ISLAMABAD: State Minister for Petroleum Dr. Musadik Malik said on Wednesday Pakistan would place its first order to import Russian crude oil at a “big discount” this month, as Islamabad looks for cheaper fuel options amid macroeconomic challenges while trying to finalize an oil refinery project with Saudi Arabia.
Russia agreed in principle to supply crude oil and oil products to cash-strapped Pakistan at cheaper rates this year and signed several memoranda of understanding with the country’s energy ministry.
Islamabad’s energy imports during the last fiscal year were valued at $23.3 billion, constituting 29 percent of the country’s total imports. During the current fiscal year, Islamabad has already imported energy products worth $7.7 billion, according to the Pakistan Bureau of Statistics (PBS).
Pakistan’s desire to look for cheaper sources of energy has been fueled by its crippling economic crisis after its official forex reserves dipped below $5 billion and its national currency underwent massive devaluation.
Recently, representatives from state-owned oil companies of both Pakistan and Russia met in the southern port city of Karachi to conclude discussions on oil trade between the two countries.
“Hopefully, within this month, we will put out an order, and very soon, we will have the first shipment coming,” Malik told Arab News in an exclusive interview.
Asked if the discounted price would be below the $60 per barrel price cap imposed by G7 countries to hurt Russia’s oil income, he said: “Obviously, if there is no discount, then what interest would Pakistan have in procuring the oil? So, very clearly, it would be at discounted prices.”
The minister said Pakistan and Russia had both taken care of most of the contractual issues and were now finalizing the terms and conditions of the deal.
“The commercial details [will be finalized] in a week or so, and then we will place the order. Obviously, it would be a big discount,” he said, adding that Islamabad wanted to conduct its business in a transparent manner.
On a question about the capacity of Pakistan’s refineries to process Russian crude oil, Malik said the petroleum ministry had discussed the issue with Pakistan Refinery Limited (PRL) and Pak-Arab Refinery Company Limited (PARCO).
“PRL had indicated that they can use one-third to 50 percent of its crude of light Russian origin,” he said. “We have also spoken with PARCO and they have indicated that they can include about one-third or about 33 percent of the Russian light crude into its cocktail.”
Additionally, the minister said private sector companies had also expressed interest in importing up to 80 percent of Russian crude oil.
SAUDI OIL REFINERY PROJECT
On the Saudi oil refinery project, the minister said Pakistan was working closely with the kingdom and the delegations of both countries had met multiple times in the past to discuss the modalities of the project.
“We have resolved problems around the refinery project,” he said. “We went to Saudi Arabia [for this] and we also met the Saudi team in Abu Dhabi.”
“Right now, the new refinery policy is with the cabinet and in a couple of weeks it will be finalized and we will reengage with Saudi Arabia … We are really looking forward to it,” he added.
Pakistan's State Minister for Petroleum Dr. Musadik Malik is pictured while speaking to Arab News in Islamabad, Pakistan, on April 12, 2023. (AN photo)
Malik expressed his gratitude to the kingdom for its continuous support during difficult times, adding that the two sides shared a close relationship.
“Pakistan is receiving a huge amount of oil on deferred payment from Saudi Arabia,” the minister added. “It is about $1.2 billion which is a significant amount … for which we are very grateful.”
“As our needs evolve, we continue to engage with our brotherly country [for more oil on deferred payment] and see how best to move forward,” he said.
OIL PRICES AND GAS SHORTAGES
He acknowledged that Pakistanis were paying a high price for oil, adding that Islamabad had no control over the prices of the commodity at the global level.
Malik added that the price of oil in Pakistan was contingent on global prices of petroleum products along with the dollar-rupee parity.
He said the government was trying to charge people who drive expensive cars a higher price for petroleum products and grant relief to the poor segment.
“We are trying to charge people who drive very expensive cars [a higher price] as we are going to make petroleum products a little bit more expensive for them and then, in the exact proportion in which we increase the price, we are going to decrease the price for the poor so that there will be no burden on the exchequer,” he added.
The minister spoke about the current gas shortage affecting Pakistan’s industrial sector, saying that gas supply was disrupted for small power plants as the government was providing electricity to them.
“We have never been deficient in providing gas for the industrial process so if gas is needed to run a certain kind of industrial process it is always available to them,” he added.
