Pakistan refiner Cnergyico expands US crude imports amid Hormuz disruption

Pakistan's leading refiner, Cnergyico, is increasing its purchases of US crude oil as the nation aims to diversify its energy supply following disruptions caused by the Iran conflict, which exposed its over-reliance on Gulf routes. The company, which began buying US crude last year, may also make spot purchases alongside longer-term contracts with firms like Vitol, contingent on factors such as pricing, reliability, and supply security, according to Cnergyico's Vice Chairman Usama Qureshi.

In the fiscal year concluding June, Cnergyico imported approximately 8.1 million barrels of US crude, accounting for around $750 million and representing about 80% of the $3.27 billion surge in US import payments recorded by Pakistan's central bank during the same period. Cnergyico could expand its US crude acquisitions if Islamabad's proposed EXIM Bank trade-finance facility is extended to the company, enabling buyers to delay payments to US exporters for up to three years.

Pakistan currently imports oil primarily from Saudi Arabia and the United Arab Emirates, with the majority of these imports transiting through the strategic Hormuz Strait before reaching the country, prior to the war. The rising cost of fuel has prompted the government to take action, as a recent wave of protests over inflation and fuel prices has emerged.

Islamabad has also explored alternatives, such as purchasing Saudi crude via the port of Yanbu, situated on Saudi Arabia's Red Sea coast. Qureshi disclosed that Cnergyico is assessing the feasibility of setting up an additional offshore mooring connected to its storage facility to import and export refined products via large tankers, bypassing Karachi's congested ports, as part of a $1.2 billion upgrade plan to meet Euro V standards, reduce furnace-oil output, and boost crude capacity to around 200,000 barrels per day.

Fawad Basir, head of research at KTrade Securities, emphasized that the Middle East disruptions underscore the risks associated with dependency on a single supply route. He suggested that utilizing Very Large Crude Carriers for US crude imports could potentially reduce freight costs by 25% to 30%, while a second Single Point Mooring would expedite vessel turnaround times.