Pakistan plans to establish strategic oil reserves

Pakistan has begun planning to build strategic petroleum reserves for the first time, alongside broader efforts to strengthen fuel storage infrastructure and reduce vulnerability to global supply shocks.

The country’s Petroleum Division, part of the Energy Ministry, last week floated a tender for a feasibility study on the “Development of Strategic Petroleum Reserves," Nikkei Asia reports. 

“Recent supply constraints and volatility in both crude and refined product markets have further highlighted the need for resilient storage and contingency infrastructure to sustain refinery operations and ensure uninterrupted fuel availability,” the tender document stated. “In response, the Government of Pakistan has initiated plans to develop countrywide strategic storage facilities, initially for crude oil only.”

Pakistan currently depends on supplies through the Strait of Hormuz for up to 90 per cent of its oil and liquefied natural gas imports and does not have any strategic petroleum reserves in place.

A government official familiar with the developments told Nikkei Asia that the country is pursuing multiple parallel initiatives to expand storage capacity and trade infrastructure.

“Pakistan is in talks with Saudi Arabia, Kuwait, Qatar, UAE and China to establish bonded terminals in Pakistan,” the official said. “Gwadar port can be one of the destinations where such terminals are established.”

A bonded terminal is a customs-controlled facility where imported oil or fuel can be stored without immediate payment of duties or taxes and later re-exported or used domestically in case of emergencies.

According to another government official who briefed Nikkei Asia on background, Pakistan is planning a multimodal strategic petroleum reserve model that would include state-backed emergency stocks, mandatory industry inventories and bonded commercial storage.

The strategy also includes plans to increase domestic oil exploration and upgrade refineries. Official data shows Pakistan’s oil demand stands at around 300,000 barrels per day, while domestic production is about 62,000 barrels per day. Reducing import dependence to a targeted 150,000–200,000 barrels per day would require significant investment estimated at $6 billion or more at current prices.

“Pakistan is planning to hold petroleum reserves for 45 days in the beginning, which can later be increased to 90,” the official said.

The proposed system is expected to be financed through a dedicated fund using 10 rupees (3.6 cents) per litre from the existing petroleum levy. Pakistan currently imposes a tax of 58 rupees per litre on diesel and 102.17 rupees per litre on petrol.

By Sabina Mammadli