Given the economic sanctions imposed by the US, UK, and EU nations against Moscow as a result of the war in Ukraine, all commercial banks in Pakistan have declined to issue letters of credit (LCs) for crude oil of Russian origin, arguing that payment in US dollars is not feasible against the import of Russian crude oil.
To ensure that Pakistan is not affected by sanctions, the government must negotiate a G2G arrangement with Russia for the import of crude oil under a transaction mechanism based on the Ruble.
Considering that crude oil is technically suitable for producing finished goods, refineries are able to use it to the tune of 15–30%.
Refineries, on the other hand, are in their short- and long-term contracts with ADNOC, Aramco, and KPC for the import of crude oil.
In addition, the sea voyage from the Black Sea would take roughly 16–26 days compared to 4-5 days from the Middle East, and the existing transport freight for imports from Russian ports is approximated in the range of $3–3.5 million comparison to the present freight of $0.8–1.0 from the Middle Eastern ports.
As a result, shipping costs from Russian ports to Karachi are $8 per barrel, which is 8–12 times more expensive than shipping from UAE ports.
This sums up the four refineries’ written responses to the government following letters sent to them on June 27 asking for advice on five issues, including the technical suitability of the Russian crude oil, quality and grades, cost of transportation and freight charges, payment mechanism, and current contract terms. The four refineries are PARCO, BYCO (Cnergyico Pk Limited), PRL, and NRL.
The Pak-Arab Refinery (PARCO) claims that a thorough technical assessment of processing Russian crude oil can be evaluated on the basis of crude oil blends of Russian grades along with the current grades, according to a copy of the written reply made available to The News.
To read our blog on “Questions about importing Russian oil are answered by refineries,” click here.
