The government’s energy security plan will soon see the arrival of vessels carrying 100,000 tons of discounted Russian oil at Pakistan ports in early June.
Musadik Malik, the State Minister for Energy, made this announcement during a private meeting with members of the media, where he discussed the new refinery policy. The policy aims to encourage investments in new refineries for shallow, deep conversion, and ultra-deep conversion projects, with incentives lasting up to 20 years.
Minister Malik revealed that the Russian cargo, consisting of 100,000 tons of Urals oil, would arrive at the Oman port on May 26-27. From there, the oil will be transported to Pakistan in smaller vessels, a journey expected to take between seven to ten days. Although the transportation cost will increase slightly, the minister assured that the impact would be minimal.
While he did not disclose the discounted price or the payment method for the Russian oil, Minister Malik hinted that the payment was made through the banking channel. The heavy Urals oil will then undergo refining at Parco, where it will be mixed with light Arabian oil to lower the overall price.
Highlighting the significance of the new refinery policy, Minister Malik emphasised that energy sector growth is crucial for economic development. He explained that a one per cent increase in the country’s GDP requires a corresponding growth rate of 1.5 to two per cent in the energy sector. Similarly, achieving a five per cent GDP growth necessitates a seven to ten per cent growth in the energy sector. Such growth is only possible with investments in refineries, as well as oil and gas exploration and production.
Under the new refinery policy, refineries with a capacity of 300,000 tons or more will receive incentives for 20 years, while those below 300,000 tons will receive incentives for 10 years. However, it will be mandatory for these refineries to achieve financial closure within five years.
Additionally, import duty on equipment used in the larger refineries will be set at 7.5 per cent for both petrol and diesel for the duration of 20 years. The same incentives will apply for 10 years to refineries below the 300,000-ton capacity. These refineries will also benefit from special economic zone (SEZ) laws.
Minister Malik projected that by 2030, the country’s petrol and diesel consumption would increase from 20 million to 33 million. Currently, local refineries produce around 10 to 11 million, with the rest being imported. He noted that the global premium on diesel is approximately $18 due to high demand.
The new refinery policy has garnered interest from multiple foreign countries and private companies, with a positive response received during a road show conducted in the United States to promote greenfield investment.
The minister reiterated the government’s commitment to implementing a comprehensive plan for the country’s energy security before the end of its constitutional tenure. Negotiations for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline project have resumed, while the Iran-Pakistan (IP) project has been delayed due to US sanctions. The LPG Air Mix policy and the brownfield policy are expected to be approved soon.