Pakistan offers Saudi Arabia tax-free oil storage away from Hormuz; Saudi embassy starts same-day visas

Pakistan has approved a tax-neutral bonded policy that lets Saudi companies keep commercial oil reserves in Pakistan without paying local taxes on them, Petroleum Minister Ali Pervaiz Malik told Saudi Arabia's new ambassador, Dr Rajeh bin Tami Al-Baqami, in Islamabad, Business Recorder reported on Friday. The policy is modelled on the bonded storage hubs at Fujairah in the UAE and Singapore, where traders park crude and fuel close to buyers without paying duty until it is sold on.

The meeting also brought news Pakistani travellers will care about more directly: the Saudi Embassy in Islamabad has started same-day processing of visa applications for Pakistani citizens, according to the same report.

Why Saudi Arabia might want oil in Pakistan

Pakistan pitched the storage as a way for Saudi Arabia to spread its shipping risk away from two chokepoints: the Strait of Hormuz, where Iran said on Thursday that four tankers had hit mines, and the Bab al-Mandeb at the mouth of the Red Sea. Oil held on Pakistan's coast would also sit closer to buyers in Asia. No storage volume or site for the Saudi reserves was given.

What else was on the table

• Hub refinery complex: Pakistan plans a large petroleum storage and refining complex at Hub in Balochistan, designed with guidance from Technip Energies UK and able to take Very Large Crude Carriers, to serve Central Asian and Chinese markets as well.
• Refinery upgrades: the minister offered investment in Pakistan's refinery modernisation programme, which aims to move local refineries to Euro 5 fuel standards.
• Crude and LPG: both sides discussed buying more crude from Saudi Aramco and dedicated LPG shipments ahead of higher winter gas demand. The minister thanked Saudi port authorities at Yanbu for prioritising crude cargoes to Pakistan during recent market disruptions.
• Minerals: Saudi Vice Minister of Mining Khalid al-Mudafier was invited to the Pakistan Minerals Investment Forum in Islamabad on 12 and 13 November.

What it means for you

For a household, the link is fuel security and price. Pakistan imports most of its crude and diesel, and diesel is up 45% and LPG 107% in a year in the latest weekly price index. Storage and refining on home soil does not cut today's price, but it lowers the risk of shortages when shipping lanes in the Gulf are disrupted. Follow the daily readings on our petrol price and diesel price pages.

Going to Saudi Arabia? Same-day visa processing applies to applications at the embassy in Islamabad; check your category and documents with the embassy or your travel agent before you go. Our riyal rate page gives today's SAR to PKR rate.