ISLAMABAD – Pakistan rolled out ambitious proposal for Saudi Arabia to establish tax-free oil storage facilities in the country, as the government moves to secure billions of dollars in potential foreign investment and transform Balochistan into a major regional energy and petroleum trading hub.
The offer came during high-level talks between Federal Minister for Petroleum Ali Pervaiz Malik and Saudi Ambassador Dr. Rajeh bin Tami Al-Baqami in Islamabad this week, with both sides exploring new avenues of cooperation in crude oil supplies, refinery upgrades, LPG imports, petroleum storage and mineral investment.
At centre of the discussions was Pakistan’s newly approved tax-neutral petroleum storage policy, which could allow Saudi energy companies to maintain significant commercial oil inventories in Pakistan without facing immediate domestic tax liabilities.
The government hopes the initiative will attract global petroleum traders and help establish Pakistan as an alternative energy storage destination amid rising geopolitical tensions and growing concerns over the security of international oil shipping routes.
Tax-Free Oil Storage in Pakistan
Under the new bonded petroleum storage framework, foreign companies would be permitted to import and store crude oil and petroleum products in designated facilities without paying the usual import duties and taxes while the products remain under bonded arrangements. Taxes would generally become applicable when petroleum products are released into the domestic market, while companies could re-export stored supplies under the relevant customs regulations.
The policy draws inspiration from international petroleum trading centres in Fujairah, United Arab Emirates, and Singapore, where extensive storage infrastructure supports global energy trading. Pakistan believes similar facilities could encourage Saudi Arabia and other international suppliers to establish inventories closer to emerging regional markets.
The framework also includes provisions intended to protect Pakistan’s domestic energy requirements during emergencies, with reports indicating possible priority purchase arrangements and government access to stocks at market prices under specified conditions.
These safeguards could strengthen national energy security, although their commercial implications would depend on the final regulatory arrangements.
Pakistan presented ambitious plan to develop large-scale petroleum storage and refining complex in Hub, Balochistan. The proposed project, being pursued with technical guidance from Technip Energies UK, is designed to accommodate Very Large Crude Carriers (VLCCs), allowing the handling of substantial crude oil shipments.
Plans under consideration include offshore Single Point Mooring infrastructure, pipelines, bonded storage terminals and potential refining facilities. The initiative get alot of attention, with support from top civil-military officials.
The government envisions complex as strategic energy gateway capable of connecting Gulf petroleum suppliers with Pakistan’s domestic market and potentially serving China, Central Asia and other regional destinations.
The proposed investment comes against the backdrop of increasing uncertainty surrounding two of the world’s most strategically important maritime chokepoints: the Strait of Hormuz and the Bab al-Mandeb Strait. Disruptions along these routes can affect oil shipments, maritime insurance premiums, transportation costs and the availability of energy supplies.
Pakistan is positioning its proposed storage facilities as additional option for Saudi Arabia to diversify petroleum distribution and maintain supplies beyond traditional Gulf-based infrastructure. Commercial inventories stationed in Pakistan could potentially improve the responsiveness of Saudi suppliers to certain Asian and regional markets.
For Pakistan, additional petroleum stocks could provide a buffer against unexpected import disruptions and strengthen the country’s ability to manage periods of international energy volatility. However, overseas storage would not automatically eliminate maritime transit risks, particularly if incoming shipments continued to depend on vulnerable routes.
Saudi Aramco Crude Supplies and Euro 5 Refinery Upgrades
Petroleum Minister Ali Pervaiz Malik also invited Saudi investors to participate in upgrading Pakistan’s ageing oil refining infrastructure. The proposed modernisation programme would focus on improving operational efficiency, enhancing petroleum processing capabilities and enabling refineries to produce cleaner fuels meeting Euro 5 standards.
Pakistan currently faces substantial investment requirements to modernise existing refineries and improve the quality of locally produced petroleum products. Saudi participation could help mobilise financing, technology and technical expertise for these developments. The two sides also discussed increasing crude oil supplies through Saudi Aramco, potentially strengthening Pakistan’s access to petroleum imports.
Pakistan acknowledged Saudi cooperation in facilitating petroleum shipments, including supply arrangements involving Yanbu, the Saudi port on the Red Sea. No specific additional crude oil volumes or new supply contract values were publicly confirmed.
With colder weather approaching, Pakistan also raised the possibility of arranging dedicated LPG supplies from Saudi Arabia to meet rising seasonal demand.
Additional imported supplies could help reduce the risk of shortages and provide greater flexibility to distributors during peak consumption periods. The discussions come at a particularly important time for consumers already facing pressure from elevated energy costs.
Saudi Mining Official Invited to Islamabad Investment Forum
The talks also extended beyond the petroleum sector, with Pakistan seeking greater Saudi participation in mineral exploration and development. Malik invited Saudi Vice Minister of Mining Khalid Al-Mudaifer to attend the Pakistan Minerals Investment Forum scheduled for November 12 and 13 in Islamabad.
The invitation forms part of Islamabad’s broader effort to attract Gulf investment into its mineral resources and related industrial infrastructure. The meeting also followed earlier diplomatic engagement with Saudi Energy Minister Prince Abdulaziz bin Salman, reflecting continued efforts to expand bilateral economic cooperation.
Pakistan’s ambitions extend beyond simply providing storage space for foreign oil companies. By combining bonded storage, large-scale crude handling, refinery modernisation and potential re-export facilities, the government hopes to develop an integrated petroleum trading ecosystem.
Such a development could attract international energy companies, create jobs, support industrial activity in Balochistan and generate revenue through shipping, storage, handling and logistics services. The proposed infrastructure could also help improve the country’s petroleum supply management while potentially supporting regional energy trade with China and Central Asia.
For Saudi Arabia, the project offers the prospect of establishing additional petroleum inventories outside its existing facilities and developing new commercial routes into regional markets. The wider economic benefits, however, would depend on whether the proposed infrastructure attracts sufficient commercial demand and investment.
Despite the scale of Pakistan’s proposal, the October 30 meeting did not produce a publicly announced binding investment agreement. Neither side disclosed committed funding, final storage capacities, confirmed construction dates or a schedule for establishing Saudi-operated facilities.
Pakistan separately engaged potential energy investors from several countries, including Kuwait, the Netherlands and Singapore, as part of efforts to develop its petroleum storage sector.
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