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From Arriba, a witness

Karachi, May 26 (Reuters) - Pakistan plans to increase its stockpiles of crude oil and refined products to boost its energy security, according to a government document circulated by oil producers and several leading global companies.

Although Pakistan relies on supplies through the Strait of Hormuz for about 90 percent of its oil and liquefied natural gas imports, it does not possess strategic oil reserves.

This made Islamabad vulnerable to supply shocks from the Iran war, even as its IMF lending program restricted the space for expensive state-owned emergency stockpiles.

The document, seen by Reuters, states that the Ministry of Energy proposes establishing strategic oil reserves and commercial storage facilities, including customs-controlled terminals, refineries, and oil marketing companies. The ministry also aims to increase oil and gas exploration and production, upgrade refineries, and strengthen the refining, marketing, and distribution sector.

The ministry said in the document, "Pakistan's oil security requires emergency reserves and stronger domestic supply capacity."

The ministry shared the proposed framework with Saudi Aramco, Abu Dhabi National Oil Company (ADNOC), Kuwait Petroleum Corporation, Qatar Energy, PetroChina, as well as oil trading companies Vitol and Trafigura, and storage company Vopak.

Trafigura, Vitol, and Aramco declined to comment. The other companies and Pakistan's Ministry of Petroleum and Natural Resources did not respond to requests for comment.

Oil Minister Ali Pervez Malik said last week that building up reserves is "easier said than done," especially for a country under an IMF program and facing severe financial challenges, but added that the government is trying to move quickly from planning to implementation.

Customs storage plan

Under the customs storage scheme, international suppliers and traders will be allowed to store quantities of oil, which in turn will build up commercial stockpiles that could help support domestic supplies during emergencies. The government may also allow companies to store fuel for re-export.

The document did not clarify terms such as incentives, pricing, taxes, exchange rates, purchase or ownership conditions, or whether companies would be required to invest in storage infrastructure.

The ministry wants to finalize the framework for customs storage for suppliers by June.

In addition to Pakistan's lack of strategic reserves, the document pointed to limited port infrastructure, weak ship-to-ship shipping capacity, and insufficient storage capacity as weaknesses in Islamabad.

The government's strategic reserves will be funded through a dedicated fund, financed by 10 rupees ($0.0359) per liter of the current oil tax, with disbursements beginning on July 1st. The report indicates that these allocations will generate approximately $700 million annually.

Pakistan currently imposes a tax of 58 rupees per liter on diesel and 102.17 rupees per liter on gasoline.

In addition, the government intends to require refineries to maintain a 15-day stock of crude oil and oil marketing companies to maintain a 30-day stock of ready-to-deliver products, with the application of these rules to be gradual through refinery policy, profit margin reviews, and strengthening of refining, marketing, and distribution operations by June 2028.

The report calls for the establishment of an energy infrastructure corridor around the city of Hope and Port Qasim, including a single-point linkage system, storage facilities and pipelines to reduce reliance on smaller and more expensive shipments.