ISLAMABAD: Pakistan is moving to establish its first commercial bonded oil storage system, under which Gulf producers and global commodity traders could store petroleum products in the country for onward export while giving Islamabad access to some of the stocks during emergencies, a senior petroleum official said on Monday.
The proposed framework, aimed at turning Pakistan into a regional storage and distribution hub and strengthening fuel security, has been submitted to the Economic Coordination Committee (ECC) for approval, Additional Secretary and Petroleum Ministry spokesperson Zafar Abbas said.
“Product will be sitting on our soil, owned by foreign companies, and we can access it on a need basis,” he told Arab News.
The scheme would allow foreign companies to retain ownership of petroleum products held in bonded storage, a customs-controlled system under which goods can be brought into the country without being treated as imports for domestic consumption. Pakistan would get the first option to buy a portion of the stored fuel during an emergency.
Under normal circumstances, companies would be free to export their stocks but would have to notify Pakistani authorities before exporting the final 10 percent of a consignment, giving the government 24 to 48 hours to decide whether it wanted to buy the fuel.
However, Abbas said a key unresolved issue was the Federal Board of Revenue’s requirement that foreign suppliers bringing petroleum products into Pakistan register for local taxes, regardless of whether the products were intended for export or domestic consumption.
The petroleum ministry is proposing that foreign companies remain outside the local tax net while their products are held in bonded storage, with buyers paying applicable duties, sales tax and other charges when fuel is cleared for domestic use.
“If a company stores product here, it doesn’t need to register for local taxes,” Abbas said.
“The buyer who uses the product registers and pays the duties. The company simply supplies it. The day the product is bought from the company and cleared from the bonded warehouse is the day taxes are paid,” he added.
The proposed policy is now awaiting an ECC decision.
Gulf producers consulted
Petroleum Minister Ali Pervaiz Malik said on Sunday the scheme had been prepared on the directives of Prime Minister Shehbaz Sharif following consultations with Saudi Arabia, Kuwait and Qatar.
“I am grateful to the governments of Saudi Arabia, Kuwait and Qatar that we will have a bonded scheme with them, under which these countries will store their oil on the secure territories of Pakistan at their own cost, and supply to the entire world from here,” Malik was quoted by Dawn as saying.
“When, God-willing, a decision is made on it next week, you will see the progress,” he said.
For import-dependent Pakistan, the scheme could provide an emergency fuel buffer inside the country, allowing local oil marketing companies to buy petroleum products already in bonded storage rather than wait for fresh shipments during a supply disruption.
Abbas said the requirement giving Pakistan the first option to buy would apply when stocks held by a supplier fell to the final 10 percent.
“However, for the last 10,000 tons, we have set a 10 percent threshold,” Abbas said. “They must check with us first. Within 24 to 48 hours, we will inform them if we need it, so they don’t sell it elsewhere. If we don’t need it, we will tell them immediately, and they can go ahead and sell.”
He said the government would not provide land or finance for the proposed storage facilities, and that foreign companies would determine the location and capacity based on commercial considerations, potentially in partnership with Pakistani firms.
“We haven’t specified fixed capacity requirements in the policy,” Abbas said. “They will decide for themselves.”
The first version of Pakistan’s bonded-storage policy was formulated in 2023 but failed to attract sufficient interest, largely because potential investors were concerned about their exposure to local taxation, the official said.
Once approved by the ECC, the policy would be open to companies seeking to develop commercially viable storage projects, Abbas said.
The proposed model is based partly on storage facilities operated by major energy companies and traders in strategic markets.
Abbas said geopolitical disruptions could increase the value of having petroleum stocks already stored in Pakistan.
“Even if a disruption occurs along the transit route, their product will already be sitting here on-site,” he said, adding that companies could continue supplying their intended markets during disruptions elsewhere in the supply chain.
