Key Takeaways
- Pakistan is establishing its first-ever Strategic Petroleum Reserves (SPR) to mitigate supply disruptions.
- The government aims for a 45-day emergency oil buffer, with plans to expand capacity to 90 days.
- Saudi Arabia has agreed to provide a $6.7 billion deferred-payment oil facility at highly concessional terms.
Pakistan is taking significant steps to bolster its energy security by establishing Strategic Petroleum Reserves (SPR) amid escalating tensions in the Middle East, particularly concerning disruptions through the Strait of Hormuz.
The current model relies on a just-in-time commercial inventory, leaving the country vulnerable to prolonged supply disruptions. The government has proposed an initial 45-day emergency oil buffer and aims for a longer-term capacity expansion to 90 days, which could be requisitioned during national emergencies.
To support this strategic initiative, Pakistan is also promoting the development of a Pakistan Maritime Energy City at Gwadar Port, inviting Gulf countries like Saudi Arabia and Kuwait to establish and maintain strategic crude-oil reserves there. This arrangement would allow Gulf producers to store oil outside the immediate conflict zone while giving Pakistan priority access in emergencies.
In response to the current crisis, Pakistan has formally requested a $6.7 billion deferred-payment oil facility from Saudi Arabia at an interest rate of one per cent, with a 15-year repayment period and a five-year grace period. This is significantly better than the previous $1.2 billion facility agreed in February 2025, which had an interest rate of six per cent and expired in April.
The immediate challenge for Pakistan is to manage higher energy costs without derailing macroeconomic stability. Sustained high oil prices could exacerbate foreign exchange reserves issues and widen the import bill, putting additional pressure on the economy.
Pakistan’s broader strategic relationship with Saudi Arabia has deepened since the signing of the Strategic Mutual Defence Agreement in September 2025. Saudi Arabia has emerged as one of Pakistan's most important bilateral financial partners, providing substantial deposits and other financial support to strengthen the relationship.
Despite recent diplomatic efforts that temporarily reopened the Strait of Hormuz, renewed hostilities have once again plunged the region into uncertainty. Analysts warn that a temporary ceasefire does not guarantee lasting stability, with energy costs expected to rise and supply chains facing renewed pressure.
