KARACHI: Pakistan’s government is in talks with major international energy companies from Saudi Arabia, Kuwait, the Netherlands, Singapore and other countries to develop bonded fuel storage facilities in the country, energy ministry officials and industry stakeholders said this week, with potential investments running into billions of dollars.

The proposed facilities are part of Pakistan’s efforts to reduce its reliance on fuel shipments passing through the Strait of Hormuz and strengthen the country’s strategic fuel storage capacity.

Saudi Aramco, Kuwait Petroleum Corporation (KPC), Vitol and Trafigura Group Pte. Ltd. are among the international energy companies interested in developing fuel storage facilities in Pakistan, according to officials.

“Yes, they are interested. They are more than willing. Some of them are very eager,” a senior official at Pakistan’s energy ministry told Arab News on condition of anonymity.

The official would not say if any of these firms had submitted a formal proposal or if talks remain exploratory.

Pakistan’s Petroleum Minister Ali Pervaiz Malik and energy ministry spokesperson Zafar Abbas did not respond to questions seeking their comment on the latest update on the government’s project.

Islamabad last month revised its bonded storage framework after the original 2023 scheme failed to attract investors, with the Economic Coordination Committee (ECC) approving on August 24 a plan allowing foreign suppliers to bring petroleum products into Pakistan, retain ownership while the fuel is stored in customs-bonded facilities, and sell it locally or re-export it. The policy draft, however, awaits approval of the federal cabinet for its implementation.

The government has also consulted Saudi Arabia, Kuwait and Qatar, while engaging international commodity traders, including Vitol, and has said foreign companies can develop dedicated storage facilities at Pakistan’s commercial capital of Karachi and Gwadar in the southwestern Balochistan province.

“We have drafted our policy because of this,” the energy ministry official said, declining to share how much capital investments the project could potentially attract.

“You see, there are foreign investors, and these are friendly countries. So, if we give a good commitment first, and then it does not materialize, it will look bad.”

‘IT WILL UNLOCK PAKISTAN’

Deeply concerned by the US-Iran conflict and disruptions to shipping in the Strait of Hormuz, international energy giants are considering shifting fuel storage from regional ports to Pakistan, building new terminals and holding oil stocks in the country, according to industry stakeholders.

“On Pakistan’s bonded tank policy, the world’s leading trading companies are looking forward to utilizing that policy and building billions of dollars’ worth of oil stocks in Pakistan,” a foreign energy company official told Arab News, requesting not to be named as his company’s “stakes are in the Middle East and everywhere” and any disclosures could upset its partners.

“Aramco will come, KPC will come, Trafigura will come, we will come, and two, three more companies,” he said, adding that Islamabad’s bonded tank policy should not be seen in isolation from its refinery upgradation project.

“These are two faces of the same coin. Without one, there can’t be another.”

Pakistan’s five major oil refineries are expected to sign agreements with the government this week to begin a long-delayed modernization program that could unlock around $6 billion in investment.

Asked how much foreign investment Pakistan should expect in its bonded tank project, the foreign energy firm official replied that “it’s a game changer.”

“It will unlock Pakistan... the bonded tank policy is such a powerful instrument. You will be amazed to see that,” he said.

WHAT ARE THESE MULTINATIONALS PLANNING TO DO?

He said the biggest risk right now for Pakistan was energy security.

“If the Strait of Hormuz is closed, there is no oil or gas in Pakistan,” the energy company official said. “What we have done in the bonded tank, as an international company, we can keep stocks in Pakistan.”

His company holds crude oil, refined petroleum products and marine bunkering fuels worth billions of dollars in the United Arab Emirates, Bahrain and other Gulf countries.

“If Pakistan goes for the bonded tank [policy implementation], we keep our tankage position in Pakistan,” he said, hinting that his company may store and sell fuel in the local and regional markets.

The government and multinational firms are quite close in their discussions.

“If the final draft comes in our hand next week, we will look at it,” the energy investor said.

“In the next 6 months, we will build one to two million tons of fuel stocks in Pakistan,” he said, alluding to the pending approval of Pakistan’s federal cabinet.

The official said his company will first utilize Pakistan’s existing storage capacities and then look to build its own new terminals.