Pakistan plans to boost domestic storage for crude oil and refined products to increase its energy security, according to a government document shared with oil producers and leading trading firms. Despite relying on the Strait of Hormuz for up to 90 percent of its oil and liquefied natural gas imports, Pakistan has no strategic petroleum reserves, leaving it exposed to supply shocks from the Iran war and other disruptions. The country's lending program with the International Monetary Fund also limits room for costly state-owned emergency stocks.
Proposed Framework for Strategic Reserves
The energy ministry is proposing to build strategic petroleum reserves as well as commercial storage through bonded terminals, refineries, and oil marketing companies. The plan also includes boosting oil and gas exploration and production, upgrading refineries, and consolidating the downstream sector. The document states, "Pakistan’s oil security requires both emergency reserves and stronger local supply capacity."
International Engagement
The ministry shared the proposed framework with Saudi Aramco, Abu Dhabi National Oil Corp, Kuwait Petroleum Corp, QatarEnergy, PetroChina, and trading firms Vitol and Trafigura, as well as storage operator Vopak. Trafigura, Vitol, and Aramco declined to comment; other companies and Pakistan's petroleum ministry did not respond to requests for comment. Petroleum Minister Ali Pervaiz Malik noted that building reserves is "easier said than done" given fiscal challenges under the IMF program, but the government is moving quickly from planning to implementation.
Bonded Storage and Strategic Reserves
Under the bonded storage plan, international suppliers and traders could hold petroleum stocks, creating commercial inventories to support domestic supply during emergencies. The government may also allow companies to store fuel for re-export. The document does not specify incentives, pricing, tax, foreign-exchange, offtake, or ownership terms, nor whether companies would invest in storage infrastructure. The ministry aims to finalize the bonded storage framework by June.
Infrastructure and Vulnerabilities
Beyond the lack of strategic reserves, the document cites constrained port infrastructure, limited ship-to-ship capacity, and insufficient storage as vulnerabilities. The government plans to fund its own strategic reserves through a ring-fenced fund financed by 10 rupees ($0.0359) per liter from the existing petroleum levy, starting July 1. This allocation would generate about $700 million annually. Pakistan currently imposes a 58-rupee per liter tax on diesel and 102.17 rupees per liter on gasoline.
Refinery and Marketing Company Requirements
The government plans to require refineries to hold 15 days of crude stocks and oil marketing companies to maintain 30 days of finished products, phased in through refinery policy, margin revisions, and downstream consolidation by June 2028. The document also calls for an energy infrastructure corridor around Hub and Port Qasim, including single-point mooring, storage, and pipeline connectivity, to reduce reliance on smaller, costlier shipments.
