Pakistan seeks help from friendly oil-producing countries to build 60-day strategic crude reserves

Pakistan has moved to fast-track the development of strategic crude oil reserves, reaching out to friendly oil-producing countries for support in meeting 60 days' worth of consumption needs as part of a broader push to strengthen the country's energy security, The Express Tribune reported.

The National Coordination and Management Council (NCMC) has directed relevant authorities to expedite work on building strategic crude oil reserves to avert supply disruptions stemming from the ongoing US-Iran war in the Gulf region, which has raised fears of a looming oil crisis.

A similar plan to build 60-day strategic oil reserves was first proposed in 2006 but failed to materialise due to changes in political administrations and lack of follow-through.

The proposed framework also includes plans to maintain 30-day stocks of petroleum products. National Logistics Corp (NLC) has stressed the need to incorporate maritime infrastructure, storage facilities, and the National Ports Master Plan into the overall mechanism. 

The NCMC has directed NLC to draft a uniform policy by evaluating and combining its own proposals with those prepared by the Petroleum Division.

Currently, oil marketing companies (OMCs) and refineries maintain around 50% oil stocks, though these are commercial rather than strategic reserves. OMCs are required to maintain stocks for 20 days. 

Meanwhile, the government expects to collect Rs1.7 trillion in petroleum levy during the current financial year, but this revenue is being used to meet current expenditures rather than being invested in strategic reserves.

The United Arab Emirates (UAE) has already built strategic oil reserves in India. Pakistan had also allocated land to the UAE for an oil city in Gwadar years ago, but no progress has been made on the project. 

Under the proposed framework, the government plans to grant export rights to entities that build strategic oil reserves, along with tax exemptions, particularly on machinery imports.

Briefing the NCMC, the Petroleum Division presented the proposed Strategic Petroleum Reserve framework, which envisages developing reserves equivalent to 60 days of crude oil consumption and 30 days of petroleum product consumption. The division also updated the council on draft policies covering bonded storage and refinery upgrades, which have been shared with stakeholders for input.

Pakistan's 2023 strategic reserves policy failed to attract foreign oil suppliers to establish bonded storages due to policy shortcomings, and is now being amended to create a more favourable environment for foreign investors. 

The Petroleum Division had earlier briefed the Economic Coordination Committee (ECC) on plans to facilitate imports via foreign suppliers by offering customs bonded storage facilities, but no supplier has set up such storage to date.

The ECC was told that disruptions to shipping traffic through the Strait of Hormuz had exposed the vulnerability of Pakistan's energy security. In response, the Petroleum Division is focusing on developing key pillars of energy security, including indigenisation and strategic storage capacity.