Observer Report
Islamabad
Pakistan can save around US$5-6 billion annually merely by using Pakistan National Shipping Corporation (PNSC) as a mainstay of its international maritime trade, while also allowing the national flag carrier to buy more oil carriers and tankers in order to increase its capacity of transporting liquid freight.
The recommendation was made by Commodore (r) Syed Muhammad Obaidullah, former executive director of PNSC, who has also served as the founding director of National Maritime Policy Research Center (NMPRC), in an exclusive webinar talk ‘Global Oil Crisis Amidst COVID19 and its Impact on Shipping Sector: Challenges and Prospects for PNSC’, organized by Institute of Policy Studies (IPS).
Explaining the reasons of the current oil crisis, the expert said that the chaos started with the conflict between Russia and the Kingdom of Saudi Arabia over oil supply. Though the conflict got resolved due to the intervention of the US president, the outbreak of COVID19 pandemic soon rendered the resolution almost irrelevant. With no air operators, no transport and no rail services in function and the lowest level of industrial productivity that followed, the demand for oil reduced significantly. The development had a severe impact on the oil markets around the globe in general, and the US oil market (WTI) and Canadian oil market in particular, owing to storage capacity issues at both suppliers’ and buyers’ end. The oil prices in these markets as a result fell into negatives, affecting a number of industries globally, including the shipping industry.
Speaking of any advantages of reduction in oil prices for Pakistan, the speaker opined that the situation may not benefit the country at all. Pakistan buys crude oil of Brent and Dubai crude, which though stands at around US$15-20 per barrel at present, the very low demand of oil within the country following the pandemic may not let it gain much. Three of its five oil refineries are shut down due to exhaustion of their storage capacities and low market demand. Another crisis for them is the new regulation of International Maritime Organization (IMO) introduced in January 2020, which requires diesel to have Sulphur content of 0.5% instead of 3.5% – inability of which has hindered the processed oil exports of Pakistani refineries considerably, he added.
Explaining the situation at length, Obaidullah briefed that Pakistan has been importing three types of oils: Crude oil (11 million tons annually), processed oil (12.5 million tons annually) and LNG (3-4 million tons annually). This situation however, according to the speaker, was now changing slightly as most of the IPPs in the country had shifted to LNG already.
The speaker told that Pakistan National Shipping Corporation (PNSC) had been earning more than US$2.5 billion as net profit annually continuously for the last 20 years despite the slump in the global shipping sector. The corporation initially was same as other trembling SOEs (State-Owned Enterprises) till 2000s and its share price was only Rs.1.50, but it rose to Rs.150 within just one year owing to some good decisions taken by the management of that time.
Cdre (r) Obaidullah lamented that the present international trade volume of Pakistan is around 100 million tons annually and only 15 per cent of it was being carried by PNSC.
In case of oil and energy transportation, he bemoaned, 100 per cent freight of the country is being handled by international carriers, which is costing the country around US$5-6 billion annually. The country however can save this enormous amount – which he pointed as being equivalent to the recent IMF’s Extended Fund Facility (EFF) that Pakistan is set to get in 39 months – merely by assigning the carrying of its international trade to PNSC as well as by letting the corporation buy more crude oil carriers and processed oil tankers in order to increase its carrying and transporting capacity.
