In a bid to address its growing Energy needs and mounting economic challenges, Pakistan is exploring the possibility of entering into a long-term agreement to purchase Russian oil. The proposal, put forward by Pakistan’s interim energy minister, Mohammad Ali, could see the country acquiring between 0.7 million to 1 million tons of Russian oil annually, which equates to up to 20,000 barrels per day (bpd).

The decision to consider such a deal has come in response to Russia’s reduced prices for crude oil. This price drop followed a significant geopolitical development – the ban on Russian oil exports to European markets due to Russia’s invasion of Ukraine.

Pakistan took its first step towards diversifying its oil sources back in June when it imported its initial government-sponsored shipment of Russian oil. Subsequent discussions are already underway for a second government-to-government delivery. Furthermore, a Pakistani refiner named Cnergyico recently made history by bringing the first batch of Russian crude oil into the country’s private sector.

Why this shift in oil procurement is significant for Pakistan can be understood by looking at its energy landscape. The nation heavily relies on oil and energy imports, and these imports represent a substantial portion of its total import expenses. Unfortunately, these expenses have become an increasing burden on Pakistan, which is already grappling with a severe balance of payments crisis, largely due to dwindling foreign reserves.

However, it’s not just oil imports that have posed challenges for Pakistan. The nation is currently battling inflation and a foreign exchange crisis, further straining its economic stability. The situation worsened with the surge in energy prices, particularly Liquified Natural Gas (LNG), following Russia’s invasion of Ukraine. This surge led to widespread power disruptions across the country.

To counter the difficulties in securing competitively priced LNG, Pakistan LNG Limited (PLL), a government subsidiary responsible for obtaining LNG from the international market, has recently taken action. They awarded a tender to commodities trader Vitol for the delivery of an LNG shipment scheduled for December. This marks Pakistan’s first spontaneous purchase in over a year and signifies the nation’s commitment to addressing its energy needs amidst a challenging geopolitical and economic environment.

While the proposed long-term agreement with Russia could provide a stable source of oil at reduced prices, it also adds an interesting dimension to Pakistan’s diplomatic ties, given Russia’s ongoing geopolitical conflicts. Nevertheless, Pakistan’s determination to secure a reliable energy supply is evident, and it remains to be seen how this evolving situation will impact the nation’s energy landscape and economic stability in the coming years.

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