National Refinery says it secured Aramco term cargoes through Yanbu in September and October, while rising freight charges and crude premiums increase procurement costs.
KARACHI, October 22, 2026: National Refinery Limited (NRL) sourced approximately 90% of its crude oil requirements from Saudi Aramco during the financial year 2025-26, according to key takeaways from a corporate briefing reported by Topline Securities Limited.
Management said the refinery’s crude procurement mix in October 2026 comprised 50% term-contract cargoes and 50% spot-market purchases. NRL secured term-contract cargoes from Aramco through Yanbu in both September and October, despite supply constraints affecting regional crude markets.
Freight costs and crude premiums surge
NRL said crude transportation costs had increased significantly. Freight charges, previously around $1–1.25 per barrel, have risen to approximately $4 per barrel for Fujairah and $10–11 per barrel for Yanbu.
A round trip from Fujairah takes around five to six days, compared with approximately 16 days from Yanbu.
Crude procurement costs comprise the official selling price, crude premium, freight, insurance and additional war-risk charges. Management said spot premiums currently range from $10–15 per barrel for regional crude and up to $35 per barrel for non-regional supplies, depending on negotiations between traders and refineries.
War-risk premiums and related costs have also increased to approximately $1–1.25 per barrel, compared with only a few cents previously.
Term-contract pricing is generally based on the 30-day average Platts price, with the applicable premium announced in advance.
Despite crude supply constraints, refineries are managing the risk of shortages of refined petroleum products. However, they face challenges from variations in crude quality as they procure available grades rather than relying predominantly on sweet crude. Refineries have also booked very large crude carriers (VLCCs) to reduce transportation costs.
Refinery upgrade may cost up to $1.2 billion
Management estimated NRL’s refinery upgrade expenditure at between $300 million and $1.2 billion, depending on the final project scope. The feasibility study is expected to be completed by June 2027.
The primary objectives are to improve production of Euro-V motor spirit (petrol) and lube base oil (LBO), while reducing furnace oil output. The higher investment estimate includes a hydrocracker to convert furnace oil into petrol and high-speed diesel (HSD).
NRL has previously invested approximately $300 million to upgrade its HSD production to Euro-V specifications.
Management also highlighted a deemed duty benefit of 27.5% on new machinery, translating into an estimated post-tax benefit of 16%.
Lube base oil market and valuation
NRL estimates Pakistan’s total lube base oil market at 400,000–450,000 metric tonnes. Group I base oil accounts for around 150,000–200,000 tonnes, Group II for approximately 150,000 tonnes, and recycled oil for the remaining 100,000–150,000 tonnes.
From a regulatory perspective, the refinery maintains seven days of crude oil inventory but generally does not hold substantial stocks of finished petroleum products.
NRL is currently trading at an estimated price-to-earnings ratio of 2.3 times for FY2027, according to the briefing.