Pakistan to boost Russian oil imports by 3.6m tonnes annually.

Pakistan is poised to increase its annual imports of Russian crude oil by up to 3.6 million tonnes starting in January 2024. The move, driven by economic considerations, involves two refineries in Pakistan finding it more cost-effective to refine the URAL grade of crude oil and conduct transactions in yuan, rather than U.S. dollars. This strategic pivot has been revealed by top officials of Pakistan's Energy Ministry.

Cnergyico PK Limited, a private sector refinery, has initiated plans to import two cargos of 100,000 tonnes each every month under a long-term agreement with a Russian company. Cnergyico has the capacity to refine 156,000 tonnes per day and can easily process 200,000 tons of Russian crude in a month. Meanwhile, Pakistan Refinery Limited (PRL) will import up to 1.2 million tonnes of URAL crude annually under a flexible business-to-business model, contingent on pricing and volume considerations.

The decision to carry out these transactions in yuan is expected to bring several advantages, including significant cost savings for the refineries, avoidance of premium costs related to U.S. dollar transactions, and the preservation of substantial foreign exchange reserves.

In addition to the financial benefits, both refineries are projected to undergo significant upgrades over the next six years, enabling them to substantially reduce the production of furnace oil from URAL to just 7-8 percent. This...