Long-term plans: Pakistan yearns for direct oil supply from Saudi refineries

[Edevelop]

ISLAMABAD: Pakistan has requested Saudi Arabia to help strike a direct oil supply deal between state-run oil marketing firm Pakistan State Oil (PSO) and refineries in the Gulf monarch, in an effort to save millions of dollars due to exemption from premium in such contracts.

According to sources, the proposal was floated in a meeting of the joint ministerial commission held in Riyadh on April 15-16. Minister of Commerce Khurram Dastgir led a 20-member strong delegation during the talks.

Pakistani authorities told the Saudi team that PSO had been entering into oil supply contracts on spot basis by paying a premium that ran into millions of dollars annually.

“If Saudi Arabia helps strike a direct oil supply deal between PSO and its refineries, PSO will be spared the hefty premium, which could lead to savings of millions of dollars,” an official quoted the Pakistani team as saying. In response, Saudi authorities assured them that they would earnestly consider the proposal.

Islamabad has already approached Riyadh through diplomatic channels, asking it to extend the credit facility for oil supply from the existing 30 days to one year valuing $10 billion. The matter was taken up during the visit of Saudi Foreign Minister Saud Al-Faisal to Pakistan in the first week of January.

At present, Saudi Arabia supplies over 10,000 barrels of crude oil per day to Pakistan’s refineries. Annual crude import bill stands at around $7.5 billion.

According to officials, Pakistani team focused on winning concessions by striking a direct oil supply deal with Saudi refineries. Apart from that, the request for enhancement in the credit facility on a long-term basis will be taken up by top leaders of the two countries.

Pakistan is seeking such a long-term credit facility for oil supplies from other countries as well. The previous Pakistan Peoples Party-led coalition government had also tried to persuade Saudi Arabia to increase the credit ceiling to one year, but Riyadh gave Islamabad the cold shoulder.

However, the current PML-N government has succeeded in getting $1.5 billion as what it called a gift from a friendly Muslim country, which is widely believed to be Saudi Arabia.

In addition to the higher credit facility, the government is also planning to clinch a state-to-state deal with Gulf countries in an attempt to reduce the cost of crude import. The import of oil and its products eats up roughly $15 billion a year.

The country’s consumption of petroleum products stands at 22 million tons, of which about 13 million tons are imported. Apart from this, oil refineries import nine million tons of crude per annum to meet their processing needs.

Long-term plans: Pakistan yearns for direct oil supply from Saudi refineries – The Express Tribune

 

[Kompromat]

Lets wait and see how this pans out.

 

[Black Eagle 90]

ISLAMABAD: Pakistan has requested Saudi Arabia to help strike a direct oil supply deal between state-run oil marketing firm Pakistan State Oil (PSO) and refineries in the Gulf monarch, in an effort to save millions of dollars due to exemption from premium in such contracts.

According to sources, the proposal was floated in a meeting of the joint ministerial commission held in Riyadh on April 15-16. Minister of Commerce Khurram Dastgir led a 20-member strong delegation during the talks.

Pakistani authorities told the Saudi team that PSO had been entering into oil supply contracts on spot basis by paying a premium that ran into millions of dollars annually.

“If Saudi Arabia helps strike a direct oil supply deal between PSO and its refineries, PSO will be spared the hefty premium, which could lead to savings of millions of dollars,” an official quoted the Pakistani team as saying. In response, Saudi authorities assured them that they would earnestly consider the proposal.

Islamabad has already approached Riyadh through diplomatic channels, asking it to extend the credit facility for oil supply from the existing 30 days to one year valuing $10 billion. The matter was taken up during the visit of Saudi Foreign Minister Saud Al-Faisal to Pakistan in the first week of January.

At present, Saudi Arabia supplies over 10,000 barrels of crude oil per day to Pakistan’s refineries. Annual crude import bill stands at around $7.5 billion.

According to officials, Pakistani team focused on winning concessions by striking a direct oil supply deal with Saudi refineries. Apart from that, the request for enhancement in the credit facility on a long-term basis will be taken up by top leaders of the two countries.

Pakistan is seeking such a long-term credit facility for oil supplies from other countries as well. The previous Pakistan Peoples Party-led coalition government had also tried to persuade Saudi Arabia to increase the credit ceiling to one year, but Riyadh gave Islamabad the cold shoulder.

However, the current PML-N government has succeeded in getting $1.5 billion as what it called a gift from a friendly Muslim country, which is widely believed to be Saudi Arabia.

In addition to the higher credit facility, the government is also planning to clinch a state-to-state deal with Gulf countries in an attempt to reduce the cost of crude import. The import of oil and its products eats up roughly $15 billion a year.

The country’s consumption of petroleum products stands at 22 million tons, of which about 13 million tons are imported. Apart from this, oil refineries import nine million tons of crude per annum to meet their processing needs.

Long-term plans: Pakistan yearns for direct oil supply from Saudi refineries – The Express Tribune

As Pakistan looking for National Dredging Company they should also make vessels used for laying Oil and Gas Pipelines as well as vessels for laying Fiber optics and its maintenance at KS&EWs.

Pakistan should put plans to bring Oil from KSA, Oman and UAE through Submarine pipe lines and supply it to India and China.

 

[surya kiran]

Pakistan should ask for a deal, where you pay in Pakistani Rupees.

 

[godofwar]

According to officials, Pakistani team focused on winning concessions by striking a direct oil supply deal with Saudi refineries. Apart from that, the request for enhancement in the credit facility on a long-term basis will be taken up by top leaders of the two countries.

Isn't that counter productive in the long run though ?
If you import crude and use domestic refineries, you can export petroleum products to other nations.
Atleast thats the case with Jamnagar.
Or am I missing something ?

Pakistan should ask for a deal, where you pay in Pakistani Rupees.

USA will bring freedom and democracy to both Saudi and Pakistan if Petrodollar is threatened

 

[niaz]

Let us look at the situation in light of ground realities.

Pakistan Imports.

Latest data available with me for Pakistan is for 2012. In that year Pakistan imported:

Mogas: 1.6 million tons- all thru spot tenders.

Jet/Kerosene: 146 Kilotons. 27 KT by KPC, rest thru spot tenders.

Gas oil (diesel): 3.4-million tons. 3.1-million tons by KPC, rest thru spot purchases by PSO or imported direct by Shell. Pakistan import requirement is for 0.5% max gas oil.

Fuel Oil (Furnace oil): 4.9-million tons. 1.1-million tons by KPC rest thru spot tenders. Quality required is of 180 centistoke viscosity.

Please note that KPC supplies are direct and not thru an intermediary.

Saudi Arabia oil products scene:

There are three oil refineries wholly owned by Saudi Aramco in operation. A small 60K (60,000) bbls per day JORC at Jeddah. 120K bbls per day at Riyadh and the giant 550K bbls per day refinery at Ras Tanura on Arab Gulf.

Additionally, Saudi Aramco also has 50% share in the 225K bbls per day Saudi Mobil refinery (SAMREF) at Yanbu on the Red Sea and 305K bbls per day Saudi Shell refinery (SASREF) located at Jubail in Arab Gulf.

ExxonMobil & Shell export 50% of the products and the balance 50% is marketed by Saudi Aramco.

Petro Rabigh is a combined Refining & petrochemical complex and 50/50 venture between Saudi Aramco & Sumitomo Chemicals. The refinery has 400K bbls per day capacity and mainly caters for the domestic demand.

Also three new refineries are planned or near completion.

400k bbls per day SATORP (Saudi Total Refinery) is already on stream at Jubail. Another 400K bbls per day Saudi - Sinopec refinery at Yanbu- Red Sea (YASREF) is expected to start operations towards the end of this year. However the new refineries have Delayed Coker therefore produce zero fuel oil.

The 400K bbls per day refinery at Jizan, also on the Red Sea Coast, has been delayed and construction has not yet started.

The new refineries produce ULSD (Ultra low sulphur diesel) with 10 ppm sulphur, far too good and expensive for Pakistan where max sulphur requirement for import is 0.5% (5000 ppm) gas oil. For the record current sulphur spec for Saudi diesel is 500 ppm max (0.05%) but expected to change to 10 ppm quality in a couple of years. Understand both the SMAREF & SASREF have also been upgraded and able to switch to 10 ppm sulphur gas oil.

Currently Saudi Arabia imports approx. 4-million tons of motor gasoline & 3-million tons of 500 ppm sulphur gas oil (diesel) per years mostly at Jizan & Jeddah on the Red Sea coast. Fuel oil for power generation in is also imported for the Red Sea region demand during the summer.

Exports are mainly from the Ras Tanura and Saudi Aramco share of the SASREF. Fuel Oil exported from SAMREF is of 650 centistoke viscosity & from SASREF 380 centistoke viscosity thus does not meet PSO quality. I can confirm that Mercuria, a Swiss based firm won the supply of 180 centistoke viscosity fuel (similar to PSO quality) to EGPC on behalf of Aramco which is part of the £5-billion Saudi aid package to Egypt

Therefore the largest single product imported by Pakistan that is Furnace Oil cannot be supplied by Saudi Arabia. Next large import is of gas oil (diesel) of which 90% is supplied by KPC at very good price. Understand KPC is currently supplying gas oil at Arab Gulf Platt’s quotes plus $2.40 per bbl delivered to Karachi. Spot prices are in the range of a premium of $3.50 per bbl over Arab Gulf Quotes FOB!

Main reason is that Pakistan gas oil import at Sulphur max (5000 ppm) is of low quality and no longer produced in the Arab Gulf. Since standard is gas oil quality is 500ppm max and KPC is still producing some 0.25% (2500ppm) sulphur gas oil. It is a win/win situation for both. KPC has a home for its high sulphur gas oil and Pakistan gets it cheap. Saudi gas oil would be definitely more expensive.

Based on the above only products that Saudi Arabia could supply to Pakistan are Jet & Motor gasoline which means only about 15 to 20 % of the total imports.

All oil matters are handled thru Saudi Aramco which is the state owned Oil Company. I personally know some of the traders working for Saudi Aramco and they are all very competent and professional. Most would try to squeeze last cent from the buyer during negotiation. Therefore, in my opinion oil products supplied by Saudi Arabia would not be any cheaper but Saudi gov’t could agree to deferred payment.

Therefore the proposed deal is not a panacea for Pakistan’s petroleum deficit problem. The real long term solution lies in either finding more hydrocarbons thru increased exploration/fracking and/ or thru exploitation of Thar coal reserves.

I have attempted to be as objective and truthful as humanly possible. I am convinced that unless there is a traumatic event such as US & Russia fighting or US attacking Iran: crude oil price are close to topping out. It is the reader’ privilege to agrees with my analysis or not.

Having just attended Middle East Petroleum & Gas Conference (MPGC) held in Dubai during the April 11-17 week where I had the opportunity to renew acquaintances with the Mid East Oil people; my information about the Middle East petroleum scene is up to date.