The arrival of the first cargo of Russian crude oil in Karachi, celebrated by both government and media, is not expected to lead to a drop in domestic petroleum product prices, say industry insiders.
On Sunday, Pakistan Refinery Limited (PRL) welcomed the first 45,000 tonnes of Russian crude oil, discharging from the vessel beginning Monday. The Karachi Port Trust stated that the total discharge of the cargo would take between twenty to thirty hours.
While many view this importation as a significant achievement, industry experts doubt its commercial viability. They note that the heavy nature of Russian crude oil allows for producing 50% furnace oil, 32% high-speed diesel, and the remaining 18% for other products.
Reduce Domestic Petroleum Prices
In contrast, domestic refineries can extract 50% HSD and 25% furnace oil from Arabian crude oil. Therefore, experts suggest introducing Russian crude oil could disrupt the economic pattern of petroleum product derivation from crude oil. For this oil to be more commercially viable, they argue, its price must be significantly discounted.
The first batch of Russian cargo is seen as a trial, and a report evaluating its refining process will be submitted to the government to determine its economic viability for the country.
Read: First Shipment of Discounted Russian Crude Oil Arrives in Pakistan
Observers also suggest that the current government’s decision to purchase Russian crude oil may be an attempt to counter the narrative of the former government, the Pakistan Tehreek-e-Insaf (PTI), which had been criticizing the sitting government for its reluctance to import crude oil from Russia.
However, industry insiders warn that this importation might exacerbate the existing oversupply of furnace oil. Pakistan has substantial FO stocks due to a lack of demand from local power plants.
In an effort to keep operations running smoothly, refineries have had to dispose of the surplus stock, sometimes resorting to selling on the international market at a lower price.
