Russian crude oil is an attempt to counter the narrative set by the former Pakistan Tehreek-e-Insaf (PTI) government, which consistently criticized the current administration for hesitating to import crude oil from Russia.
Impact on Furnace Oil Stocks
The increased production of furnace oil from the Russian crude oil will only contribute to the existing surplus of this fuel. Pakistan currently holds a substantial stock of furnace oil, amounting to hundreds of thousands of tonnes, due to the non-lifting of fuel by local power plants. Refineries have struggled to dispose of this surplus and have resorted to exporting it at lower prices to maintain smooth refinery operations.
In conclusion, while the arrival of Russian crude oil in Pakistan is a significant development, the expected reduction in petroleum product prices may not materialize. The heavy nature of the oil and its impact on the economic viability of different products present challenges that need to be addressed for a more favorable outcome.
Published in PakWeb, June 13th, 2023.
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