Petroleum division kicks off feasibility study on strategic reserves

ISLAMABAD: The government on Tuesday kicked off a feasibility study regarding strategic petroleum reserves (SPR) through international consultancy firm Wood McKenzie.

Federal Minister for Petroleum Ali Pervaiz Malik today chaired the kick-off meeting with Wood Mackenzie, which was selected to undertake the study following a competitive tender process that attracted four bids.

Wood Mackenzie Vice President Christopher Darry, Director Chris Brown, Principal Consultant Jordan Macdonald and Senior Vice President Aamir Malik attended the meeting. Representatives of Attock Refinery Limited, the Pakistan Institute of Development Economics, Government Holdings (Private) Limited, the Ministry of Maritime Affairs and Pakistan LNG Limited were also present.

“The minister was briefed on the scope and objectives of the study, following which the meeting discussed and agreed on the timelines and overall architecture for the assignment,” an official statement by the information ministry said.

The minister highlighted that the government was pursuing reforms and initiatives to advance Pakistan’s energy security, recognising that energy security was intrinsically linked to national security. He termed ensuring the resilience of energy supplies and reducing vulnerabilities to external shocks a key priority of the government, according to the statement.

He said the recent crisis in the Strait of Hormuz had further magnified the need to strengthen Pakistan’s buffers and build greater resilience against supply disruptions.

“The SPR initiative is therefore an important step towards assessing how the country can strengthen its preparedness for potential supply shocks,” he said, noting that the Economic Coordination Committee (ECC) had already approved a “world-class bonded scheme” for large international oil players.

The government on Monday formally approved allowing foreign fuel suppliers to set up bonded storage facilities in Pakistan at their own expense for multiple purposes, including re-export and supplies to the local market.

Malik said the purpose of commissioning the study was to enable the government to make an informed decision based on evidence before embarking on such a major strategic initiative.

The minister also emphasised that the study should provide a “pragmatic and implementable” solution suited to the country’s requirements and help to determine the most appropriate way forward, the statement said. This would include the possibility of pursuing SPR development in a phased manner.

According to the statement, the Wood Mackenzie team termed it the “right time” for Pakistan to work on energy security, particularly in view of the evolving global energy landscape and recent supply disruptions.

The team said the study would focus on developing a pragmatic solution based on Pakistan’s specific requirements and circumstances.

“The study will cover technical feasibility, integrity, safety and operational assessment of proposed strategic storage facilities; international and regional benchmarks; policy and regulatory requirements; and short-, medium- and long-term implementation options,” the statement said.

“It will also examine legal, regulatory, financial, commercial and institutional arrangements, including possible public-private partnership models.”

The study will assess existing infrastructure that could potentially be utilised for strategic storage, taking into account connectivity and logistics requirements, the statement noted.

It will also provide “estimates of capital expenditure, financing options, implementation timelines and institutional responsibilities for phased development of SPR capacity” in Pakistan.

The minister directed all relevant stakeholders to extend full cooperation to Wood Mackenzie, ensuring the timely provision of required data and input to allow the completion of the study within agreed timelines and “provide a sound basis for future policy decisions”. He added that a steering committee will be formed to periodically review progress on this matter.

Pakistan has been planning to boost domestic storage for crude oil and refined products to increase its energy security, it emerged in May. With no strategic petroleum reserves, the country has been left exposed to oil supply shocks resulting from the US-Iran war that has choked supplies through the Strait of Hormuz.

In July, Prime Minister Shehbaz Sharif directed authorities to increase the country’s strategic petroleum reserves as a cabinet committee approved amendments to the oil refining policy.