Pakistan eyes strategic oil reserves as government drafts energy security overhaul

Pakistan is preparing plans to establish strategic petroleum reserves and expand domestic fuel storage capacity as the government seeks to reduce exposure to external supply disruptions and strengthen long-term energy security.

A government framework document reviewed by Reuters shows the petroleum ministry has proposed a series of measures including bonded storage facilities, compulsory fuel stockholding requirements, refinery upgrades and expanded import infrastructure.

The move comes as Pakistan remains heavily dependent on energy imports routed through the Strait of Hormuz, which accounts for up to 90% of the country’s crude oil and liquefied natural gas supplies. Pakistan currently has no strategic petroleum reserves.

The document was shared with several major international energy firms and commodity traders, including Saudi Aramco, Abu Dhabi National Oil Company, Kuwait Petroleum Corporation, QatarEnergy, PetroChina, commodity traders Vitol and Trafigura, and storage operator Vopak.

Under the proposed bonded storage mechanism, foreign suppliers and trading firms would be allowed to maintain petroleum inventories inside Pakistan, creating commercial reserves that could support domestic supply during emergencies. The framework also allows for fuel storage intended for re-export.

The ministry plans to finalize the bonded storage structure by June, although the document does not specify proposed tax incentives, pricing terms, ownership arrangements or foreign exchange rules for participating firms.

Separately, the government plans to build its own strategic petroleum reserves through a dedicated financing mechanism funded by Rs10 per litre from the existing petroleum levy starting July 1. The document estimates the allocation could generate around $700 million annually.

Pakistan currently charges a petroleum levy of Rs58 per litre on diesel and Rs102.17 per litre on gasoline.

The framework also proposes stricter inventory obligations across the downstream sector, requiring refineries to maintain crude oil stocks equivalent to 15 days of supply and oil marketing companies to hold 30 days of refined fuel inventories. The measures are expected to be phased in by June 2028.

The document identifies limited storage capacity, inadequate port infrastructure and insufficient ship-to-ship transfer capability among Pakistan’s major energy-sector vulnerabilities.

It also proposes the development of an energy infrastructure corridor around Hub and Port Qasim featuring storage terminals, pipeline connectivity and single-point mooring facilities aimed at improving import efficiency and lowering logistics costs.

Petroleum Minister Ali Pervaiz Malik said last week that building strategic reserves remained difficult under Pakistan’s IMF-supported fiscal framework, but said the government was attempting to move quickly toward implementation.