Pakistan Offers Saudi Arabia Tax-Free Petroleum Storage Facilities

Pakistan offers Saudi Arabia tax-neutral oil storage facilities under a new bonded policy to strengthen energy trade, diversify supply routes, and attract investment.

Pakistan is positioning itself as a potential regional energy hub by offering Saudi Arabia tax-free petroleum storage facilities under a newly approved bonded policy. The initiative aims to attract billions of dollars in foreign investment while giving international oil suppliers greater flexibility in storing and distributing fuel across Asian markets.

The proposal was discussed during a meeting between Federal Minister for Energy Ali Pervaiz Malik and Saudi Ambassador to Pakistan Dr. Rajeh bin Tami Al-Baqami in Islamabad on October 30. Both sides explored opportunities to expand cooperation in the petroleum, mining, and energy sectors, with a particular focus on developing Pakistan’s energy infrastructure.

Under the proposed framework, Saudi companies will be able to establish commercial petroleum reserves in Pakistan without facing local tax liabilities. According to the Petroleum Ministry, the policy has been designed with international energy hubs such as Fujairah and Singapore in mind, reflecting Pakistan’s ambitions to compete in the regional fuel storage and distribution market.

Beyond attracting investment, the arrangement could give Saudi Arabia an alternative storage and distribution base for reaching Asian markets. It may also help reduce dependence on vulnerable maritime routes, particularly the Strait of Hormuz and Bab Al Mandab, where geopolitical tensions and shipping disruptions continue to create uncertainty for global energy supplies.

Pakistan is also engaging energy companies from Saudi Arabia, Kuwait, the Netherlands, Singapore, and other countries to establish bonded fuel storage facilities. These projects could bring investments worth billions of dollars and strengthen the country’s strategic petroleum reserves.

Another major development discussed during the meeting was a proposed petroleum storage and refining complex in Hub, Balochistan. The facility is expected to accommodate Very Large Crude Carriers (VLCCs), potentially positioning Pakistan as an energy transit corridor connecting Central Asian and Chinese markets.

Malik also highlighted investment opportunities under the country’s refinery upgradation programme, which aims to modernise existing facilities, improve efficiency, and support the transition to Euro 5 fuel standards.

The discussions further covered increased crude oil procurement from Saudi Arabia, coordination with Saudi Aramco, and dedicated LPG shipments through Yanbu port to support Pakistan’s fuel requirements ahead of winter.

If implemented, the proposed arrangement could mark a shift in Pakistan-Saudi energy relations, moving beyond traditional oil supply agreements towards long-term commercial partnerships, infrastructure investment, and regional energy connectivity.