PRL's Russian Crude Refining Challenges: Viability, Furnace Oil Shortage, and Storage Constraints

 Pakistan Refinery Limited Grapples with Complexities in Refining Russian Crude Oil

ISLAMABAD: In an anticipated move, the Pakistan Refinery Limited (PRL) is expected to present a comprehensive report to the government in the coming weeks regarding the quality, yields, and commercial viability of the Russian crude oil variant known as URAL, which is notably heavier. A senior official from the Petroleum Division shared this information, stating that the report would encompass a detailed analysis of the yields, quality, and economic feasibility of refining the Russian crude oil after considering the refining costs and margins of the refinery.

The report's findings will play a crucial role in enabling the relevant authorities to make an informed decision on whether to pursue a government-to-government (GtG) import agreement with Russia. At present, local refineries in Pakistan produce approximately 25-30% motor spirit (petrol) and 45% furnace oil from the crude sourced from Saudi Aramco and ADNOC.

However, due to the heavier nature of URAL crude, it is expected that half of the 100,000 tonnes of Russian crude will be exported as furnace oil, incurring a 25% loss compared to the crude's cost. This is attributed to the limited utility of URAL crude in Pakistan. Furthermore, Pakistani refineries already face a shortage of furnace oil, leading to the export of furnace oil with a 25% loss to overseas markets.

Interestingly, deep conversion refineries in Dubai process the furnace oil exported by Pakistani refineries, thereby converting it into finished products. The PRL, an older refinery in Pakistan, has taken up the task of processing the Russian crude. Despite the discounted price of the heavy Russian crude, PRL will only produce 50% of furnace oil from it, as the demand for this product in Pakistan is not substantial.

Recent developments have led to increased demand for furnace oil in Pakistan due to the gas crisis and rising temperatures, with local authorities utilizing it for power generation. Consequently, the PRL's refining process for 100,000 tonnes of Russian crude is expected to take approximately two months. Initially, a blend of 25-30% Russian URAL crude and 70-75% Saudi Aramco crude will be created, which will then undergo refining.

According to the Petroleum Division official, the first shipment carrying 45,000 tonnes of Russian crude arrived at Karachi Port Trust on June 11. However, the arrival of the remaining 55,000 tonnes from the same shipment has been rescheduled to June 29 due to storage constraints. Additionally, a vessel containing 70,000 tonnes of crude oil from Saudi Aramco is scheduled to reach the Pakistan Refinery Limited on June 25.

The primary vessel transporting 100,000 tonnes of URAL crude from Russia arrived in Oman on June 7. From there, a smaller vessel has been arranged to facilitate the transportation of the crude in two separate rounds.

In conclusion, Pakistan Refinery Limited is currently grappling with the challenges of refining Russian crude oil. The assessment of the quality, yields, and economic viability of URAL crude in the forthcoming report will play a pivotal role in shaping the government's decision regarding a potential import agreement with Russia. The ongoing shortage of furnace oil and storage constraints further add to the complexities faced by the PRL, necessitating careful management of the refining process and logistics.