Russia offered Pakistan 30% discount on oil and wheat. PM IK.

[Patriot forever]

Was it even practical? How would Saudi Arabia & UAE react if we stopped buying Oil from them? Admitted, at a 30% discount we could have saved around 15%-20% of forex spent on Oil imports (rest is transport + refining locally) which would be roughly USD 4.0 Billion. What about Saudi Arabia and UAE which regularly provide financial assistance, provide oil at deferred payments and have historically even written off oil debt by Pakistan?

In addition to the above, Pakistanis in UAE and Saudi Arabia remit around 50% of our USD (expected at USD 15 Billion in the current FY); can we jeopardize this? Can we afford the wrath of GCC and risk the employment of millions of Pakistanis in those countries?

Oil at 30% discount was also offered by Iran many years back, when we started building the IPI pipeline but that too got shelved primarily because of US and particularly because of GCC. Not everything is in the black and white.

No one was going to replace all the oil imports from middle East.

The oil bought from Russia would have been paid in either rubble or yuan. We have so much dollar debt which we run off to IMF for, it would not hurt a bit if some of the debt portfolio is in yuan or rubbles.

The deal is a crude swap deal with a 3rd country in the middle. My bet is if its refined products its China or if its crude its middle east. ( Remember Russia is apart of OPEC).
Just a reminder that a significant portion ( in fact the majority, correct me if I wrong) is refined products import like petrol/diesel. We already import huge amounts of refined products from China. No one from the Middle East ever complained.

Russia is now a sanctioned country and Pakistan exports can easily carve a few billion dollars in exports. Especially textiles.

This kind of opportunities don't come often.

Can you comprehend the significance of this deal?

I don't remember Iran crude being marketed for so cheap.

India took the opportunity now it will refine this crude and sell it at market price. India is already an exporter of refined petroleum products. That's the difference between them and us.

 

[nahtanbob]

Russian companies are reportedly trying to source some products from India. There were a few that I read, but only remember ketchup from the list

Iran and India have tried this type is agreement for oil trade in the past. Iran has a significant amount of rupees from this trade in Indian account. They sit and decline in value as INR is structurally set up to decline through planned deficits in the budget

What is the point of these deals ? I suppose you could purchase cashews, sugar, cotton, spices, tea and garments maybe steel

 

[Wood]

What is the point of these deals ? I suppose you could purchase cashews, sugar, cotton, spices, tea and garments maybe steel

Yes, the roster of goods that can be imported is very limited. I even read that Russia has Indian rupees that was issued before the fall of Soviet Union via trade at that time. Russia has been holding the bag for all this time as the currency value tumbled. This is one trade deficit that India will merrily run into

EDIT: Given that the value ruble is less than parity with INR now, may be it was profitable for Russia afterall

 

[GOAT]

In laymen’s terms, the distillation/fractionating column has 3 main restrictions. Diameter of the column determines how much volume of vapours can be accommodated, in other words its capacity. Height of the column determines degree of fractionation, because greater number of bubble-cap plates better the separation of the fractions.

In order of fractionating to work; all the plates in the column have to be kept wet; this determines the API limits of the crude. If a very heavy crude needs to be used as feed, one would need to adjust the throughput so that all the bottoms (residue which is used to make furnace oil) can be accommodated along with generating sufficient light-ends to keep all the plates wet. If this is not possible, then the refinery wouldn’t be able to run the crude. Similarly, very light feeds such, as the “Condensate” (API 55 or higher) could only be used if the feed rate is reduced to the limit of column’s capacity of the light--ends. The refineries solve this problem by blending the different kinds of crudes to produce the optimum feed for the country’ requirements.

Another limitation of the refinery is the sulphur content. All countries have a sulphur limit on the petroleum products and if the desulphurization capacity of a refinery is not sufficient, crudes with very high sulphur content cannot be used.

Before the sanctions, Russia exported about 5 mm BPD of crude second only to Saudi Arabia which exports about 6.6 mm BPD. Russian most commonly exported crude is the “ Urals”. Like all export crude oil, Urals is a blend of the heavy crude oils produced from the Urals and the Volga regions with the light sweet crude of Western Siberia. It has an API of 32 with 1.2% sulphur, hence not too different in quality to the Saudi Light of 33 API & 1.77% sulphur and Iran Light (32 to 33 API and Sulphur of 1.4%). Pakistani refineries have been using Iran Light and Arab Light thus there should be no problem running the Urals crude. I am not sure if Urals can also be used for making good quality lubricants.

These sanctions have been a boon to India. Understand India is buying Urals at at discount of $25/- per bbl to Brent. In case of Pakistan main problem would be transportation. Crude is normally carried in the VLCC's (230K DWT) . Pakistani ports cannot accommodate large vessels and crude transportation in less than 100 K DWT vessels over long distances is uneconomic.

P.S. Please note that API & sulphur of the crude blends are liable to change slightly over the years due to the exhaustion of old wells and inclusion of crude from new wells.

This deserves a positive rating. Maybe you can give yourself one lol.

Your point regarding current Pakistani ports being unable to handle large vessels underscores the importance of Gwadar port, which once fully complete should be able to handle the largest vessels out there (400k+ DWT). We are still more than a decade away from that however.

 

[Jango]

installed capacity is a pointless metric, the truth is Pakistani refineries are built to produce large amounts of the wrong type of fuel - high sulfur furnace oil. The demand for High sulfur furnace oil has fallen off a cliff largely due to ever tightening emission regulations. In 2017, the then government planned an urgent pivot to Euro 5 diesel and gasoline ...and we are still waiting. Meanwhile, most refineries have ceased or scaled back operations because they have no place to store the high sulfur furnace oil and they can't seem to sell it quickly enough. The truth is Pakistani refineries need billions of dollars of investments to produce the right fuels the nation desperately needs to reduce fuel imports. You may want to look into why something that was planned in 2017 hasn't materialized five years later.

Agreed.

Byco was in the news that it was targeting around a billion dollars in upgrades to increase the proportion of gasoline, but don't know how far that has progressed.

 

[Jango]

....because greater number of bubble-cap plates better the separation of the fractions.

Ah bubble caps, that's a word I have heard after a loooooong time!

In order of fractionating to work; all the plates in the column have to be kept wet; this determines the API limits of the crude. If a very heavy crude needs to be used as feed, one would need to adjust the throughput so that all the bottoms (residue which is used to make furnace oil) can be accommodated along with generating sufficient light-ends to keep all the plates wet. If this is not possible, then the refinery wouldn’t be able to run the crude. Similarly, very light feeds such, as the “Condensate” (API 55 or higher) could only be used if the feed rate is reduced to the limit of column’s capacity of the light--ends. The refineries solve this problem by blending the different kinds of crudes to produce the optimum feed for the country’ requirements.

Another limitation of the refinery is the sulphur content. All countries have a sulphur limit on the petroleum products and if the desulphurization capacity of a refinery is not sufficient, crudes with very high sulphur content cannot be used.

Thank you sir for the detailed explanation.

Before the sanctions, Russia exported about 5 mm BPD of crude second only to Saudi Arabia which exports about 6.6 mm BPD. Russian most commonly exported crude is the “ Urals”. Like all export crude oil, Urals is a blend of the heavy crude oils produced from the Urals and the Volga regions with the light sweet crude of Western Siberia. It has an API of 32 with 1.2% sulphur, hence not too different in quality to the Saudi Light of 33 API & 1.77% sulphur and Iran Light (32 to 33 API and Sulphur of 1.4%). Pakistani refineries have been using Iran Light and Arab Light thus there should be no problem running the Urals crude. I am not sure if Urals can also be used for making good quality lubricants.

This is why the technical explanations should be left to those with proper knowledge of the subject, and not used for political points ala Umar Saif.

These sanctions have been a boon to India. Understand India is buying Urals at at discount of $25/- per bbl to Brent. In case of Pakistan main problem would be transportation. Crude is normally carried in the VLCC's (230K DWT) . Pakistani ports cannot accommodate large vessels and crude transportation in less than 100 K DWT vessels over long distances is uneconomic.

This is a very valid point.

But perhaps in these desperate times, perhaps Russia is willing to ship low quantities of crude to countries accepting these shipments. Something is after all better than nothing?

Perhaps Russia would also be willing to ship refined oil to Pakistan, or at least was? I have no idea about the refining capacity of Russia and it's domestice consumption though, perhaps you can shed light on it.

 

[Indos]

India took the opportunity now it will refine this crude and sell it at market price. India is already an exporter of refined petroleum products. That's the difference between them and us.

30 percent discounted is the price that is realistic for non Europe countries due to higher transportation cost and Russia will not give discounted oil and gas to Europe ( so they are profiting from higher energy price ).

India traditionally only absorb Russian Ural oil about 6 % of their total oil import. Majority of their refineries are used to process Saudi and other Middle East oil, the same with Indonesia state owned Pertamina refineries, this is why Pertamina said they only can use Ural oil to be processed in their refinery after May as they have started refinery upgrade since some years ago that make one of the refineries can absorb many kind of oil using modern technology

 

[Surya 1]

Great Opportunity. Grab it with both hands.

 

[313ghazi]

Was it even practical? How would Saudi Arabia & UAE react if we stopped buying Oil from them? Admitted, at a 30% discount we could have saved around 15%-20% of forex spent on Oil imports (rest is transport + refining locally) which would be roughly USD 4.0 Billion. What about Saudi Arabia and UAE which regularly provide financial assistance, provide oil at deferred payments and have historically even written off oil debt by Pakistan?

In addition to the above, Pakistanis in UAE and Saudi Arabia remit around 50% of our USD (expected at USD 15 Billion in the current FY); can we jeopardize this? Can we afford the wrath of GCC and risk the employment of millions of Pakistanis in those countries?

Oil at 30% discount was also offered by Iran many years back, when we started building the IPI pipeline but that too got shelved primarily because of US and particularly because of GCC. Not everything is in the black and white.

Who cares how they'd have reacted - we need to learn to look after ourselves. If they wanted us to buy their oil, they could price match it too. Besides it's highly unlikely we'd have bought all our oil from Russia, and it would have taken years to setup.

Also people won't believe this, but i can guaruntee every single overseas Pakistani would be an economic success if they returned to Pakistan. Well 99% anyway. We would not live as comfortably as we are living abroad perhaps, but we'd be economically successful. The biggest problem young people in Pakistan face is a lack of opportunity. When you move overseas you have plenty of opportunity, only the bottom feeders don't grab it. Once you have made that leap once, you can do it again and again without fear.

 

[Mav3rick]

Who cares how they'd have reacted - we need to learn to look after ourselves. If they wanted us to buy their oil, they could price match it too. Besides it's highly unlikely we'd have bought all our oil from Russia, and it would have taken years to setup.

Also people won't believe this, but i can guaruntee every single overseas Pakistani would be an economic success if they returned to Pakistan. Well 99% anyway. We would not live as comfortably as we are living abroad perhaps, but we'd be economically successful. The biggest problem young people in Pakistan face is a lack of opportunity. When you move overseas you have plenty of opportunity, only the bottom feeders don't grab it. Once you have made that leap once, you can do it again and again without fear.

There are many fairytales posted on the forum, yours is right at the top somewhere. I cannot even imagine trying to respond to your creativity about Pakistanis abroad especially considering the shrinking potential in Pakistan for employment. The disillusion, when realized, will hit very hard.

As for our GCC friends, Imran Khan has led some of you to believe that we can survive on our own by abandoning all our friends, the GCC, the European Union, the US etc., (whereas the same person passionately defended our relations with just 1 EU country on the blasphemy matter and the consequences of sending the French ambassador back). However, the truth is China is not the friend that people expect it to be, Chinese assistance is always very targeted and the Chinese do not believe in financial assistance whereas the GCC, US and EU have been providing us financial assistance, despite two-way troubled relations at times and sanctions, throughout our history.

 

[313ghazi]

There are many fairytales posted on the forum, yours is right at the top somewhere. I cannot even imagine trying to respond to your creativity about Pakistanis abroad especially considering the shrinking potential in Pakistan for employment. The disillusion, when realized, will hit very hard.

As for our GCC friends, Imran Khan has led some of you to believe that we can survive on our own by abandoning all our friends, the GCC, the European Union, the US etc., (whereas the same person passionately defended our relations with just 1 EU country on the blasphemy matter and the consequences of sending the French ambassador back). However, the truth is China is not the friend that people expect it to be, Chinese assistance is always very targeted and the Chinese do not believe in financial assistance whereas the GCC, US and EU have been providing us financial assistance, despite two-way troubled relations at times and sanctions, throughout our history.

Said like a true patwari. Good look with your hunt for a salkari naukri.

 

[Patriot forever]

30 percent discounted is the price that is realistic for non Europe countries due to higher transportation cost and Russia will not give discounted oil and gas to Europe ( so they are profiting from higher energy price ).

India traditionally only absorb Russian Ural oil about 6 % of their total oil import. Majority of their refineries are used to process Saudi and other Middle East oil, the same with Indonesia state owned Pertamina refineries, this is why Pertamina said they only can use Ural oil to be processed in their refinery after May as they have started refinery upgrade since some years ago that make one of the refineries can absorb many kind of oil using modern technology

No way I am going to believe that the transportation differential is 30% of the product cost.

This is absurd. Please give facts and figures.

Even wheat transportation cost from Russia which countries like Pakistan buy from Russia is not that high ( in fact very minor in large quantities).

There are many fairytales posted on the forum, yours is right at the top somewhere. I cannot even imagine trying to respond to your creativity about Pakistanis abroad especially considering the shrinking potential in Pakistan for employment. The disillusion, when realized, will hit very hard.

As for our GCC friends, Imran Khan has led some of you to believe that we can survive on our own by abandoning all our friends, the GCC, the European Union, the US etc., (whereas the same person passionately defended our relations with just 1 EU country on the blasphemy matter and the consequences of sending the French ambassador back). However, the truth is China is not the friend that people expect it to be, Chinese assistance is always very targeted and the Chinese do not believe in financial assistance whereas the GCC, US and EU have been providing us financial assistance, despite two-way troubled relations at times and sanctions, throughout our history.

I have corrected you before, most of Pakistan petroleum import is refined products not crude and China is currently the largest supplier ( especially after the tariff incentives ) in that category.

I don't see GCC complaining about it.

So please stop making arguments from thin air without fcats and figures to back it up.

Furthermore this is a crude swap deal, involving 3rd friendly country. IMO China in case of refined products and GCC in case of crude.

 

[Indos]

No way I am going to believe that the transportation differential is 30% of the product cost.

This is absurd. Please give facts and figures.

Even wheat transportation cost from Russia which countries like Pakistan buy from Russia is that high.

I dont say the transportation cost is exactly 30 %, since if the cost is like that, so better buying oil coming from Saudi with less complexity in making transaction while in the same time secure good relationship with USA and other Western countries.

 

[Patriot forever]

Agreed.

Byco was in the news that it was targeting around a billion dollars in upgrades to increase the proportion of gasoline, but don't know how far that has progressed.

Not just Byco but all 3 major refineries are undergoing upgradation and capacity enhancement on ground.

This is one of the most notable achievements of PTI government after decades of negligence.

We need one more major refinery ( coupled with the ongoing enhancements in already existing ones) to be self suffient in refined products like petrol/diesel.

 

[Patriot forever]

I dont say the transportation cost is exactly 30 %, since if the cost is like that, so better buying oil coming from Saudi with less complexity in making transaction while in the same time secure good relationship with USA and other Western countries.

Whatever costs us cheaper should be driving decision making instead of international geopolitics.

Yes we prefer to have balanced friendly relations with all blocks.

I hope you understand that.