Cnergyico, a Pakistani refiner, announced on Monday that it has imported the country’s first private-sector supply of Russian crude oil, as the cash-strapped country takes advantage of Moscow’s discounts on its oil exports.
The South Asian country has begun purchasing crude oil that Russia has discounted as a result of its shipments being prohibited from European markets due to Russia’s invasion of Ukraine. Pakistan’s first government-imported cargo landed in June, and a second government-to-government transfer is currently being negotiated.
Private imports were thought to be unprofitable because cargo had to be split and moved to smaller ships because Pakistan’s ports couldn’t accommodate massive tankers.
Cnergyico has utilized its single point mooring, designed to accommodate deep-draft tankers, according to a company spokesperson in response to Reuters’ inquiries. The shipment of 100,000 metric tons of Urals crude is intended for processing at Cnergyico’s refinery located in the southwestern city of Hub.
The company’s spokesperson emphasized the significance of this development, stating that the processing of Urals crude represents a crucial milestone for both the company and the nation. It underscores Cnergyico’s capabilities and preparedness to refine various types and complexities of crude oil.
Cnergyico currently operates Pakistan’s largest refinery, boasting a capacity of 156,000 barrels per day (bpd), which accounts for one-third of the national capacity of 450,000 bpd. Notably, it is the sole refinery equipped with its own single-point mooring.
Cnergyico’s strategic plan includes the sale of gasoline and diesel produced from the Urals crude within the domestic market, along with the export of furnace oil, commonly used in industrial boilers, power plants, and ship engines.
The spokesperson highlighted the global demand for furnace oil, which presents an opportunity for Pakistan to generate foreign exchange.
In the pursuit of this initiative, Cnergyico conducted comprehensive due diligence and sought advice from external sanctions counsel to ensure that the import of Russian oil remained in compliance with international sanctions.
Pakistan’s ambition is to import 100,000 bpd of crude oil from Russia this year, which would constitute a significant portion of its total imports. This move is aimed at addressing foreign exchange challenges and curbing soaring inflation. In the previous year, Pakistan’s total crude imports amounted to 154,000 bpd.
Regarding the payment for the Russian crude, the government used Chinese yuan for its initial import, which was directed to the state-owned Pakistan Refinery Ltd. Cnergyico, on the other hand, did not disclose the currency used for its Russian cargo, but a source familiar with the deal informed Reuters that Cnergyico would also settle the payment in yuan through a letter of credit from a Chinese bank.
It is worth noting that while the Russian crude comes with attractive discounts, these benefits may be partially offset by increased shipping costs and the production of lower-quality fuels from the heavy sour Urals crude grade compared to products refined from crude supplied by Pakistan’s primary sources, Saudi Arabia and the United Arab Emirates, according to analysts.
Cnergyico anticipates making its Russian imports economically viable by leveraging the export of furnace oil to generate much-needed foreign exchange.
