KARACHI: The Pakistan Refinery Limited (PRL) has reportedly raised concerns about its capacity to process more quantities of Russian crude oil, a setback for the previous government’s attempts to increase reliance on cheaper Russian crude to cut domestic fuel prices.

Analysts say the processing of Russian crude oil — available at a discount after it was banned from European markets due to Russia’s war on Ukraine — has been hampered by a shortage of foreign currency and limitations at Pakistan’s refineries and ports.

Another obstacle is that local refineries cannot extract as much petrol and diesel out of Urals crude — a type of crude oil from Russia — as they produce from Middle Eastern crudes.

Pakistan’s first crude cargo from Russia arrived in June and the payment was made in yuans. The target was to import 100,000 barrels per day (bpd) from Russia, nearly two-thirds of Pakistan’s total 154,000 bpd of crude imports in 2022.

However, the first shipment did not immediately lead to any significant savings for consumers. Instead, just over a week before the National Assembly’s dissolution, the outgoing coalition government raised petrol and diesel prices by up to Rs20 per litre.

Sources said the PRL did not see notable financial gains from processing the Russian crude, adding that the move to increase imports was allegedly a “political stunt” by the PDM government to appease consumers.

Senior PRL executives did not respond to requests for comment.

Musadik Malik, the minister of state for petroleum in the previous cabinet, told Dawn that PRL had not refused to further process Russian crude imports as long as he was in charge. The National Assembly was dissolved at midnight on Wednesday.

‘Minor gains’

Some sources estimate the financial benefit to the PRL from this import to be between 50 paise and Re1 per litre. “This minor gain translates to a reduction of only 15 to 20 paise per litre in diesel and petrol prices for consumers, an inconsequential amount given the rising cost of living,” they said.

Meanwhile, industry sources said the PRL had taken the stance that other refineries should also bear the responsibility and challenges of processing Russian crude oil, which had not resulted in any significant financial benefit for the PRL.

Given the minimal benefits in terms of reducing local fuel prices, insiders believe the interim government may shy away from importing more Russian crude until after the general elections.

Annually, local refineries process about 3 million tonnes of locally extracted crude oil. Besides, the country imports between 7m and 8m tonnes of crude from Saudi Arabia and the United Arab Emirates.

PRL CEO Zahid Mir last month told Reuters that the refinery would need around two months to fully process its first batch of 100,000 tonnes (730,000 barrels) of Urals crude.

This oil needs to be mixed with Middle Eastern crude to balance the high fuel oil output from the Russian variant. “Our optimum processing solution is to blend Urals with Middle Eastern imported crude while not exceeding 50pc Ural in the blend,” Mr Mir told the news agency.

Published in Dawn, August 13th, 2023