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Pakistan Eyes Long-Term Agreement for Importing Russian Oil

Pakistan is considering a long-term agreement to import between 0.7 million and 1 million tons (up to 20,000 bpd) of Russian oil per year. This move comes as the country seeks to diversify its energy supplies and take advantage of the global shift in oil trade dynamics following Russia's invasion of Ukraine.

Background

The first import of crude oil shipment from Russia arrived in Pakistan in June this year. This marked a significant milestone in the bilateral trade relations between the two countries. The second government-to-government cargo is currently being negotiated.

Private Sector Involvement

In a noteworthy development, Cnergyico, a Pakistani refiner, imported the first-ever private-sector shipment of crude oil from Russia last week. This indicates the growing involvement of the private sector in the country's efforts to secure its energy needs.

Impact of Global Events

The export of Russian crude oil was banned from European markets following Moscow's Ukraine invasion. This has led to a shift in global oil trade dynamics, with countries like Pakistan attempting to benefit from buying the commodity at cheaper prices.

Challenges and Opportunities

Pakistan has been grappling with high inflation and a foreign exchange crisis. The country has also struggled with spot purchases of Liquified Natural Gas (LNG) after Russia’s invasion of Ukraine last year pushed prices to record highs. This has resulted in widespread power outages across the country.

In response to these challenges, Pakistan LNG Limited (PLL), a government subsidiary that procures LNG from the international market, awarded a tender to commodities trader Vitol for the delivery of an LNG cargo in December. This marked the country’s first spot purchase in over a year.

Future Plans

Early in October, Islamabad was scheduled to discuss a long-term programme for the import of discounted crude oil from Russia with Moscow. As part of this initiative, a Pakistani delegation, headed by the interim energy minister, attended the Russian Energy Week 2023 on October 11-13 at the Manege Central Exhibition Hall in the Russian capital.

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