Pak to limit oil imports from India

Islamabad: Pakistan is considering a proposal to limit oil imports from India to 5-10 per cent of the total requirement till confidence-building measures between the two countries take root, according to a media report today.

Pakistan`s total oil imports currently stand at around USD 14.5 billion and annual imports of petroleum products from India will not be allowed to exceed USD 1.5 billion at the initial stage, a government official told the Dawn newspaper.

The two countries are in discussions on the issue of import of petroleum products, including liquefied natural gas, from India. "The proposal is to start importing between 5-10 per cent of total oil requirement from India because we have to be cautious and careful in dealing with oil supply security and dependability issues," the unnamed official was quoted as saying.

The two sides are exploring the possibility of LNG supplies from India that could be transported through bowsers and tankers via land route as this could provide relief to bulk consumers in Pakistan`s Punjab province, particularly around Lahore and Faisalabad, the official said.

The two countries have formed working groups for negotiations on pricing and modes of transportation as early as possible. This decision was made during three-day talks between the Petroleum Secretaries in New Delhi in March.

Subsequently, Islamabad proposed dates for a dialogue that were not acceptable to New Delhi, while dates proposed by India were inconvenient to Pakistani authorities. The two sides are expected to meet sometime during May, the report said.

Pakistan`s Petroleum Ministry has been proposing to the government since 2008 to allow the import of petroleum products from India to diversify sources of imports and to make savings on transportation charges for areas bordering India.

After the government`s recent decision to move towards granting Most Favoured Nation-status to India the Petroleum Ministry was directed by the government to hold dialogue with its Indian counterpart on trade in oil products.

Pakistan is deficient in almost all petroleum products while India has a surplus refining capacity of better quality though most of it depends on imported crude. During the Petroleum Secretary-level talks, the two sides exchanged initial information on quality aspects, pricing, mode of transportation and its cost and possible quantities for trade in different petroleum products.

Pakistan has also discussed the possibility of exporting naphtha to India. The country currently exports naphtha at cheaper rates because of quality issues with Pakistani refineries.

Naphtha could be considered for export to India and adjusted against import of other refined products, mostly for upper areas of Pakistan, including Punjab, PoK and Gilgit-Baltistan. Currently fed by the Attock Refinery, these areas often face supply problems because of the facility`s limited capacity.

Pakistan`s consumption of petroleum products currently stands at about 22 million tonne, of which about 85 per cent is met through imports. Indigenous crude production meets only 15 per cent of the consumption, while 30 per cent crude and 55 per cent refined products are imported.

The country`s total refining capacity is about 13 million tonne. Pakistan`s total diesel consumption of about 4.4 million tonne can be met through imports from India, where its prices are lower than in Pakistan, the report said. The price of diesel in Pakistan is Rs 107 a litre as against Rs 75.68 in New Delhi (40.91 Indian rupees).

Bhatinda and Panipat in India have a refining capacity of about 15 million tonne and two refineries of the Reliance Industries have a capacity of 40 million tonne. Import through the Wagah land border by rail and road could be cost-effective to meet diesel requirements in northern parts of Pakistan and through sea for Karachi and adjoining areas, the report said.