Surgutneftegaz increases oil supplies to Pakistan

By Rhod Mackenzie

According to Kommersant, Russia is increasing its oil exports to Pakistan,( SCO member) with the third shipment of the year being dispatched. The only current supplier is Surgutneftegaz. There have been discussions between Russia and Pakistan for some months about signing a long-term oil supply contract, but it has not yet been announced. According to analysts, limitations at port of Karachi in accommodating large oil tankers could reduce the profitability of Russian companies' deliveries to Pakistan compared to India.
In early November, Surgutneftegaz dispatched a new consignment of oil from Ust-Luga port to Pakistan weighing approximately 100,000 tonnes as per the records of Kpler . On November 7, the Clyde Noble tanker was loaded at the Ust-Luga port situated in the Leningrad region. The oil firm commenced shipments in May and transported an equivalent quantity of oil from Primorsk to Karachi. The company dispatched the second consignment in August to cater to the requirements of Baluchistan province's leading oil refinery, Cnergyico Pk.
Pakistan principally consumes raw materials from the Middle East, with the most significant maritime exporters to this country being Saudi Arabia and the UAE. On average, Saudi Arabia provided around 110 thousand barrels per day (b/d) to Pakistan each month, and the UAE supplied 21 thousand b/d.
The Russian Federation delivered approximately 25 thousand b/d in June and October. Russian and Pakistani authorities have repeatedly discussed signing long-term contracts for oil supply. In September, Russia began exporting petroleum products to Pakistan. In October, Pakistani Energy Minister Muhammad Ali acknowledged importing about 1 million tons of Russian oil per year as a possibility. “We received an oil cargo from Russia for the first time in July this year. We think that we can cover 10% of our oil needs from Russia."
"In the coming years, we have the capability to raise this percentage to 30%," reported the official as cited by TASS agency. It was assumed that Pakistan will settle the payment for Russian raw materials in Chinese yuan.

The appeal of Russian oil supplies for Pakistan stems from the fact that sanctions have compelled the Russian Federation to sell its oil below market price, whereas the loss of the European market has raised the expenses of Russian oil companies with regard to the leasing of tankers.
The primary recipients of seaborne oil shipments from Russia are India and China, who have benefited considerably from the usage of low-priced Russian raw materials. At the onset of the year, the discount stood at around $30 per barrel. Nonetheless, discounts started decreasing sharply from April onwards in response to Saudi Arabia and Russia increasing production cuts. As of November, the Urals discount, relative to Brent, stood at approximately $9.4 per barrel according to the Russian Ministry of Finance.
According to sources cited by Kommersant, Russian companies may find deliveries to Pakistani ports less lucrative than to neighbouring India due to capacity limitations. When exporting to Pakistan, Russian oil firms have two choices, as Victor Katona of Kpler notes:
"They can send volumes to refineries controlled by the state, but access is severely limited due to the weak throughput of the port Karachi .
" In Karachi, tanker unloading is restricted to 50 thousand tonnes, which compels Russian exporters to rely on ship-to-ship transfers, leading to a deterioration of the economics of the supply. The other option, according to the analyst, is to dispatch the oil to Cnergyico's private refinery in Baluchistan where light Emirati Murban crude is mainly handled and mixed with domestically produced oil.