Kuwait Petroleum and Aramco battle for dominance in Pakistan’s oil market: report

Pakistan’s oil market has become a competitive arena for Gulf oil giants Kuwait Petroleum Corporation (KPC) and Saudi Aramco’s trading arm, Aramco Trading, as they vie for a larger share of the domestic market.

According to a news report, the rivalry escalated after Aramco entered Pakistan’s market by acquiring a 40% stake in Gas & Oil Pakistan Limited (GO), a local oil marketing company (OMC), in mid-2024. This strategic move positioned Aramco to directly compete in the high-speed diesel (HSD) import segment, which has traditionally been dominated by state-owned Pakistan State Oil (PSO).

The latest development in the competition came as KPC reduced its premium on HSD imports for PSO from $5 per barrel to $3.25 per barrel earlier this month.

The reduction, confirmed by the Oil and Gas Regulatory Authority (Ogra), is part of a six-month extension of KPC’s long-term supply agreement with PSO.

Industry sources revealed that KPC’s move to lower its premium was a direct response to Aramco Trading's competitive pricing.

GO had earlier obtained regulatory approval to import HSD from Aramco at discounted rates, enabling it to bring in approximately five cargos despite initial resistance from local refiners. This pricing strategy allowed GO to supply HSD to other OMCs at lower rates, intensifying pressure on KPC.

Pakistan is a key market for HSD, with demand outpacing local production. During the first five months of the current fiscal year, domestic refineries produced 1.8 million tonnes of HSD, falling short of demand.

To bridge the gap, the country imported 0.8 million tonnes of HSD, with total petroleum imports amounting to $2.3 billion during the period. HSD alone accounted for over half of these imports, highlighting its critical role in Pakistan’s energy needs.

Despite these formal imports, the market has also absorbed significant volumes of smuggled diesel from Iran, further complicating the competitive landscape.

The ongoing competition between KPC and Aramco is expected to shape the pricing and supply dynamics in Pakistan’s oil market in the months ahead.