Strategic petroleum reserves in Pakistan: between necessity and public accountability

Pakistan’s renewed debate on establishing strategic petroleum reserves (SPR) reflects a growing realisation that energy security can no longer be treated as an afterthought. Recent global supply disruptions and price volatility have exposed the vulnerability of import-dependent economies like Pakistan, where even short interruptions in oil supplies can trigger inflation, industrial slowdown, and fiscal stress. However, while the need for SPR is increasingly evident, policy making must avoid knee-jerk reactions driven by temporary crises. Emergency response measures and long-term strategic planning are related but fundamentally different challenges, requiring different mindsets and planning tools. For Pakistan, the stakes are particularly high. With a significant portion of the population already struggling under economic hardship, failure to develop a robust energy security framework could have severe social and economic consequences. Beyond economics, petroleum reserves also carry strategic importance for national defense in an increasingly uncertain regional environment. The central question, therefore, is not whether Pakistan requires strategic reserves, but how such reserves should be designed, financed, and governed? Also read: Pakistan’s weekly oil import bill jumps to $800mn amid US-Iran conflict, says PM Potential storage locations such as Hub, Pipri, Port Qasim, and refinery-adjacent coastal areas are frequently discussed because of their proximity to import terminals and distribution infrastructure. Yet SPR development is far more complex than allocating land. It requires heavy capital investment, integration with logistics networks, environmental safeguards, and long-term operational planning. Proposals such as installing single point moorings (SPMs) west of Hub may appear strategically attractive, but they involve substantial costs and regulatory challenges. A more pressing concern is the absence of a commercially viable policy framework. Oil marketing companies (OMCs) and refineries already operate under regulated margins that often do not compensate adequately for carrying large inventories. Imposing higher mandatory stock holding requirements without reforming pricing mechanisms could weaken the financial health of these entities and reduce market efficiency. Similarly, upstream oil and gas companies, already burdened by circular debt and pressures outside their core mandate, such as mining sector, should not be further stretched by responsibilities better suited for specialised storage entities. The debate also raises an important question about the role of government versus private industry. Internationally, many countries operate hybrid models in which strategic reserves are shared between state-owned facilities and mandatory private holdings. Pakistan may eventually adopt a similar approach, but its fiscal realities cannot be ignored. Large government-owned SPR facilities would require substantial public investment at a time when debt servicing, social welfare, and infrastructure demands are already straining national finances. This naturally brings the discussion to the issue of financing. Pakistan has historically relied on levies such as the Gas Infrastructure Development Cess (GIDC) and Petroleum Development Levy (PDL) to fund energy-sector initiatives. Unfortunately, the public perception regarding transparency and purpose-specific utilisation of such funds has remained weak. Any proposal for new levies to finance SPR development must therefore be accompanied by strong structural safeguards rather than mere assurances. Strategic petroleum reserves are not a luxury; they are an essential pillar of national energy security. First, any SPR-related levy should be legally ring-fenced through independently audited escrow accounts that cannot be diverted for general budgetary use. Second, quarterly public disclosure of collections, expenditures, and project progress should be mandatory. Third, parliamentary oversight must ensure that funds are used strictly for their stated objectives. Most importantly, financially vulnerable citizens should not bear disproportionate burdens; instead, sectors that remain under taxed should contribute more meaningfully. There is also a strong moral and economic case for acknowledging past misallocations of public funds. Where energy-related levies were diverted or underutilised, corrective mechanisms should be considered. These may include future levy offsets, targeted subsidies for vulnerable consumers, or tariff rationalisation that gradually returns value to the public. Without visible corrective action, new financial burdens risk being perceived as a continuation of past practices rather than genuine reform. At the same time, Pakistan can improve energy resilience without immediately embarking on massive SPR construction projects. Stricter enforcement of existing inventory requirements, digital monitoring of stock levels, and greater transparency across the supply chain could significantly strengthen preparedness at comparatively lower cost. Nevertheless, some level of state-owned reserve remains strategically necessary. Commercial storage alone may not guarantee supply continuity during geopolitical crises or wartime conditions. Yet policymakers must avoid repeating costly mistakes seen elsewhere in the energy sector, particularly rigid long-term financial commitments that eventually burden consumers and taxpayers. An innovative interim option could involve leasing decommissioned oil tankers as offshore floating storage facilities. Such arrangements may provide quicker and relatively cheaper emergency storage capacity while permanent onshore infrastructure is developed. A similar concept could also be explored for LNG storage through older Floating Storage and Regasification Units (FSRUs). Ultimately, Pakistan requires a phased and pragmatic approach. The country should begin by optimising existing infrastructure, reforming regulations, and gradually increasing mandatory stock levels in line with market realities. Parallel to this, a limited government-owned reserve focused on critical national requirements can be developed over time. Strategic petroleum reserves are not a luxury; they are an essential pillar of national energy security. But in Pakistan, they must also become a test of whether public policy can align strategic necessity with transparency, accountability, and public trust. Without credible safeguards and a willingness to correct past mistakes, even the most important national initiatives risk losing legitimacy in the eyes of the people they are meant to protect.

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