Pakistan is moving ahead with an oil storage scheme involving Saudi Arabia, Kuwait and Qatar, under which the three countries would store petroleum products in bonded facilities in Pakistan at their own cost, allowing Islamabad to access the stocks during an energy supply crisis.
Petroleum Minister Ali Pervaiz Malik said the commercial bonded storage scheme, prepared with the help of Saudi Aramco and other major companies, has been sent to the Economic Coordination Committee (ECC) for approval. He said the government expects a decision on the proposal next week.
Under the proposed arrangement, foreign suppliers would be able to keep crude oil and petroleum products in customs bonded storage facilities in Pakistan without immediately paying import duties and taxes. The products could later be sold to local oil marketing companies and refineries or re exported.
The scheme would cover crude oil, petrol, high speed diesel, jet fuel, fuel oil, LPG and LNG. Proposed storage locations include Port Qasim, Karachi Port and Keamari, Hub, Gwadar, Mahmood Kot and Machike Sheikhupura.
The Petroleum Division is separately seeking ECC approval for revised policy guidelines governing foreign supplier funded imports through customs bonded storage facilities. The framework was first approved by the ECC in June 2023, but no foreign supplier has established a bonded storage facility under the policy so far.
Under the revised framework, foreign suppliers could maintain petroleum stocks in private or public bonded facilities and move the products between approved locations through the national pipeline network without triggering duties or taxes while the products remain under the bonded regime.
Key Points of the Proposed Framework:
• Foreign suppliers would be allowed to store crude oil, petrol, diesel, jet fuel, fuel oil, LPG and LNG in Pakistan.
• Local sales would be made to licensed oil marketing companies and refineries, with applicable duties and taxes paid when products are removed from the bonded regime for domestic consumption.
• Re exports would be allowed from bonded storage, with the proposed framework giving foreign suppliers broad flexibility to re export their stocks.
• Approved locations would include Port Qasim, Karachi Port and Keamari, Hub, Gwadar, Mahmood Kot and Machike Sheikhupura.
• OGRA would receive daily stock reports from consignees and would establish product specific safety and regulatory protocols for the approved storage locations.
• FBR would continue to oversee customs requirements, while the Petroleum Division would act as the lead coordinating authority for the policy.
The revised policy has been circulated among the Finance, Commerce, Industries and Production, Maritime Affairs and other relevant authorities. The FBR, however, has maintained reservations over several provisions, particularly in relation to the Customs Act and Sales Tax Act.
Malik said Pakistan’s lack of strategic petroleum reserves has exposed the country to international supply disruptions. He said the government would need about $500 million to maintain one month of crude oil reserves, while an underground storage system could require another $300 million to $400 million.
Pakistan currently imports around 90 percent of its energy requirements, while domestic oil production is about 70,000 barrels per day, compared with daily demand of roughly 500,000 barrels. The government is therefore also seeking to increase domestic exploration and develop other measures to reduce exposure to international supply shocks.
The proposed storage arrangement comes after disruptions in oil supplies through the Strait of Hormuz highlighted Pakistan’s dependence on imported energy. Malik said the government is also working on a broader energy roadmap, while Turkish Petroleum is expected to begin offshore drilling operations in Pakistan’s territorial waters.
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