Newsletter 160

Newsletter

Publication 160

01st Oct 2023

Pakistan to discuss long-term Russian oil deal next month & arrival of first shipment of LPG

Pakistan will hold talks with Russia next month on a long-term arrangement for importing Russian crude oil, as the country seeks to diversify its energy sources and cope with high prices of petroleum products. A high-level delegation will attend an energy conference in Russia from Oct. 10 to Oct. 12, and meet with Russian officials on the sidelines to discuss energy cooperation, sources said. The delegation plans to discuss long-term supply of Russian crude oil to Pakistan, supply of LNG, as well as the North-South Gas pipeline project. The Pakistani and Russian sides would be meeting for the first time on account of the energy sector after the first consignment of Russian crude oil arrived in Pakistan in June this year, following which the supply halted. In another development Pakistan has received its first shipment of liquefied petroleum gas from Russia, Moscow’s embassy in Islamabad said, marking Islamabad’s second major Russian energy purchase. The shipment, which the embassy said was delivered with Iranian help, comes after Pakistan received its first-ever delivery of Russian crude under a deal earlier this year. Russia delivered 100,000 metric tons to Pakistan through Iran’s Sarakhs Special Economic Zone. The embassy said consultations on a second shipment were under way.

China is reported to have agreed to a revised cost of $6.6bn for Mainline-1 (ML-1) — the 1,872km Karachi-Peshawar railway track — and would submit a modified design plan for the project to Pakistan latest by October 31. Informed sources told that officials from Pakistan would travel to Beijing at the weekend to attend the JWG meeting for finalisation of the cost estimated and associated matters. Formal announcement for the agreement is expected when caretaker prime minister Anwaarul Haq Kakar visits China on October 18 to attend annual events relating to One-Belt and Road Initiative. The sources said ML-1 costs were estimated at around $9.8bn previously but the Chinese side had shown some flexibility and some design changes had helped reduced costs and some other portions of the project would be developed by the Pakistani side itself in due course. During the upcoming visit of PM Kakar, the two sides are also expected to take up four proposed projects for implementation that had been delayed between 2018 and 2022. Formal negotiations on the four projects including Mirpur-Muzaffarabad-Mansehra Motorway, Zhob-Dera Ismail Khan Motorway and Babusar Top would also be held during the JWG meetings next week.

ML-1 cost being revised as officials head to Beijing

Cement exports up by 130.24 percent in two months

The exports of cement witnessed an increase of 130.24 per cent during the first two months of the financial year 2023-24, as against the exports of the corresponding month of last year. The cement exports from the country were recorded at $39.641 million during July-August (2023-24) against the exports of $17.217 million during July- August (2022-23), according to the Pakistan Bureau of Statistics (PBS). In terms of quantity, the exports of cement also surged by 198.15 per cent, going up from 329,157 metric tons to 981,395 metric tons, according to the data. Meanwhile, on year-on-year basis, the exports of cement increased by 102.74 per cent during the month of August 2023 as compared to the same month of last year. The exports of cement from the country during August 2023 were recorded at $23.496 million against the exports of $11.589 million in August 2022. On a month-on-month basis, exports of cement increased by 45.53 per cent during August 2023 when compared to the exports of $16.145 million in July 2023, the PBS data revealed.

Work on Pakistan-Iran gas pipeline has already started, and we are ready to fully explore the option of importing gas and oil from neighbouring countries, Caretaker Federal Minister for Energy Muhammad Ali said. “We will explore Iran’s offer to provide natural gas and petroleum products to Pakistan. I met the Iranian ambassador and discussed bilateral energy issues earlier. To respond to the new offer of Iranian envoy, which he made on Friday in the provincial metropolis, we will engage with them to see options for oil and gas import offers,” the minister said while talking to media men at the inauguration of a model customer service centre at Sui Northern Gas Pipelines Ltd. Definitely, the minister said, we will go for any buying option that is not in violation of international laws and sanctions.

Pakistan to engage with Iran to explore oil, gas imports

Govt mulls over privatising power companies

Irked by circular debt and line losses issues, the interim government is exploring two options - privatization of power generation (Gencos) and distribution companies (Discos) or transfer their management control to private entities for 20 to 25 years. This strategic shift in policy direction can be attributed to the pressing issue of the power sector’s circular debt, which has ballooned to over Rs2.3 trillion, posing a severe threat to the sector’s sustainability. Consequently, the government is shifting its stance, distancing itself from direct involvement in business operations. Remarkably, the circular debt in the gas sector has surpassed that of the power sector, amassing a total of Rs2.8 trillion, including Rs2.1 trillion principal amount and up to Rs700 billion in late payment surcharges. When combined, the circular debts of the gas (Rs2.8 trillion) and power sectors (Rs2.3 trillion) amount to a staggering Rs5.1 trillion (equivalent to over $17 billion).

Sales of high speed diesel (HSD) and motor gasoline have not picked up in recent weeks despite crackdown against smugglers of Iranian petroleum products, as high prices deter consumer spending, Government initiated action against criminals over bringing in various types of contraband into the country, as it was harming the formal economy. This action also included crackdown against cross-border smuggling of Iranian petroleum products into Pakistan, which has been inflicting immense losses on the domestic oil sector. According to the statistics provided by the oil sector, the sale of both HSD and petrol has come down so far in the month of September this year. “Either the smuggling of these products is still being done clandestinely or the consumers have stopped buying of these products in huge quantities after prices went up to the highest level in the month of September,” oil sector people stated. The sale of HSD in the first three weeks of September stood at 311,924 tonnes compared to 383,921 tonnes sold in the first three weeks of August this year. On the other hand, HSD sales in the first three weeks of September last year stood at 361,932 tonnes, this was higher by 50,008 tonnes compared to the current weeks this September. Similarly, petrol sales stood at 470,000 tonnes in August, with sales in September standing at 409,000 tonnes so far, depicting a negative growth of almost 61,000 tonnes. In the corresponding period in September last fiscal, the sale of HSD was also on the higher side at 444,000 tonnes. Pakistan is facing a loss of more than Rs60 billion annually due to smuggling of more than 2.81 billion litres of oil from Iran to Pakistan.

HSD, petrol sale slump persists as high prices discourage consumers

Ban on import of smuggled items through ATT imminent

The federal government is all set to impose restrictions on import of those items through Afghan Transit Trade which are being smuggled to Pakistan and hurting its industry and economy. The volume of Afghan Transit Trade (forward) via Pakistan increased by 67% during FY 2022-23 to USD 6.71 billion from USD 4.016 billion during FY 2021-22, the huge trade deficit created by the surge in Afghan imports is neither plausible nor understandable keeping in view its limited export potential and other funding sources especially after the imposition of multiple types of sanctions on the interim Afghanistan government. Comparative analysis of the major forward Afghan Transit Trade items of previous two years clearly shows that the increased volume of major import items of Afghanistan transiting via Pakistan i.e. fabrics, tyres, black tea, home appliances, toiletries and cosmetics etc is attributable to low volume of imports by Pakistan of these very items due to imposition of import restrictions by Pakistan on import of non-essential and luxury goods during the same period. Substantial increase in incidence of smuggling of these items has not only caused loss of revenue but has also rendered import curtailment measures of the government ineffective, curtailed revenue and caused injury to the domestic industry. The Ministry of Commerce, is submitting a summary to ban fabrics, tyres, black tea, home appliances, toiletries and cosmetics etc under Afghan Transit Trade, for which the SRO will be issued after approval of the authorities.

Korea-based MMC People has expressed interest in establishing a hybrid (solar and wind) power project of 250MW based on Korea’s Hydrogen Fuel Cell Power Generation System (KHFCPG) in the Dhabeji Special Economic Zone (DSEZ). MMC People CEO HeeJong Yoo expressed his commitment to invest in untapped opportunities in Sindh, and proposed the establishment of the hybrid power project of 250MW at the DSEZ at an estimated cost of $500 million. He was speaking at a meeting with Sindh’s Investment Department, along with a delegation of businesspersons from South Korea to discuss potential avenues of investment in various sectors, including green energy, agriculture, and electronics.

Korean firm plans to invest $500m in green energy project in Dhabeji economic zone

OGDCL discovers gas in Punjab

Oil & Gas Development Company Limited (OGDCL), Pakistan's largest hydrocarbon exploration firm, said it had discovered gas at an exploratory well in Punjab province. The company said in a notice to the Pakistan Stock Exchange that it had found gas at well in the Mari East Block, where it holds a 100 percent stake. The well, which was drilled using OGDCL's in-house expertise, reached a depth of 1,851 meters and yielded gas from two formations, the company said. The Dunghan formation produced 1.1 million standard cubic feet per day (mmscfd) of gas, while the Sui Main Limestone formation produced 1.31 mmscfd of gas, both at a choke size of 32/64 inches and a well head flowing pressure of around 250 pounds per square inch, the company said. "This discovery marks the first in the Mari East Block and is a testament to the company's commitment to harnessing the hydrocarbon potential of the Block through aggressive exploration strategies," the company said

Notwithstanding the ongoing heatwave, poor picking and bugs attack, at least 0.9 million bales of raw cotton reached ginning factories during the last two weeks in the country keeping the hopes alive for a much better crop this year as compared with the last season. The figures released by the Pakistan Cotton Ginners Association (PCGA) for the first fortnight of September reveal that around 3.93m bales were produced till Sept 15 which is 1.74m bales or 80 per cent more than 2.18m bales by this time last year. As per cotton production breakup, Sindh produced over 2.389m bales against 1.11m bales last year which shows an increase of 115.26pc, while the output in Punjab was 1.545m bales against 1.076m bales last season, an increase of 43.47pc. The data shows that the exporters, including an international firm, have so far bought over 0.221m bales against just 3,080 bales last year; textile spinners more than 3.3m bales against 1.76m bales (an increase of 88pc) last season. Whereas, ginning factories are holding a stock of 0.40m bales, around 5.25pc less than last year’s figure of 0.422m bales. The fortnightly flow was recorded at 892,742 bales against last season’s 646,883 bales for the same fortnight (Sept 1-15).

Cotton output jumps despite pest attack