ISLAMABAD – The easing of US sanctions on Iranian oil sparked debate over whether Pakistan can finally tap into its western neighbour’s vast energy reserves and ease the burden of soaring fuel import costs.
With Washington granting Iran 60-day window to export crude oil and petrochemical products, Pakistanis questioned whether the government could avail opportunity to secure cheaper oil and bring relief to consumers. However, industry experts say the picture is far more complicated than it appears.
Federal Petroleum Minister Ali Pervaiz Malik confirmed that Pakistan is actively engaging with Iranian authorities to explore energy cooperation, including the possibility of importing crude oil. The minister also addressed the long-stalled Iran-Pakistan (IP) Gas Pipeline, saying the dispute remains before the Paris Court of Arbitration but stressing that both countries should resolve the matter through negotiations rather than legal battles.
He made it clear that affordability would remain Pakistan’s top priority. “If locally produced gas costs around $6 and imported gas around $10, we will not purchase Iranian gas if it costs even more,” he stated, adding that technical teams from both countries are working to find a mutually beneficial solution.
IP Gas Pipeline has remained largely dormant since its inauguration in 2013 by then-President Asif Ali Zardari. While Iran completed its portion years ago, Pakistan’s planned 780-kilometre pipeline was never built due to U.S. sanctions and funding constraints. Iran eventually moved the dispute to international arbitration in 2024.
Pakistan remains heavily reliant on imported petroleum products despite domestic refining capacity. According to the Pakistan Oil Report FY2025, the country consumes around seven million tonnes of petrol and diesel annually. Domestic refineries produce nearly five million tonnes of diesel, while another two million tonnes are imported. Petrol tells a different story, with only around two million tonnes produced locally compared to nearly five million tonnes imported every year.
Pakistan processes roughly 9-10 million tonnes of crude oil annually through its five refineries, producing petrol, diesel, LPG, lubricants and furnace oil. Most crude oil imports currently come from Saudi Arabia and the United Arab Emirates, with additional supplies sourced from the United States under existing long-term agreements.
Despite public expectations, energy specialists say sanctions relief does not automatically mean Pakistan will receive discounted Iranian crude.
Oil and gas experts said Pakistan got enough flexibility within its supply arrangements to purchase crude from countries beyond the Gulf region, noting that imports from Russia and Nigeria in recent years demonstrate this possibility. He however cautioned that Iranian crude will almost certainly be sold at international market prices rather than at the discounted rates seen when sanctions severely restricted Tehran’s exports.
Lower transportation costs may provide some savings, but they are unlikely to significantly reduce fuel prices, experts claimed.
The numbers underline Pakistan’s dependence on overseas supplies. Around 70 percent of diesel demand is met through domestic production, while 30 percent is imported, mainly from Kuwait. Petrol remains even more import-dependent, with nearly 70 percent purchased from international spot markets.
As of late June, official diesel prices stand at Rs311 per litre, while petrol is priced at Rs299 per litre. Smuggled Iranian fuel available in parts of Balochistan sells for around Rs250 per litre, but analysts say legal commercial imports cannot be compared with illicit cross-border supplies.
Iranian crude was sold below market value only because sanctions had left Tehran with limited buyers. With sanctions temporarily eased, Iran is expected to sell crude at prevailing international prices. Also, Pakistan would not be the only country seeking Iranian oil, as major buyers such as India and China are also likely to enter the market.
Islamabad and Tehran could negotiate a special bilateral arrangement, there is no guarantee Tehran would offer crude below international prices. Even Saudi Arabia, one of Pakistan’s closest allies, supplies oil according to global market rates.
Even if Pakistan begins importing larger quantities of Iranian crude, another obstacle remains, its refineries. Iranian crude is predominantly heavy crude, producing a significantly higher volume of furnace oil than lighter crude grades.\ With domestic demand for furnace oil shrinking and global prices remaining weak, processing heavy crude is considered less profitable.
Pakistan’s five refineries are primarily configured to process lighter crude and have yet to undergo major upgrades needed to efficiently refine heavier grades. Although Iranian crude can technically be processed, the economics make it a less attractive option under current market conditions.
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