Pakistan wants to cover a third of its oil needs with supplies from Russia

Russia agreed with Pakistan on oil supplies. The corresponding agreement will be prepared by April, Russian Energy Minister Nikolai Shulginov said on January 20 following a meeting of the intergovernmental commission. Logistics, insurance, payment and volume of deliveries will be registered in this document.

“We think we can buy more than 35% of our total oil imports from Russia,” said Pakistani Energy Minister Musadiq Masood Malik (quoted by Interfax).

Also, Russia and Pakistan, according to Shulginov, will discuss the supply of petroleum products to the country. “We deliberately did not mention oil products, because we need to wait until February 5, when the issue with the price cap (price ceiling) is clarified. And then we will supplement the agreement that we are developing with issues related to the supply of petroleum products,” the official said.

The price ceiling for Russian oil products will come into effect on February 5, 2023, simultaneously with the European Union (EU) embargo on marine supplies of oil products from Russia. According to the Wall Street Journal, countries that have joined the ceiling are discussing two limits – for more expensive (like diesel) and cheaper (like fuel oil) petroleum products. Ceiling level has not yet been announced. According to analysts’ forecasts, the ceiling for more expensive fuel can be set at $650/t, for cheaper fuel – $350/t (Vedomosti wrote about this on January 18).

According to Shulginov, deliveries of oil and oil products will be paid in the currencies of friendly countries, and Russia will give discounts on oil “equally for everyone on a commercial basis.”

According to the Federal Customs Service for 2021 (the latest available data for 2022, the agency does not disclose), Russia supplied Pakistan with 11,600 tons of oil products per year. There were no oil deliveries from Russia to Pakistan in 2020 and 2021.

The Russian oil industry came under serious pressure after the strengthening of anti-Russian sanctions in 2022. The main buyers of Russian oil – the United States, Great Britain and the EU countries – imposed an embargo on its imports. Also, the countries of the European Union and the G7 (Great Britain, Germany, Italy, Canada, the USA, France and Japan) introduced a price ceiling for Russian oil at $60 per barrel from December 5.

As a result, Russian oilmen had to hastily redirect oil supplies from Europe to Asia. The main buyers of oil from the Russian Federation in 2022 were India and China. China increased oil imports from Russia by 8.2% year-on-year to 86.24 million tons. And India increased oil supplies for the year by 33 times to 1.2 million barrels per day in December 2022, Bloomberg reported on January 16 .

In response to the limitation of prices for Russian oil, Russian President Vladimir Putin at the end of December 2022 banned the supply of fuel to foreign companies if the contract included a link to the price ceiling.

Igor Yushkov, a leading analyst at the National Energy Security Fund, explained that it would be interesting for Pakistan to import diesel and liquefied hydrocarbon gases (LHG, used as motor fuel) from Russia, and to a lesser extent fuel oil.

Kirill Rodionov, an expert at the Institute for the Development of Fuel and Energy Complex Technologies, notes that in 2021 Pakistan imported 8.8 million tons of oil. Thus, if the Russian Federation replaces 35% of supplies, then the annual volume of Russian oil exports will be more than 3 million tons. Now Pakistan buys raw materials mainly from Saudi Arabia (4.4 million tons in 2021) and the United Arab Emirates (3.6 million tons). ), as well as Kuwait and other countries (total 0.8 million tons). Imported oil is used at oil refineries (refineries): in 2021, the country’s refineries processed 12 million tons of oil, but their maximum capacity is 20.5 million tons per year, adds Rodionov.

The expert also noted that in recent years, Pakistan “rapidly increased” the import of light distillates, which are used for the production of gasoline, kerosene, diesel. If in 2012 the import of such products amounted to 1.5 million tons, then in 2021 – 9.5 million tons. Along with oil, this raw material, according to Rodionov, ensures the loading of Pakistani refineries.