Pakistan want Russian Oil at $60/barrel

September 20, 2023

Pakistan is actively seeking a monthly supply of crude oil from Russia, aiming to secure a price that does not exceed the $60 per barrel limit set by the Group of Seven (G7) nations. This effort is motivated by the desire to diversify the country’s sources of crude oil and ensure a stable supply. A senior official from the Energy Ministry shared this information, revealing that the decision to import Russian crude regularly was made following a pilot shipment of 100,000 tonnes of URAL crude, which was processed by Pakistan Refinery Limited (PRL).

The PRL successfully transformed the URAL crude into various products, producing 10 percent petrol, 60 percent furnace oil, and 10-15 percent diesel, along with other by-products accounting for the remaining 15 percent. However, due to the nature of the URAL crude, PRL had to export furnace oil at a loss of 25 percent of the Brent crude price. Notably, the furnace oil produced from URAL crude had a high viscosity, measuring 700 cSt, which necessitated the addition of 10 percent diesel to reduce it to 180 cSt for proper flow. This process led to an increase in furnace oil production to 60 percent while reducing diesel production by 10 percent.

As a result, PRL was left with a net diesel production of 10-15 percent from URAL crude. Consequently, out of every 100,000 tons of URAL crude, PRL had to export 60 percent as furnace oil at a discounted price. The official mentioned that Moscow has indicated an interest in purchasing the furnace oil from Pakistan, but the price is yet to be determined.

Pakistan has also requested Russia to provide alternative crudes like SOKOL or Siberian Light Oil, which command higher prices in the international market compared to URAL. However, the decision to offer these alternative crudes at a substantial discount of $35 per barrel lies with Russian authorities.

With Brent crude prices exceeding $95 per barrel and predictions of further increases, largely due to production cuts by OPEC+, Pakistan views monthly shipments of Russian crude as a strategic move to secure a stable and cost-effective source of oil. The diversification of crude sources can help mitigate potential supply disruptions and price volatility, contributing to Pakistan’s energy security and economic stability.