Petroleum Division is attempting to purchase Russian crude oil for approximately $50/barrel, which is at least $10/barrel below the price ceiling imposed by G7 countries on this valuable commodity originating from Russia because of its conflict with Ukraine. Presently, crude oil is being sold internationally for $82.78/barrel.
Officials participating in the virtual negotiations with Russia have disclosed that Moscow is primarily focused on fulfilling all prerequisites, such as deciding on the method of payment, shipping costs with premium, and insurance expenses, before entering into an agreement with Pakistan. These officials, who requested anonymity, revealed that Russia will respond regarding the discount on the base price after the prerequisites are finalized. They also stated that shipping the crude oil from Russian ports will take 30 days, resulting in a $10-15/barrel increase due to transportation costs.
The talks between Moscow and Islamabad are progressing positively, with the expectation that a government-to-government deal on Russian crude oil imports will be finalized by the end of March. When asked, officials stated that the government has decided not to disclose the payment method to Russia for crude oil imports, but authorities are considering using Pakistan National Shipping Corporation (PNSC) ships or Russian tankers for transportation.
An official cautioned that the landed cost of Russian crude must be considered because the crude vessel will arrive in 30 days, leading to a per barrel shipping cost of $10-15. They added that Moscow has not agreed on the discount yet, and the maximum discount may be offset by the crude oil’s shipping costs.
State Minister Musadik Malik had previously claimed that Pakistan would receive a 30% discount on Russian crude oil during a press conference. The government plans to import one Russian crude oil ship to test the landed cost compared to the existing cost of crude being imported from Abu Dhabi National Oil Company (ADNOC) of the United Arab Emirates and Saudi Aramco.
According to Geo, the Petroleum Division secretary is currently in Karachi to further discuss the import of Russian crude oil to process it for finished products with the top management of Pak-Arab Refinery Company Limited (PARCO), Pakistan State Oil (PSO), Pakistan Refinery Limited (PRL), and other refineries. If the test ship’s cost is low enough to bring down the prices of petroleum, oil, and lubricants, Pakistan will approve Russian oil cargos within a month.
Due to a US dollar liquidity crunch, Pakistan will pay Russia in the currencies of friendly countries such as China, Saudi Arabia, and the UAE. The officials revealed that the ship carrying Russian crude will be insured by the National Insurance Company Limited (NICL) and Pakistan Reinsurance Company Limited (PakRE). The State Bank of Pakistan (SBP), which was previously hesitant about transactions with Russian banks due to G7 restrictions, has now expressed a willingness to communicate with the Russian counterpart bank regarding a payment mechanism for oil imports in three currencies other than dollars.
