Iranian oil option returns for Pakistan

KARACHI: Pakistan could once again tap Iranian crude oil supplies following a temporary easing of US sanctions on Tehran, reopening the possibility of sourcing discounted crude and refining it locally to produce higher-value petroleum products. While industry experts say local refineries are technically capable of processing Iranian crude, commercial and operational challenges remain, particularly due to the high furnace oil yield and the absence of significant domestic demand for the fuel. Pakistan Refinery Ltd (PRL) had previously imported Iranian crude under a long-term contract with the National Iranian Oil Company, but purchases halted after US sanctions were imposed. Since then, no Iranian oil has been imported into the country. Commenting on the prospects for refining Iranian crude oil, a former head of a leading refinery in Karachi told Dawn that the scenarios are changing and sanctions are being lifted temporarily. The outcome remains uncertain over the next two months. Discounts, demand and tech upgrades will decide prospects for refining heavy crude grades “We can refine Iranian light crude oil, but due to high furnace oil (FO) content, it is not a commercially viable option, particularly when there is no domestic market for the FO due to its negligible usage in the power sector. “The most notable aspect is the price of Iranian crude oil and whether it is pegged to an international benchmark, with parity to Arab crude. If there is no discount, refining at the local refinery is not economical,” he said. When asked whether India is refining Iranian crude, he said Indian refineries are mostly deep-conversion units equipped with hydrocrackers, hydrocokers, residue fluid catalytic cracking units, etc. This gives them the flexibility to process crude ranging from heavy to light grades into value-added products like diesel and petrol. “If Pakistani refineries are upgraded in near future then we will have a choice to process heavy crude,” he said. During the last