The Slippery Stance of Refining Russian Oil

Can Pakistan's oil refineries refine Russian crude?

Russian military offensive on Ukraine marked the visit of the former premier Imran Khan to Russia. The ill-timed visit irked the eyes of the self-proclaimed vanguard of democracy, aka the United States. Donald Lu's threatening cipher to Pakistan and the ouster of the PTI government through an allegedly "foreign-sponsored" successful no-confidence motion (NCM) followed the basis for the 'Ghulami Namanzur' stance.

The main agenda of the visit was to hold talks to resume the long-delayed Pakistan Stream gas pipeline (formerly North-South gas pipeline), initiated in 2015. As per Reuters:

"According to Russian media reports, shareholder agreement for the Pakistan Stream should be signed this month (February)."

However, after the arrival of the coalition government, the Petroleum Division remarked that no such deal was in place. While this is a different debate, another debate has sparked - whether Pakistan can refine Russian crude oil or not?

Since the Russia-Ukraine conflict, despite the sanctions imposed, Russia has found its crude oil customers in the form of India (importing the Urals) and crisis-hit Sri Lanka (importing Siberian Light). While many have been dismissive of the stance that Pakistani refineries can refine low-cost Russian oil, the author's research suggests otherwise. It is a short disclaimer that the author is not a subject matter expert on oil and gas. However, the author draws his research from credible resources, including ExxonMobil, S&P Global Commodity Insights, McKinsey Energy Insights, American Enterprise Institute (AEI), and other sources.

Russia produces seven types of crude oil, namely:

1. ESPO (Eastern Siberia Pacific Ocean)
2. Urals
3. Sokol
4. Sakhalin Blend
5. Arctic oil
6. Novy port
7. Siberian Light.

Currently, Pakistan mainly imports Arabian Light from Saudi Arabia. To assess whether our refineries can refine Russian oil, the author will consider two significant parameters: API gravity and sulfur content. Short for American Petroleum Institute, the more the API gravity, the lighter the fuel. It might be self-explanatory, but since sulfur is corrosive, the less the sulfur content, the "sweeter" the crude and is easier on the machinery.

To put things into context, the API gravity of Arabian Light ranges from 31 to 34 degrees. Meanwhile, the sulfur content is to the maximum of 1.5 (mass/weight) percent. Now, let's compare these parameters to those of the Russian oil variants.

1. ESPO: API gravity (34), sulfur content (0.5)
2. Urals: API gravity (31.1), sulfur content (1.7)
3. Sokol: API gravity (34.8), sulfur content (0.3)
4. Sakhalin Blend: API gravity (45.5), sulfur content (0.16)
5. Arctic oil: API gravity (35-37), sulfur content (0.5)
6. Novy port: API gravity (35), sulfur content (0.1)
7. Siberian Light: API gravity (37.8), sulfur content (0.4).

Pakistani refineries are ideal for refining Arabian Light crude oil possessing 31-34 degrees of API gravity and 1.5 percent of sulfur content. Hence, Pakistani refineries can refine Russian variants with equal or higher API gravity and equal or less sulfur content than the Arabian light. Hence, Pakistan's six operational oil refineries can refine the following:

1. ESPO: API gravity (34=34), sulfur content (0.5<1.5)
2. Sokol: API gravity (34.8>34), sulfur content (0.3<1.5)
3. Sakhalin Blend: API gravity (45.5>34), sulfur content (0.16<1.5)
4. Arctic oil: API gravity (35>34), sulfur content (0.5<1.5)
5. Novy port: API gravity (35>34), sulfur content (0.1>1.5)
6. Siberian Light: API gravity (37.8>34), sulfur content (0.4<1.5).

Originally published at https://rafeyirahman.substack.com on May 29, 2022. If you liked this or learned something new, please consider subscribing to Finesse for more financial literacy posts.

 

[Samlee]

Excellent research brother seldom such analysis is done in the economy section of pdf

 

[farok84]

Can Pakistan's oil refineries refine Russian crude?

Russian military offensive on Ukraine marked the visit of the former premier Imran Khan to Russia. The ill-timed visit irked the eyes of the self-proclaimed vanguard of democracy, aka the United States. Donald Lu's threatening cipher to Pakistan and the ouster of the PTI government through an allegedly "foreign-sponsored" successful no-confidence motion (NCM) followed the basis for the 'Ghulami Namanzur' stance.

The main agenda of the visit was to hold talks to resume the long-delayed Pakistan Stream gas pipeline (formerly North-South gas pipeline), initiated in 2015. As per Reuters:


However, after the arrival of the coalition government, the Petroleum Division remarked that no such deal was in place. While this is a different debate, another debate has sparked - whether Pakistan can refine Russian crude oil or not?

Since the Russia-Ukraine conflict, despite the sanctions imposed, Russia has found its crude oil customers in the form of India (importing the Urals) and crisis-hit Sri Lanka (importing Siberian Light). While many have been dismissive of the stance that Pakistani refineries can refine low-cost Russian oil, the author's research suggests otherwise. It is a short disclaimer that the author is not a subject matter expert on oil and gas. However, the author draws his research from credible resources, including ExxonMobil, S&P Global Commodity Insights, McKinsey Energy Insights, American Enterprise Institute (AEI), and other sources.

Russia produces seven types of crude oil, namely:

1. ESPO (Eastern Siberia Pacific Ocean)
2. Urals
3. Sokol
4. Sakhalin Blend
5. Arctic oil
6. Novy port
7. Siberian Light.

Currently, Pakistan mainly imports Arabian Light from Saudi Arabia. To assess whether our refineries can refine Russian oil, the author will consider two significant parameters: API gravity and sulfur content. Short for American Petroleum Institute, the more the API gravity, the lighter the fuel. It might be self-explanatory, but since sulfur is corrosive, the less the sulfur content, the "sweeter" the crude and is easier on the machinery.

To put things into context, the API gravity of Arabian Light ranges from 31 to 34 degrees. Meanwhile, the sulfur content is to the maximum of 1.5 (mass/weight) percent. Now, let's compare these parameters to those of the Russian oil variants.

1. ESPO: API gravity (34), sulfur content (0.5)
2. Urals: API gravity (31.1), sulfur content (1.7)
3. Sokol: API gravity (34.8), sulfur content (0.3)
4. Sakhalin Blend: API gravity (45.5), sulfur content (0.16)
5. Arctic oil: API gravity (35-37), sulfur content (0.5)
6. Novy port: API gravity (35), sulfur content (0.1)
7. Siberian Light: API gravity (37.8), sulfur content (0.4).

Pakistani refineries are ideal for refining Arabian Light crude oil possessing 31-34 degrees of API gravity and 1.5 percent of sulfur content. Hence, Pakistani refineries can refine Russian variants with equal or higher API gravity and equal or less sulfur content than the Arabian light. Hence, Pakistan's six operational oil refineries can refine the following:

1. ESPO: API gravity (34=34), sulfur content (0.5<1.5)
2. Sokol: API gravity (34.8>34), sulfur content (0.3<1.5)
3. Sakhalin Blend: API gravity (45.5>34), sulfur content (0.16<1.5)
4. Arctic oil: API gravity (35>34), sulfur content (0.5<1.5)
5. Novy port: API gravity (35>34), sulfur content (0.1>1.5)
6. Siberian Light: API gravity (37.8>34), sulfur content (0.4<1.5).

Originally published at https://rafeyirahman.substack.com on May 29, 2022. If you liked this or learned something new, please consider subscribing to Finesse for more financial literacy posts.

Hi,
Are you sure about the Sulfur Contents of Arab Light and Urals?

Crude grades

www.mckinseyenergyinsights.com

 

[RafeyIR]

Hi,
Are you sure about the Sulfur Contents of Arab Light and Urals?

Crude grades

www.mckinseyenergyinsights.com

Yes, sure about Arab Light. Never talked about the Urals in the first place since it is medium-sulfur crude and Pakistan cannot refine this particular grade. The link you shared shows the sulfur content of Arab Light at 1.7. Mine shows at 1.5. It is pertinent to note that sulfur content and API gravity vary by a small margin for all crudes over time.

 

[farok84]

Yes, sure about Arab Light. Never talked about the Urals in the first place since it is medium-sulfur crude and Pakistan cannot refine this particular grade. The link you shared shows the sulfur content of Arab Light at 1.7. Mine shows at 1.5. It is pertinent to note that sulfur content and API gravity vary by a small margin for all crudes over time.

Hi,

First, it is not my link, you quoted McKinsey Energy Insight as source for the data you quoted.

Arab Light itself is Medium Sour Crude, it does not have 1.5% Sulfur Content. Can you please share credible source for that? The whole premise of the article you wrote is based on Pakistan refiners cannot refine Sulfur content above 1.5, if that is true than how are we refining Arab Light, Iran Light and Kuwait Crude for ages?

https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/downloads/crude_grades_periodic_table/crude_grades_periodic_table.html?utm_source=blog&utm_content=plattspto&utm_term=editorial

Changing quality mix is affecting crude oil price differentials and refining decisions - U.S. Energy Information Administration (EIA)

www.eia.gov

 

[RafeyIR]

Hi,

First, it is not my link, you quoted McKinsey Energy Insight as source for the data you quoted.

Arab Light itself is Medium Sour Crude, it does not have 1.5% Sulfur Content. Can you please share credible source for that? The whole premise of the article you wrote is based on Pakistan refiners cannot refine Sulfur content above 1.5, if that is true than how are we refining Arab Light, Iran Light and Kuwait Crude for ages?

View attachment 850069

https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/downloads/crude_grades_periodic_table/crude_grades_periodic_table.html?utm_source=blog&utm_content=plattspto&utm_term=editorial

View attachment 850076

Changing quality mix is affecting crude oil price differentials and refining decisions - U.S. Energy Information Administration (EIA)

www.eia.gov

If you read carefully, McKinsey Energy is not the only data source I've used. There are other sources as well. Meanwhile, the source of the data I've quoted is mentioned in the post. Sharing it here for your convenience. http://www.gercl.co.uk/resources/ARABLT.pdf

 

[farok84]

If you read carefully, McKinsey Energy is not the only data source I've used. There are other sources as well. Meanwhile, the source of the data I've quoted is mentioned in the post. Sharing it here for your convenience. http://www.gercl.co.uk/resources/ARABLT.pdf

Hi,

Thanks for the link.

Again, is this a credible source? Much more credible than EIA and S&P Global, whose data was shared in earlier post?

Please share a credible source.

The crude oil spectrum: Platts periodic table of oil

The global oil market is brimming with a smorgasbord of crudes, from the Canadian tar sands extracted with the help of steam and sand, to the lightest US condensates whose color mirrors a glass of fine white wine.

www.spglobal.com

 

[RafeyIR]

Hi,

First, it is not my link, you quoted McKinsey Energy Insight as source for the data you quoted.

Arab Light itself is Medium Sour Crude, it does not have 1.5% Sulfur Content. Can you please share credible source for that? The whole premise of the article you wrote is based on Pakistan refiners cannot refine Sulfur content above 1.5, if that is true than how are we refining Arab Light, Iran Light and Kuwait Crude for ages?

View attachment 850069

https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/downloads/crude_grades_periodic_table/crude_grades_periodic_table.html?utm_source=blog&utm_content=plattspto&utm_term=editorial

View attachment 850076

Changing quality mix is affecting crude oil price differentials and refining decisions - U.S. Energy Information Administration (EIA)

www.eia.gov

If you read carefully, McKinsey Energy is not the only data source I've used. There are other sources as well. Meanwhile, the source of the data I've quoted is mentioned in the post. Sharing it here for your convenience. http://www.gercl.co.uk/resources/ARABLT.pdf

Hi,

Thanks for the link.

Again, is this a credible source? Much more credible than EIA and S&P Global, whose data was shared in earlier post?

Please share a credible source.

View attachment 850215

The crude oil spectrum: Platts periodic table of oil

The global oil market is brimming with a smorgasbord of crudes, from the Canadian tar sands extracted with the help of steam and sand, to the lightest US condensates whose color mirrors a glass of fine white wine.

www.spglobal.com

GERCL is a UK-based consultancy firm dealing in the oil and gas industry. If you are not satisfied I'll share a "credible" source. Not negating your source. I've already mentioned that sulfur content varies. For instance, Aramco defines the range of sulfur content from 1.3 to 2.2 percent for Arabian Light. https://china.aramco.com/en/news-media/global-news/2021/aramco-crude-oil-assay

 

[farok84]

If you read carefully, McKinsey Energy is not the only data source I've used. There are other sources as well. Meanwhile, the source of the data I've quoted is mentioned in the post. Sharing it here for your convenience. http://www.gercl.co.uk/resources/ARABLT.pdf

GERCL is a UK-based consultancy firm dealing in the oil and gas industry. If you are not satisfied I'll share a "credible" source. Not negating your source. I've already mentioned that sulfur content varies. For instance, Aramco defines the range of sulfur content from 1.3 to 2.2 percent for Arabian Light. https://china.aramco.com/en/news-media/global-news/2021/aramco-crude-oil-assay

Hi,

So, the basic assumption that Pakistan cannot refine Sulfur content above 1.5 is wrong, right?

Here is the assessment of S&P Global on the specification of Urals for February 2022.

https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/en/our-methodology/methodology-specifications/emea-crude-methodology.pdf

Also, note Pakistan refineries have been refining Kuwait Crude (at API 30.5 and Sulfur 2.6%) without any issues.

https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/downloads/crude_grades_periodic_table/crude_grades_periodic_table.html?utm_source=blog&utm_content=plattspto&utm_term=editorial

Crude Petroleum in Pakistan | The Observatory of Economic Complexity

Find the latest exports, imports and tariffs for Crude Petroleum trade in Pakistan.

oec.world

 

[HaMoTZeMaS]

its has been turning into Blunder for us, for staying stuck with One type of refinery capability
That has been an Overdependency, from all previous decision makers

Basically, IK is challenging the Monopoly of Petro Cartels who want Pakistan being cornered and dependent on single option in control of our enemies

Next Question is Why the Hell we havent installed other refineries .. Answers are obvious tho

 

[RafeyIR]

Hi,

So, the basic assumption that Pakistan cannot refine Sulfur content above 1.5 is wrong, right?

Here is the assessment of S&P Global on the specification of Urals for February 2022.

View attachment 850218

View attachment 850221

https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/en/our-methodology/methodology-specifications/emea-crude-methodology.pdf

Also, note Pakistan refineries have been refining Kuwait Crude (at API 30.5 and Sulfur 2.6%) without any issues.

View attachment 850220

https://www.spglobal.com/commodityinsights/plattscontent/_assets/_files/downloads/crude_grades_periodic_table/crude_grades_periodic_table.html?utm_source=blog&utm_content=plattspto&utm_term=editorial

View attachment 850219

Crude Petroleum in Pakistan | The Observatory of Economic Complexity

Find the latest exports, imports and tariffs for Crude Petroleum trade in Pakistan.

oec.world

Yes, Pakistan does import Kuwaiti crude but most of the other crudes are blended in Pakistani refineries to suit their capabilities.

its has been turning into Blunder for us, for staying stuck with One type of refinery capability
That has been an Overdependency, from all previous decision makers

Basically, IK is challenging the Monopoly of Petro Cartels who want Pakistan being cornered and dependent on single option in control of our enemies

Next Question is Why the Hell we havent installed other refineries .. Answers are obvious tho

It's a tradeoff, basically. Existing refineries can upgrade themselves by investing USD 4bn while setting up a new refinery would take USD 10bn. Also, since it is a colossal investment business, the barriers to entry are also high, much like the telecom and the power sector wherein only a few market players operate.

 

[farok84]

Yes, Pakistan does import Kuwaiti crude but most of the other crudes are blended in Pakistani refineries to suit their capabilities.

Hi,

After so much discussions, we have arrived to the magical term.

Although it wasn't your articles argument, but why can't such blending be mated with Urals?

 

[RafeyIR]

Hi,

After so much discussions, we have arrived to the magical term.

Although it wasn't your articles argument, but why can't such blending be mated with Urals?

You can see the "magical term" defined by the Ministry of Petroleum (http://khalidzafar.com/wp-content/f...leumRefiningBlendingandMarketingRules1971.pdf). Also, Pakistan can buy the Urals to blend it. But one should not consider it as a standalone substitute. For the comparison, the API gravity of ARL is 33-34 while for the Urals it is 30-31. The higher the API gravity, the lighter the fuel.

 

[farok84]

You can see the "magical term" defined by the Ministry of Petroleum (http://khalidzafar.com/wp-content/f...leumRefiningBlendingandMarketingRules1971.pdf). Also, Pakistan can buy the Urals to blend it. But one should not consider it as a standalone substitute. For the comparison, the API gravity of ARL is 33-34 while for the Urals it is 30-31. The higher the API gravity, the lighter the fuel.

View attachment 850332

Hi,

So blending a low API Kuwait crude with really high Sulfur content is all kosher and economical but not Urals, right? You are again being dishonest. I have shared with you the Urals API figures (from Feb 2022), which is in between 31.3 - 31.5. Please plot in here and see the difference between two.

 

[RafeyIR]

Excellent research brother seldom such analysis is done in the economy section of pdf

Thanks!