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Home Life Style Pakistan's Synergy Imports First Russian Crude Amidst Discounts, Eyes Foreign Exchange Boost

Pakistan's Synergy Imports First Russian Crude Amidst Discounts, Eyes Foreign Exchange Boost

This move marks a significant development in Pakistan's oil sector, as it capitalizes on a concession offered by Moscow on crude oil exports following Russia's conflict with Ukraine.
by TNN Editor - 02 Oct, 2023 1597
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Pakistan's leading oil refinery, Synergy, announced the successful import of its maiden shipment of Russian crude oil on Monday. This move marks a significant development in Pakistan's oil sector, as it capitalizes on a concession offered by Moscow on crude oil exports following Russia's conflict with Ukraine.

After Russia's restrictions on its oil exports to European markets due to the Ukraine situation, the country initiated a discount scheme for the purchase of its crude oil. Pakistan, seizing the opportunity, imported its inaugural cargo under this scheme. While the first government-imported shipment arrived in June, ongoing negotiations between the governments are underway for a second delivery.

It is worth noting that private imports might face commercial challenges, necessitating cargo division and transshipment to smaller vessels. Pakistan's ports may not be equipped to handle larger vessels efficiently.

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Synergy Co employed its single-point mooring system, capable of accommodating deep-draft tankers, to facilitate the import, as confirmed by a company spokesperson in response to Reuters' queries. The imported crude will undergo refining at Synergy's refinery located in the southwestern city of Hub.

The spokesperson emphasized that processing 100,000 metric tons of Urals crude oil signifies a vital milestone for both the company and the nation. It showcases Synergy's capabilities and preparedness to handle various types and complexities of crude oil.

Synergy currently operates Pakistan's largest refinery, boasting a capacity of 156,000 barrels per day (bpd), equivalent to one-third of the national capacity, which stands at 150,000 bpd. Furthermore, it is the sole refinery equipped with its single-point mooring system.

Synergy's strategic plan involves selling refined petrol and diesel produced from Urals crude in the domestic market, while exporting furnace oil or fuel oil, widely used in industrial boilers, power plants, and ship engines. According to the spokesperson, there is significant global demand for furnace oil, which can potentially boost Pakistan's foreign exchange reserves.

To ensure compliance with sanctions, Synergy Co conducted thorough due diligence and sought advice from external sanctions experts regarding its Russian oil imports.

Pakistan aims to import 100,000 barrels of oil per day from Russia this year, constituting a substantial portion of its total imports. This move is expected to address foreign exchange challenges and mitigate record inflation. In the previous year, Pakistan's total crude oil imports averaged 154,000 barrels per day.

For the initial subsidized import of Russian crude oil, the government utilized the Chinese yuan as the payment currency, with the transaction going to the state-owned Pakistan Refinery Limited Company. However, Synergy Co did not disclose the payment currency for its Russian cargo.

Notably, an informed source stated that Synergy would also pay in yuan through a letter of credit from a Chinese bank. Analysts recognize that rising shipping expenses and lower-quality fuel from heavier Urals crude grades may offset the Russian discount. Nevertheless, Synergy Co anticipates that revenues from furnace oil exports will offset the Russian imports, ultimately bolstering foreign exchange reserves.