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:

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.