Business

Pakistan’s imports of Russian oil face port, refinery, currency constraints

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10 months ago

July 31, 2023

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Pakistan's imports of Russian oil face port, refinery, currency constraints

Pakistan is unlikely to meet a target for Russian crude to make up two-thirds of its oil imports, despite attractive prices, hampered by a shortage of foreign currency and limitations at its refineries and ports, officials and analysts say.

The cash-strapped South Asian nation became Russia’s latest customer snapping up discounted crude that has been banned from European markets due to Russia’s war on Ukraine. Its first cargo arrived in June and a second is now under negotiation.

It is targeting 100,000 bpd of imports from Russia, compared with the total 154,000 bpd of crude it imported in 2022, in the hopes that will lower its import bill, address a foreign exchange crisis and keep a lid on record high inflation.

However, the benefits are being offset by increased shipping costs and lower quality refined products compared with the fuels produced with crude from Pakistan’s main suppliers, Saudi Arabia and the United Arab Emirates.

Pakistan will have to increase gasoline and gasoil imports to make up for the lower output of these fuels from the Russian crude, leading to more dollar outflows and stress on its crisis-hit economy, said Shahbaz Ashraf, chief investment officer at Pakistan-based FRIM Ventures.

While Islamabad and Moscow have not disclosed pricing details and the extent of discounts, a shortage of Chinese yuan currency to pay for Russian crude poses another hurdle, as it needs the yuan for trade with China, its top trade partner.

Pakistan paid for its first Russian crude cargo in Chinese yuan. However, Aadil Nakhoda, assistant professor at Karachi’s Institute of Business Administration, said it would be better for the country to use a barter deal with Russia than paying with yuan, which traders say is in short supply.

“How will it pay other lenders and how will it finance trade with China if it uses the low yuan reserves to pay for Russian oil?” Nakhoda said.

Adding to the challenges, transportation costs for Russian crude are higher than for Middle Eastern crudes not only because of the longer distance travelled, but because Pakistan’s ports cannot handle the large vessels departing Russia.

Urals crude had to be transferred from a super tanker on to smaller ships, known as a lightering operation, in Oman before heading to Pakistan, government officials said, unlike direct shipments from the Middle East.

Even with that extra cost, it was worth importing Russian oil, said Viktor Katona, lead crude analyst at Kpler, as Saudi Arab Light crude is $10 to $11 per barrel more expensive for Pakistani refiners than Urals, while lightering operations add around $2 to $3 per barrel.

“Pakistani buyers would still be much better off,” he said.

However, Urals quality is a deterrent, as Pakistan’s refineries cannot get as much gasoline and diesel out of Urals crude as they produce from Saudi and UAE crudes.

It will take Pakistan Refinery Ltd (PRL) at least two months to fully process its first cargo of 100,000 metric tons (730,000 barrels) of Urals crude as it needs to be blended with Middle East crude to offset the high output of fuel oil from the Russian oil, Zahid Mir, chief executive of the state-run refiner, told Reuters.

“Our optimum processing solution is to blend Urals with Middle Eastern imported crude while not exceeding 50 per cent Ural in the blend,” Mir said.

The residual fuel produced from Urals crude has to be mixed with diesel and kerosene to meet specifications for local use while the remainder is exported, but the deal was still commercially viable for Pakistan, Mir said.

PRL has no plans to upgrade its refinery to process fuel oil into higher quality fuels, he added.

Kpler’s Katona expects Pakistan’s liquidity issues and technical challenges to weigh on its appetite for Russian crude.

“Russian imports into Pakistan will not grow into anything bigger than one cargo per month,” he said.

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Chinese firm aims to expand investments in Pakistan, shows interest in mining sector

Published

2 days ago

May 17, 2024

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Chinese firm aims to expand investments in Pakistan, shows interest in mining sector

A notable Chinese company has expressed keen interest in expanding its investment in Pakistan, in yet another sign of investor confidence boost in the leadership of Prime Minister Shehbaz Sharif.

A delegation from Chinese firm MCC Tongsin Resources led by its Chairman Wang Jaichen called on PM Shehbaz here on Friday.

The premier invited the Chinese company to invest in Pakistan’s mining sector and manufacturing of export goods.

Shehbaz assured the delegation that his government would extend all-out facilitation to the company from minerals exploration and processing to the export of goods.

The PM instructed the relevant federal ministers and officers to continue consultation with the Chinese firm, taking the Balochistan chief minister, provincial departments and stakeholders on board.

The delegates reposed trust in PM Shehbaz’s leadership, and expressed keen interest in enhancing their investment in Pakistan’s mining and minerals sectors.

The delegation briefed Prime Minister Shehbaz about the construction of a mineral park in Pakistan and their future investment plans.

The premier welcomed the Chinese firm and highlighted the priority steps by his government to promote foreign investment in Pakistan.

He said that being a time-tested friend, China supported Pakistan in every difficult hour for which the Pakistani nation was grateful to the leadership and people of China.

Federal ministers Ahad Khan Cheema, Dr Musaddik Malik, Rana Tanveer Hussain, Jam Kamal Khan and relevant senior officers attended the meeting.

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Business

Govt jacks up power price by Rs1.47 per unit

Published

2 days ago

May 17, 2024

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Govt jacks up power price by Rs1.47 per unit

The government on Friday increased the electricity tariff by Rs1.47 per unit.

According to Nepra sources, the collection from consumers will take place in August, September, and October.

The electricity companies had requested the funds as part of the third quarter adjustment for 2023-2024, seeking Rs 31.34 billion under capacity charges.

Sources said that Rs5.57 billion were requested for operation and maintenance costs, and Rs12.38 billion were requested for the transmission and distribution impact under monthly fuel cost adjustment.

Previously, Nepra had completed the hearing on the electricity companies’ request under the quarterly adjustment.

Nepra approved the Power Division’s request, allowing an increase of Rs 1.45 per unit in electricity prices.

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Business

Hong Kong allows China’s digital yuan to be used in local shops

Published

2 days ago

May 17, 2024

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Hong Kong allows China's digital yuan to be used in local shops

Hong Kong will allow mainland China’s pilot digital currency to be used in shops in the city, the head of its de facto central bank said on Friday, marking a step forward for Beijing’s efforts to internationalise the yuan amid rising geopolitical tensions.

The programme, backed by Beijing, will allow mainland Chinese and Hong Kong residents to open digital yuan wallets via a mobile app developed by China’s central bank and will permit them to make payments in retail shops and some online stores in Hong Kong and in mainland China.

Transactions using e-CNY, predominantly for domestic retail payments in China, hit 1.8 trillion yuan ($249.27 billion) as of end of June 2023, with 120 million digital wallets opened, according to the latest disclosure from China’s central bank.

Using the wallet, users can make payments at over 10 million merchants in 17 provinces and cities in the mainland.

Each wallet used in the city will be subject to a balance limit of 10,000 yuan, with single transactions and daily payments capped at 2,000 yuan and 5,000 yuan, respectively, officials from the Hong Kong Monetary Authority said.

Peer-to-peer transfers will not be allowed at the moment, according to the HKMA.

“By expanding the e-CNY pilot in Hong Kong .. users may now top up their wallets anytime, anywhere without having to open a mainland bank account, thereby facilitating merchant payments in the mainland by Hong Kong residents,” HKMA Chief Eddie Yue said.

Currently, users of other digital yuan wallets such as those operated by Ant Group and Tencent can make payments in the city.

Industrial and Commercial Bank of China, Bank of China Ltd, China Construction Bank Corp and Bank of Communications Co have been selected as e-CNY wallet operators.

The yuan’s use in global finance remains low, though it has shown steady increases.

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