KARACHI: The government has decided to hire international consultants to build countrywide storage facilities for maintaining strategic petroleum reserves, a move officials say would help Pakistan avoid energy shortages during crises such as the Iran war and disruptions in the Strait of Hormuz.
The decision was taken in a meeting chaired by Petroleum Minister Ali Pervaiz Malik in Islamabad, according to a notification the energy ministry issued on Friday.
“After detailed deliberations, it was decided to constitute a committee to prepare an RFP [Request for Proposal] for an international benchmarking study and proposal for phased implementation [of strategic petroleum reserves] for Pakistan,” said the notification.
The move comes as Islamabad seeks to strengthen its energy security framework amid recurring volatility in international oil markets and disruptions in global supply chains, including uncertainty caused by the Iranian closure of the Strait of Hormuz and a US naval blockade of Iranian ports during the conflict.
Pakistan currently relies heavily on imported oil and liquefied natural gas (LNG) supplies routed through the Middle East and lacks a fully functional strategic petroleum reserve system, leaving the country vulnerable to supply disruptions and price shocks during regional conflicts.
The country is facing gas shortages and floated a tender on May 6 to buy spot LNG cargoes but rejected the bids on Friday without citing any specific reason. The decision to buy LNG was taken amid supply disruptions from Qatar, Pakistan’s permanent contractor.
According to the terms of reference (TORs) mentioned in the notification, the eight-member committee, headed by a special secretary of the Petroleum Division, will operationalize existing studies on strategic petroleum reserves and prepare an RFP or tender documents to engage “a consortium of reputable consultants including technical, financial/chartered accountant firm(s) and legal firm, through competitive process.”
The selected consultants will be tasked with conducting a comprehensive study covering technical, commercial and legal aspects of developing these reserves in a phased manner.
According to the notification, the consultants’ deliverables will include undertaking “a techno-feasibility, integrity, safety, and operational assessment of proposed strategic storage facilities in Pakistan.”
They will also develop a structured working paper on strategic petroleum reserves, covering international benchmarks, regional practices and Pakistan’s strategic requirements.
The selected firm will also submit the estimated capital expenditure requirements, financing options, implementation timelines and institutional responsibilities for the development of Pakistan’s strategic petroleum reserve capacity.
In addition, the consultants will provide mapping and health assessment of existing infrastructure that can be utilized for this purpose while keeping in mind connectivity and logistical requirements.
The committee will hold its first meeting on May 11 and submit its recommendations and report to the petroleum minister by May 14.
“The government plans to build strategic storage facilities across Pakistan so that the country can avoid another energy crisis like the one it faced due to the war in the Middle East,” an official privy to the developments told Arab News on condition of anonymity.
A recent study carried out by the Pakistan Institute of Development Economics (PIDE) warned that if the Strait of Hormuz remained closed for three months, global oil prices could surge as high as $150 per barrel, potentially pushing Pakistan’s monthly petroleum import bill to between $3.5 billion and $4.5 billion and driving inflation from 7 percent to 17 percent.
“Given Pakistan’s around 80-85 percent dependence on Gulf oil and the absence of large strategic reserves, urgent measures ... are critical to insulate the economy from crippling inflationary pressures,” Dr. Abida Naurin, who conducted the PIDE study, said.
