ISLAMABAD: The Pakistani government on Tuesday said it would not be able to provide any “immediate relief’ to the public in fuel prices after the arrival of first discounted Russian oil cargo as it was aiming to boost the discounted import to constitute one-third of total crude oil purchases by the country.
The first cargo of discounted Russian crude oil, arranged under a deal struck between Islamabad and Moscow earlier this year, arrived in Karachi on Sunday, which was currently being offloaded at the port in the southern Pakistani city.
The first government-to-government purchase comprised 100,000 metric tons, out of which 45,000 metric tons of discounted Russian crude reached the Karachi port, while the remaining 55,000 metric tons would arrive “within the next week,” according to the government.
“The government will not be able to provide any immediate relief in fuel prices to the public, but when more discounted oil reaches Pakistan, the public will definitely benefit from it,” Bilal Azhar Kayani, Prime Minister Shehbaz Sharif’s coordinator on economy and energy, told Arab News.
Energy imports make up a majority of Pakistan’s external payments and the Russian discounted crude would offer some respite to the frail South Asian country that is facing a debt default, with its foreign exchange reserves barely enough to cover a month’s import bill, record inflation and rapidly depreciating national currency.
Kayani said the government had received a “significant discount” on the Russian oil import, but refrained from sharing the details.
“It is a significant discount compared to the price of crude oil already being imported by Pakistan,” he said. “We cannot disclose full commercial details to media or public at this stage as part of the agreement with Russia.”
He confirmed that Pakistan made payment to Russia in the Chinese currency due to the dollar shortage and would continue to import more shipments to save the precious foreign exchange and benefit the public “in the long run.”
About the US concerns on the import and subsequent payments to Russia in the Chinese currency, he said: “We have received no concerns from the US so far. Some other countries are also paying Russia in RMBs, and so did we. This is a mutually agreed [between Pakistan and Russia] payment mode for the crude import.”
Sharing details about the capacity and capability of oil refineries in Pakistan to handle the Russian oil, he said the Russian crude would be blended with the Arab Light crude for processing at Pakistan Refinery Limited (PRL).
“We are sure this will go well,” Kayani said. “Once the refining process of the pilot cargoes of 100,000 metric tons is done successfully, significant large quantities of Russian crude will follow to benefit Pakistan and the public.”
The official said the government was aiming to jack up the discounted Russian crude imports to “eventually constitute one-third of all crude oil imported by Pakistan.”
Energy experts, however, doubt the Russian crude would bring any major relief to the public and the country unless oil refineries upgrade their technology to handle the ‘hard crude’ to produce petroleum products.
“This is just an experiment, and even if the PRL succeeds in processing the hard Russian crude, it will be able to produce around fifty percent of furnace oil and some diesel,” Afia Malik, a research economist at the Islamabad-based Pakistan Institute of Development Economics (PIDE), told Arab News.
Furnace oil would be of “no use” to Pakistan as it had already announced to phase it out from power generation by the end of this year, she said.
“The government should import petroleum products, including diesel and petrol, from Russia at a discounted rate like India was doing instead of importing the crude and then refining it here,” Malik suggested.
“The transportation and processing cost of Russian hard crude will eat away the discount and we don’t see any significant import benefit at this stage.”
