KARACHI: Pakistan has offered Saudi Arabia tax-neutral oil storage facilities under a newly approved bonded policy that could allow Saudi companies to establish commercial petroleum reserves in the South Asian country while diversifying supply routes, the Pakistani petroleum ministry said on Friday.

Pakistan’s latest offer builds on longstanding energy cooperation between Islamabad and Riyadh, with Saudi Arabia serving as an important partner in meeting Pakistan’s petroleum requirements through financial assistance, oil supplies and investment.

It comes at a time of United States-Iran tensions in the Middle East that have severely disrupted maritime traffic through the Strait of Hormuz, a critical artery for global oil shipments, with many countries exploring alternative supply arrangements.

Pakistan Petroleum Minister Ali Pervaiz Malik on Friday met with Saudi Ambassador to Pakistan Dr. Rajeh bin Tami Al-Baqami to discuss opportunities for strengthening bilateral cooperation in the mining, petroleum and energy sectors

“Pakistan has approved a tax neutral bonded policy, benchmarked against international energy hubs such as Fujairah and Singapore,” Malik was quoted as saying by his ministry.

“Under this framework, Saudi companies can establish commercial oil reserves in Pakistan without local tax liabilities, offering an opportunity to diversify maritime transit risks associated with the Strait of Hormuz and Bab Al Mandab Strait while facilitating access to Asian markets.”

Pakistan’s government has been in talks with major international energy companies from Saudi Arabia, Kuwait, the Netherlands, Singapore and other countries to develop bonded fuel storage facilities in the country, officials and industry stakeholders told Arab News last month, with potential investments running into billions of dollars. The proposed facilities are part of Pakistan’s efforts to reduce its reliance on fuel shipments passing through the Strait of Hormuz and strengthen the country’s strategic fuel storage capacity.

Malik told the Saudi ambassador that the strategic storage facilities in Pakistan would provide Saudi Arabia with greater flexibility in managing supply routes and accessing regional markets. He further highlighted Pakistan’s plans to develop a major petroleum storage and refining complex in Hub, Balochistan, to accommodate “Very Large Crude Carriers and strengthen Pakistan’s potential as a regional energy corridor serving Central Asian and Chinese markets,” according to the Pakistani petroleum ministry.

The minister also highlighted investment opportunities offered by Pakistan’s ongoing refinery upgradation program, aimed at modernizing domestic refining infrastructure, improving operational efficiency and transitioning toward Euro 5 fuel standards, offering significant opportunities for Saudi investment and participation in Pakistan’s refining sector.

He thanked Saudi authorities for prioritizing crude oil shipments to Pakistan at Yanbu port and also discussed coordination with Saudi Aramco to explore expanded procurement of crude oil cargoes and dedicated liquefied petroleum gas (LPG) shipments to support Pakistan’s energy requirements, particularly in view of the anticipated increase in domestic gas demand during the winter season.

“Both sides expressed their commitment to further strengthening the longstanding brotherly relationship through enhanced cooperation, investment and mutually beneficial partnerships in the energy and petroleum sectors,” the petroleum ministry said.