As talks between the two parties have come to a standstill, it is unlikely that Pakistan and Russia reach an agreement on the long-term oil supply.
Pakistan and Russia had agreed to establish a special purpose vehicle (SPV) oil supply from Russia. However, Pakistan has not yet initiate the process, and with the current coalition government’s limited time in office due to upcoming elections, there are concerns about the progress of the agreement.
Another obstacle is the negotiation of a long-term oil supply deal with favorable discounts. Pakistan has request attractive oil supply concessions, but Moscow hesitates to enter into a long-term agreement with such terms. Russia bases its oil prices on the Platts index. Basically reflects prices in India, making it difficult to offer permanent discounts as prices fluctuate.
Government officials are also n decide on the approach to the potential oil supply deal. One option is to establish an SPV that would handle oil supply from Russia, indicating state involvement in purchasing. The other option is to allow the oil industry to negotiate commercial deals directly with Russian firms, assuming responsibility for profit or loss.
This indicates that Pakistani refineries can utilize Russian oil by blending it with Arabian crude. Without this blending, there is no market for Russian oil in Pakistan due to the surplus of furnace oil produced from it.
In a recent shipment, Pakistan received Urals crude directly from Russia. PRL entered into a contract to oil supply 100,000 tons of Urals-grade crude oil. That was loaded at a Russian port. It transferred to two small shuttle vessels at an Oman port for delivery to Karachi Port.
The shuttle vessels arrived at Karachi Port and successfully delivered the cargo. The Urals crude is currently being processed at PRL. A comprehensive report will be submit to the government upon completion of the processing. Government officials emphasize that the import of Russian oil is part of a strategy to enhance diplomatic relations through oil diplomacy.
Additionally, The availability of Russian oil supply has open up opportunities for diversifying energy imports from other markets.
Once PRL submits its report on the byproducts produced from Russian oil. The government will decide on a long-term deal, according to sources.
