Pakistan is actively considering the purchase of cheaper crude oil and gas from Iran, according to Petroleum Minister Ali Pervaiz Malik. The option has become viable again following a temporary easing of US sanctions on Tehran. By sourcing discounted Iranian crude, Pakistan could refine it locally to produce higher-value petroleum products, generating import cost savings of $170-340 million. This estimate assumes the country imports 10-20% of its total petroleum requirement at a discount, including freight savings.
Technical and Commercial Challenges
Industry experts confirm that local refineries are technically capable of processing Iranian crude. However, commercial and operational challenges remain, particularly due to the high furnace oil yield from Iranian crude and the absence of significant domestic demand for that fuel. Malik acknowledged these hurdles while speaking to the media in Lahore, stating that the government is “active regarding the reduction in oil prices” and noting that rising petrol and diesel prices had created difficulties for the entire nation.
Government’s Price Reduction Efforts
Malik emphasized that the difficult phase of high fuel prices had passed. “Good times are coming now,” he said, adding that the government had significantly reduced petrol and diesel prices. On June 19, Prime Minister Shehbaz Sharif announced a Rs74 reduction in petrol prices and a Rs67 cut in high-speed diesel prices, passing on the benefit of declining international oil prices. Malik maintained that the reduction in local prices was more than the one in international oil prices.
Geopolitical Context
The development follows eased tensions in the Middle East after the US-Iran interim peace deal and the restoration of energy shipping in the Strait of Hormuz. The earlier blockade of Hormuz had caused a sharp increase in international oil prices, which subsequently declined as tensions eased. This geopolitical shift has opened new opportunities for Pakistan to secure cheaper energy supplies.
