Pakistan’s Cnergyico has imported the nation’s inaugural private-sector shipment of Russian crude oil, taking advantage of Moscow’s discounted oil exports. This move comes as Pakistan seizes the opportunity to purchase discounted Russian crude after European markets banned Russian oil exports due to the Ukraine conflict. The government’s first shipment arrived in June, and negotiations for a second government-to-government shipment are in progress.
Initially, the need to split and transfer cargo to smaller ships, as Pakistan’s ports couldn’t handle large tankers, deemed private imports commercially unviable. However, Cnergyico made use of its single-point mooring, capable of accommodating deep-draft tankers, enabling the import of Urals crude, which the company’s refinery in Hub, a southwestern city, will process.
This marks a significant milestone for Cnergyico and Pakistan, showcasing the company’s ability to refine various types of crude oil. Cnergyico operates Pakistan’s largest refinery, with a capacity of 156,000 barrels per day (bpd), representing one-third of the country’s total capacity of 450,000 bpd. It is the only refinery with its own single-point mooring.
Cnergyico plans to sell gasoline and diesel locally, while exporting furnace oil, primarily used in industrial boilers, power plants, and ship engines. The global demand for furnace oil could assist Pakistan in generating foreign exchange.
The company conducted due diligence and consulted external sanctions counsel to ensure compliance with sanctions when importing Russian oil. Pakistan aims to import 100,000 bpd from Russia this year, significantly boosting its total imports, alleviating foreign exchange challenges, and mitigating record inflation. Last year, Pakistan’s crude imports stood at 154,000 bpd.
Balancing Benefits and Challenges
The government did not reveal which currency it used to pay for the Russian oil import, but it is known that it made the payment in Chinese yuan for its first shipment. Cnergyico may utilize yuan and a letter of credit from a Chinese bank for payment.
While the Russian discounts are advantageous, increased shipping costs and the lower quality of fuels produced from heavy sour Urals crude compared to those from Pakistan’s primary suppliers, Saudi Arabia and the United Arab Emirates, present challenges. However, Cnergyico plans to offset these challenges by exporting furnace oil to generate foreign exchange.
