Pakistan’s last oil opportunity

Pakistan is at a critical energy crossroads as the world marches toward a post-oil future. With global oil demand expected to peak before 2030 and decline sharply thereafter, the country has, at best, a 20–25-year window to exploit responsibly its hydrocarbon resources. The International Energy Agency’s (IEA) Net Zero 2050 roadmap envisions a drastically decarbonized world. In this rapidly changing global energy landscape, Pakistan must confront a hard truth: petroleum may not be the future, but it remains our present for now. Until reforms, we risk squandering our last chance to leverage our oil potential to finance a secure and sustainable energy transition. Despite vast reserves and a strategic location, Pakistan’s petroleum sector, from exploration to refining to retail, remains alarmingly underdeveloped. The key culprit? A misaligned fiscal and regulatory framework that reflects neither investor realities nor global best practices. Front-loaded taxes, policy inconsistency, and cumbersome bureaucratic hurdles burden the upstream sector, tasked with exploration and production. Outdated technology, low margins, and an unpredictable tax regime shackle downstream oil marketing companies and refineries. Pakistan’s taxation model, especially in upstream exploration, is among the most investor-unfriendly in the region. Downstream, the situation is equally bleak. The government’s practice of charging GST on deemed prices, rather than actual ex-refinery or ex-depot rates, distorts cost structures and leaves companies vulnerable to volatile losses. Industry voices, including the Oil Companies Advisory Council (OCAC), have raised the alarm, but policy inertia continues to paralyze reform. This policy paralysis has consequences. Multinational energy giants such as Shell and Total Energies have exited the Pakistani market, citing operational difficulties and regulatory unpredictability. Petroleum is entwined with our energy ecosystem. According to the Pakistan Economic Survey 2023–24, fossil fuels account for nearly 59% of our electricity generation, with domestic crude meeting a mere 20% of national petroleum demand. The rest—approximately 80%—is imported, at a staggering cost of over $15 billion annually. This drains our foreign exchange reserves, fuels inflation, and widens the current account deficit. Refineries, too, are in a state of decay. Pakistan operates five major refineries with a combined capacity of 19 million tons per year. Yet most run at below 60% utilization due to aging infrastructure and a lack of investment. Planned upgrades stand shelved, repeatedly undermined by unclear tax treatment, the absence of long-term pricing frameworks, and a lack of policy clarity. Yet, there are signs of hope if only the government is willing to act. The interest shown by new entrants like Aramco, Wafi Energy, and Gunvor Group is proof that Pakistan still holds potential. However, potential alone does not attract capital; confidence does. Without a comprehensive overhaul of our petroleum policy, this renewed interest may fade. A coherent strategy must include incentives for upstream exploration based on production-sharing, not punitive taxation; a rationalized and fair tax regime across the value chain; transparent, formula-based pricing mechanisms; simplified regulatory processes; and long-term policy guarantees to reduce investor risk. The stakes could not be higher. If we fail to extract and monetize our hydrocarbons within this narrowing window, we risk leaving them stranded, economically unviable, and environmentally unsellable. In a world moving fast toward decarbonization, this is not just a missed economic opportunity; it’s a forfeited future. Pakistan’s energy transformation will require more than technical fixes. It demands bold political leadership and long-term vision. Piecemeal, ad hoc adjustments will no longer suffice. The reforms we undertake will determine whether we emerge as an energy-resilient nation or remain dependent on costly imports for generations. The clock is ticking. We can either use the last decades of oil to fuel our independence or continue importing energy we could have produced, at the cost of our growth and sovereignty.