Surgutneftegaz increases oil supplies to Pakistan

According to Kommersant, the Russian Federation is expanding oil supplies to Pakistan, sending the third batch this year. The only supplier is Surgutneftegaz. For several months now, the Russian Federation has been discussing a long-term contract with Pakistan for the supply of oil, but so far its conclusion has not been announced. According to experts, due to the restrictions of the Karachi port on accepting large oil tankers, deliveries to Pakistan for Russian companies may be less profitable than to India.

In early November, Surgutneftegaz shipped a new batch of oil from the port of Ust-Luga to Pakistan in the amount of about 100 thousand tons, according to Kpler data, which Kommersant has at its disposal. On November 7, the tanker Clyde Noble was loaded at the port of Ust-Luga in the Leningrad region. The oil company began deliveries in May, sending a similar volume of oil from Primorsk to Karachi. The second batch was sent by the company in August for the needs of the country’s largest oil refinery, Cnergyico Pk, in the province of Balochistan. Thus, for now, Surgutneftegaz remains the only Russian supplier of oil to Pakistan.

Pakistan primarily consumes raw materials from the Middle East; the largest maritime exporters to this country are Saudi Arabia and the UAE. On average, Saudi Arabia supplied about 110 thousand barrels per day (b/d) to Pakistan every month, the UAE – 21 thousand b/d. The Russian Federation supplied approximately 25 thousand b/d in June and October. At the same time, Russian and Pakistani authorities have repeatedly discussed concluding long-term contracts for the supply of oil, and in September Russia began exporting petroleum products to Pakistan. Thus, Pakistani Energy Minister Muhammad Ali in October admitted the possibility of importing about 1 million tons of Russian oil per year. “This year in July we received oil cargo from Russia for the first time. We think that we can meet 10% of our oil needs from Russia. In the next few years, we can increase this share to 30%,” the TASS agency quoted the official as saying. It was assumed that Pakistan would pay for Russian raw materials in Chinese yuan.

The attractiveness of Russian supplies for Pakistan lies in the fact that, due to sanctions, the Russian Federation is forced to sell its oil at a discount, and the loss of the European market has increased the costs of Russian oil companies for chartering tankers. The largest importers of seaborne oil shipments from the Russian Federation are India and China, which have benefited most from cheap Russian raw materials, the discount on which at the beginning of the year reached about $40 per barrel. However, starting in April, discounts began to sharply decrease amid increasing production cuts by Saudi Arabia and Russia, and in November, according to the Russian Ministry of Finance, the Urals discount relative to Brent was already about $9.4 per barrel.

According to Kommersant’s interlocutors, due to limitations in the capacity of Pakistani ports to receive large tankers, deliveries there for Russian companies may be less profitable than to neighboring India. When exporting oil to Pakistan, Russian oil companies have two options, notes Victor Katona of Kpler: “They can send volumes to state-controlled refineries, access to which is severely limited due to the weak throughput of the port of Karachi. In Karachi, tanker unloading is limited to 50 thousand tons, and this forces Russian exporters to resort to ship-to-ship transfers, which worsens the supply economy.” The second option, he continues, is to send the oil to Cnergyico’s private refinery in Balochistan, which primarily processes light Emirati Murban crude, which is blended with locally produced oil.

Dmitry Kozlov