By Staff Reporter
ISLAMABAD: Pakistan’s biggest oil refiner is turning into an unlikely pressure valve for two of Islamabad’s most pressing problems at once: a lopsided trade relationship with Washington and a Gulf supply line that suddenly looks less reliable than it used to.
Cnergyico Pk Ltd. has ramped up purchases of US crude to about 8.1 million barrels over nine months, Vice Chairman Usama Qureshi said, with 7.1 million of those barrels — worth roughly $750 million — landing in the fiscal year that ended in June. The buying spree is now large enough to move a national trade statistic: Pakistan’s total import payments to the US rose $914 million to $3.27 billion that year, according to central bank data, meaning Cnergyico alone accounted for something close to 80% of the entire increase.
The company started small. Its first cargo, a 1-million-barrel test shipment of West Texas Intermediate loaded from Houston, arrived in Karachi only last October under an umbrella supply agreement with commodities trader Vitol Group. Qureshi said at the time that gross refining margins on the US grade matched Gulf crude closely enough that no blending or refinery adjustments were needed — a detail that mattered, given Cnergyico was moving into unfamiliar supply territory largely because Washington had asked it to.
That request traces back to April, when President Donald Trump threatened tariffs of 29% on Pakistani exports. Islamabad’s finance and petroleum ministries pushed local refiners toward American oil in response, and Cnergyico has since kept expanding the relationship rather than treating the first cargo as a one-off. Qureshi said the refiner is now weighing a mix of spot purchases and longer-term contracts with Vitol and other suppliers, choosing between them on “pricing, reliability and supply security.”
There’s a financing piece still to fall into place. Islamabad pitched a trade-finance facility through the US Export-Import Bank last month that would let Pakistani buyers defer payment to American exporters for as long three years. Qureshi said Cnergyico could increase its US purchases further if that facility gets extended to the company — a detail that ties Pakistan’s energy diversification directly to an unresolved piece of bilateral financial plumbing.
Hormuz exposure becomes the other half of the story
The trade math would matter on its own, but the war in Iran has given Cnergyico’s pivot a second, more urgent rationale. Roughly 90% of Pakistan’s oil and liquefied natural gas imports moved through the Strait of Hormuz before the conflict disrupted regional shipping, leaving the country almost entirely dependent on a single chokepoint for energy it mostly sources from Saudi Arabia and the United Arab Emirates.
Islamabad has been scrambling for alternatives beyond the US relationship. It has also pursued Saudi crude routed through Yanbu, a port on the kingdom’s Red Sea coast that sidesteps Hormuz entirely. The urgency isn’t abstract: a fresh round of protests over inflation and fuel prices broke out in Pakistan this week, adding domestic political weight to a supply-security problem that had mostly been discussed in trade-balance terms.
Fawad Basir, head of research at KTrade Securities, said the disruptions in the Middle East have exposed the risks inherent in leaning on one supply corridor. He noted that using Very Large Crude Carriers to bring in US oil could cut freight costs by 25% to 30% versus current shipping arrangements, and that a second Single Point Mooring facility would speed up vessel turnaround — a logistics upgrade that happens to be exactly what Cnergyico is now pursuing.
A $1.2 billion bet on bigger tankers and cleaner fuel
Cnergyico’s ability to absorb this pivot at all comes down to infrastructure most of its domestic competitors don’t have. The company operates Pakistan’s only single-point mooring terminal near Karachi, letting it handle large tankers that other refiners in the country simply can’t berth. Its total refining capacity runs to 156,000 barrels a day.
Qureshi said the company is now evaluating a second offshore mooring tied to its storage network, which would let it move refined products in and out on large tankers without routing through Karachi’s congested ports. That expansion sits inside a broader $1.2 billion upgrade program aimed at bringing the refinery up to Euro V fuel standards, reducing furnace-oil output and pushing total capacity toward 200,000 barrels a day. Qureshi said the company expects to complete the refinery upgrade over the next five to six years.
The investment is a bet against Cnergyico’s own recent history. The refiner has been running at just 30% to 35% of capacity because of soft domestic demand, a utilization rate that would make a nine-figure capital program hard to justify almost anywhere else. Qureshi said the company is wagering that demand for oil products will strengthen enough to justify the spending — a wager that now doubles as insurance against the next Hormuz disruption, whenever it comes.
Copyright © 2021 Independent Pakistan | All rights reserved
