Pakistan Moves to Build Strategic Oil Reserves Amid Fears of Supply Disruptions

By Shahzad Paracha :

Pakistan is planning a major expansion of its oil storage capacity in an effort to strengthen energy security and reduce vulnerability to external supply disruptions, according to a government policy framework shared with global energy companies and commodity traders.

The proposal comes as Islamabad faces growing concerns over the security of energy imports passing through the Strait of Hormuz, a critical shipping route through which Pakistan receives the majority of its crude oil and liquefied natural gas supplies.

Government officials fear that escalating tensions in the Middle East, particularly the conflict involving Iran, could expose Pakistan to serious fuel shortages due to its heavy dependence on imported energy.

According to the policy document reviewed by Reuters, Pakistan currently lacks strategic petroleum reserves, leaving the country exposed during periods of geopolitical instability, shipping disruptions or sudden spikes in global oil prices.

The Ministry of Energy is now proposing the development of both strategic petroleum reserves and expanded commercial fuel storage through bonded terminals, private-sector partnerships and upgraded infrastructure facilities.

Officials say the broader strategy also includes increasing domestic oil and gas exploration, modernising refineries and restructuring parts of Pakistan’s downstream petroleum sector to improve long-term supply stability.

“Pakistan’s oil security requires both emergency reserves and stronger local supply capacity,” the ministry stated in the document.

The proposed framework has reportedly been shared with several major international energy firms, including Saudi Aramco, Abu Dhabi National Oil Company, Kuwait Petroleum Corporation, QatarEnergy and PetroChina.

Global commodity trading giants Vitol and Trafigura, along with Dutch storage operator Vopak, were also approached as part of the consultations.

Pakistan imports a significant portion of its energy requirements, with analysts estimating that up to 90% of its oil and LNG imports pass through the Strait of Hormuz. Any disruption in the region could therefore have immediate consequences for fuel availability, electricity generation and industrial activity within the country.

The initiative is being pursued despite Pakistan’s ongoing financial constraints under its programme with the International Monetary Fund, which limits the government’s ability to maintain large state-funded emergency reserves.

Petroleum Minister Ali Pervaiz Malik recently acknowledged the financial challenges associated with building strategic reserves but said the government was attempting to move quickly from planning towards implementation.

Under the proposed bonded storage system, international suppliers and traders would be allowed to maintain petroleum stocks inside Pakistan, creating commercial inventories that could be used during emergencies or supply shortages.

The government is also considering allowing companies to store petroleum products for re-export, potentially positioning Pakistan as a regional storage and logistics hub linked to Gulf energy markets.

However, the document does not yet clarify critical commercial details, including taxation policies, pricing structures, incentives, foreign exchange arrangements, ownership rules or whether private companies would be expected to finance storage infrastructure independently.

In addition to reserve storage, the framework proposes development of a major energy infrastructure corridor centred around Hub and Port Qasim.

The proposed corridor would include expanded storage facilities, pipelines and single-point mooring systems designed to accommodate larger fuel shipments and improve import efficiency.

Energy experts say Pakistan’s current infrastructure often forces the country to rely on smaller and more expensive fuel shipments, increasing transportation costs and limiting supply flexibility during periods of global volatility.

The government’s push for strategic reserves reflects broader concerns over energy security as geopolitical instability continues to affect global oil markets. Recent conflicts in the Middle East have triggered fluctuations in crude prices and renewed fears about disruptions to maritime trade routes used by major energy-importing countries.

Analysts say countries with limited strategic reserves remain particularly vulnerable to sudden supply interruptions, especially economies like Pakistan that already face foreign exchange pressures and high import dependence.

Officials hope the new framework will encourage foreign investment into Pakistan’s energy infrastructure while helping the country reduce risks associated with future global energy crises.

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