A TFN Perspective on International Petroleum Trading, Geopolitical Risk and Regional Energy Logistics

Trade Facilitation Network (TFN) CONNECTING REGIONS. ENABLING TRADE.

1. Executive Perspective

The international petroleum trade is entering a period in which geopolitical risk, maritime security, sanctions, supply-chain disruption and inventory positioning are becoming increasingly important commercial considerations.

The Middle East conflict that began in February 2026, the disruption of petroleum movements through the Strait of Hormuz, continuing insecurity around the Red Sea and Bab el-Mandeb, and the expansion of sanctions enforcement have demonstrated the vulnerability of global energy supply chains to geopolitical developments.

For international petroleum companies, the question is no longer simply where oil can be stored at the lowest cost. It is also where commercial inventory can be positioned to manage supply risks, maintain access to customers, diversify shipping exposure and respond to changing market conditions.

Against this background, Pakistan’s announcement on 30 October 2026 of a tax-neutral bonded petroleum storage policy creates an opportunity to develop a new role for the country in international petroleum trading and inventory management.

The policy is intended to enable foreign suppliers to maintain commercial petroleum reserves in Pakistan under a bonded framework, with opportunities for eligible domestic sales and re-export.

The proposition is strengthened by an important existing advantage: Hub, Balochistan, already has operational offshore petroleum-import infrastructure. Cnergyico (formerly Byco) has operated its Single Point Mooring (SPM) at Khalifa Point since 2012, receiving crude oil tankers and transferring cargo through subsea pipelines to onshore facilities.

Pakistan is therefore not starting from an entirely undeveloped offshore location.

The central investment proposition is the combination of:

• A tax-neutral bonded petroleum inventory framework.
• An existing operational offshore petroleum-handling facility at Hub.
• Potential additional storage, terminal and pipeline infrastructure.
• Access to Pakistan’s domestic petroleum market.
• Geographic proximity to important Asian and regional markets.
• An opportunity to diversify inventory locations in a period of geopolitical and maritime uncertainty.

Pakistan could emerge as an additional location within the international petroleum inventory network, complementing established hubs such as Fujairah and Singapore.

2. The Geopolitical Environment: Why Inventory Location Matters Now

The international energy market is experiencing a significant change in its risk environment.

The Middle East remains central to global petroleum supply, but the security of its maritime routes has become a major concern for producers, traders, refiners, shipping companies and insurers.

The developments of 2026 have reinforced the importance of maintaining commercial flexibility and avoiding excessive dependence on a single supply route or inventory location.

2.1 The Strait of Hormuz: A critical energy chokepoint

The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. It is a principal maritime route for crude oil and petroleum products exported from the Gulf.

The scale of its importance is demonstrated by historical flows. EIA data recorded approximately 21.6 million barrels per day passing through Hormuz in the fourth quarter of 2025.

The conflict that began on 28 February 2026 fundamentally changed the maritime operating environment. The International Energy Agency has described the resulting disruption as the largest supply disruption in the history of the global oil market.

EIA’s October 2026 data show that estimated petroleum flows through Hormuz fell to 14.9 million barrels per day in Q1 2026 and 4.9 million barrels per day in Q2 2026.

These figures demonstrate the potential impact of geopolitical disruption on the physical movement of energy supplies.

For international traders, the consequences extend beyond the availability of crude oil. They include:

• Uncertainty over vessel movements and arrival schedules.
• Higher war-risk insurance and freight costs.
• Delays and disruption to cargo discharge.
• Changes in the availability and pricing of petroleum products.
• Increased working-capital requirements.
• Greater uncertainty over delivery commitments.
• The need to reassess inventory positions and alternative supply arrangements.

The commercial lesson is that the location of petroleum inventory has become an increasingly important element of energy risk management.

2.2 Red Sea and Bab el-Mandeb: The second maritime risk dimension

The Red Sea route, including Bab el-Mandeb and the Suez Canal, connects Asian and Gulf energy shipments with European and Mediterranean markets.

Security concerns affecting commercial shipping in the Red Sea have encouraged route diversions and longer voyages around the Cape of Good Hope.

EIA data show a substantial change in estimated oil flows through Bab el-Mandeb, increasing from 5.4 million barrels per day in Q4 2025 to 8.1 million barrels per day in Q2 2026.

The increase should not be interpreted as evidence that the route has become safer. It illustrates the changing distribution of maritime flows during a period of disruption and route adjustment.

For petroleum traders, the Red Sea situation adds another layer of uncertainty to voyage planning, freight costs, delivery schedules and inventory management.

2.3 The changing geography of energy supply

The current situation demonstrates that global energy supply is exposed to more than one maritime chokepoint.

The principal routes relevant to petroleum traders include:

• Strait of Hormuz, connecting the Persian Gulf with the Gulf of Oman.
• Bab el-Mandeb, connecting the Gulf of Aden with the Red Sea.
• Suez Canal and SUMED pipeline, connecting the Red Sea with the Mediterranean.
• Strait of Malacca, an important route for Asian energy trade.
• Cape of Good Hope, an alternative route for vessels avoiding the Red Sea and Suez system.

Disruption in one region can affect vessel availability, freight rates, insurance premiums, cargo schedules and the commercial attractiveness of alternative inventory locations.

This creates a stronger commercial rationale for diversified petroleum storage and trading locations.

2.4 Sanctions, shipping networks and compliance exposure

Geopolitical risk is not confined to physical maritime security.

The enforcement of sanctions against Iranian petroleum trade has become an important factor in international shipping, finance and commodity transactions.

In October 2026, the US Treasury announced further measures targeting Iranian petroleum shipping networks and their international support structures. Its sanctions programme also identifies risks associated with financial institutions, shipping companies, vessels, intermediaries and entities involved in Iranian petroleum transactions.

For international petroleum traders, this creates a need for rigorous due diligence covering:

• Origin of crude oil and petroleum products.
• Vessel ownership, registration and operating history.
• Beneficial ownership of suppliers and counterparties.
• Vessel tracking and potential ship-to-ship transfers.
• Insurance and classification arrangements.
• Banking and payment channels.
• Applicable sanctions and export-control requirements.

Pakistan’s bonded storage proposition must therefore be designed for transparent, compliant international trade. Its attractiveness will depend partly on whether international companies can demonstrate clear cargo provenance, lawful ownership and reliable documentation.

A bonded facility must not be treated as a mechanism for circumventing sanctions or other international restrictions.

2.5 Why this matters for Pakistan

Pakistan’s geographical position on the Arabian Sea gives it an opportunity to participate in the changing energy logistics environment.

Its location is relevant to petroleum cargoes arriving from suitable Gulf, African and other international origins, as well as potential onward distribution to selected Asian markets.

The advantage is not that Pakistan eliminates exposure to Hormuz. Gulf-origin cargoes that must pass through Hormuz remain exposed to that route before reaching Hub.

Rather, Pakistan can offer an additional location for inventory once cargoes have arrived, enabling traders to hold stocks closer to selected customers and manage subsequent distribution decisions.

For cargoes originating outside the Persian Gulf, the voyage and risk calculation may be different.

The investment proposition is therefore one of inventory diversification, commercial flexibility and regional positioning, rather than a claim that Hub bypasses all maritime chokepoints.

3. Pakistan’s Bonded Petroleum Storage Policy

On 30 October 2026, the Government of Pakistan announced approval of a tax-neutral bonded policy intended to enable foreign companies, particularly Saudi companies, to establish commercial oil reserves in Pakistan.

The announcement referred to Fujairah and Singapore as international benchmarks and identified the opportunity to diversify maritime transit risks and access Asian markets.

The announcement followed an earlier decision of the Economic Coordination Committee (ECC), made public on 24 August 2026, approving a Petroleum Division proposal for petroleum imports on foreign suppliers’ accounts through customs-bonded storage facilities.

Pakistan already has a statutory foundation for this business model.

Federal Board of Revenue SRO 568(I)/2024 introduced Chapter XLV into the Customs Rules, 2001, covering the import, domestic sale and re-export of petroleum products on foreign suppliers’ accounts under customs-bonded facilities.

The existing framework provides for eligible foreign suppliers to maintain petroleum inventory in approved bonded facilities, sell eligible products to domestic purchasers or re-export them, subject to the applicable customs, petroleum, regulatory and other legal requirements.

The 2024 rules establish an important legal baseline. The detailed operative text and implementing instruments for the revised October 2026 policy must nevertheless be examined before its complete tax treatment, product coverage, eligibility and procedures can be stated conclusively.

For international investors, the distinction between a government policy announcement and its operative legal instruments is essential.

4. Hub: An Existing Operational Petroleum-Handling Location

Hub, Balochistan, offers a significant practical advantage: offshore petroleum-import infrastructure is already operational.

Cnergyico (formerly Byco) operates its Single Point Mooring at Khalifa Point. The SPM receives crude oil tankers and transfers cargo through subsea and onshore pipeline connections to storage and refinery facilities.

The facility has been operational since 2012. Cnergyico’s published corporate information records substantial crude oil handling since commissioning.

This is important for international investors because it demonstrates that Hub is already an established location for tanker-based petroleum imports.

The existing facility provides:

• Experience in offshore tanker operations.
• Established marine handling arrangements.
• Subsea petroleum-transfer infrastructure.
• Pipeline connections to onshore facilities.
• Nearby petroleum storage and refining activity.
• An existing industrial operating environment.

For international suppliers and commodity traders, this is a practical advantage over an entirely undeveloped coastal location.

Separately, PARCO has announced its proposed Coastal Refinery Project at Hub. Its first phase envisages an Oil Import Terminal designed for approximately 15–20 million tonnes per annum of refined products, with offshore and onshore facilities and a pipeline connection to PAPCO’s White Oil Pipeline terminal at Port Qasim.

PARCO’s proposed terminal is an additional development opportunity. It should not be confused with the existing operational Cnergyico SPM.

The Government’s 30 October announcement also refers to a major petroleum storage and refining complex at Hub, under the guidance of Technip Energies UK. The precise scope, investment structure, contractual status and implementation timetable require confirmation through project documentation.

The existing operational SPM, together with proposed additional infrastructure, gives Hub a relevant foundation for international petroleum inventory and trading operations.

5. The International Petroleum Inventory Business Model

The proposed commercial model is based on foreign-owned inventory held in Pakistan under applicable customs-bonded arrangements.

An eligible international supplier or commodity trader could:

1. Import crude oil or eligible petroleum products into Pakistan.
2. Place the cargo in an approved customs-bonded and appropriately licensed storage facility.
3. Retain ownership of inventory while it remains bonded.
4. Monitor market conditions and customer demand.
5. Sell eligible quantities to approved domestic purchasers, subject to the required permissions and payment of applicable duties and taxes at ex-bonding.
6. Re-export inventory to eligible international destinations, subject to export rules and other applicable requirements.

The model can offer commercial flexibility. A trader may hold inventory in anticipation of demand, supply a domestic buyer when commercially appropriate, or redirect cargo to another market where the economics justify it.

The business extends beyond tank rental. It can include:

• Petroleum inventory management.
• Tank storage and terminal handling.
• Cargo receipt and dispatch.
• Blending and product management, where permitted.
• Pipeline transportation.
• Quality testing and certification.
• Customs and regulatory documentation.
• Vessel scheduling and marine services.
• Re-export and regional distribution.

The actual services available will depend on the licences, facilities and operating permissions of the relevant service providers.

6. Pakistan’s Position in the International Petroleum Hub Network

Fujairah and Singapore demonstrate the commercial value of combining strategic geography, marine infrastructure, petroleum storage, trading services and a predictable regulatory environment.

Their role extends beyond storage. Their commercial ecosystems support international commodity trading, cargo aggregation, blending, bunkering, shipping services and regional distribution.

Pakistan should be assessed against these benchmarks in terms of the services and commercial conditions it can offer, rather than storage capacity alone.

The relevant investor considerations include:

• Competitive bonded storage charges.
• Transparent customs and tax treatment.
• Reliable access to offshore terminals.
• Adequate tank capacity and product segregation.
• Efficient cargo documentation and clearance.
• Reliable pipeline and road connectivity.
• Availability of quality testing and certification.
• International banking and trade-finance arrangements.
• Marine insurance and vessel services.
• Predictable regulatory administration.

Pakistan does not need to replicate the entire Singapore or Fujairah ecosystem immediately. It can develop a commercially focused proposition around existing petroleum infrastructure, bonded inventory arrangements and access to selected regional markets.

7. Commercial Revenue Opportunities

A petroleum inventory hub can generate income through several service categories.

Storage revenue: Rental of tanks and associated inventory services, generally linked to capacity reserved, duration and product type.

Terminal handling: Charges for receipt, discharge, transfer and dispatch of petroleum cargoes.

Pipeline transportation: Charges for moving petroleum products between offshore terminals, storage locations and connected distribution networks.

Blending and product services: Revenue from permitted blending, segregation, heating, sampling and other specialised services.

Marine services: Vessel support, mooring, pilotage, tugboats and other services where provided by licensed operators.

Trading and commercial services: Brokerage, inventory management, cargo coordination, documentation and related services.

Ancillary services: Inspection, laboratory testing, insurance facilitation, financing and other specialist support.

The value of the business is determined by throughput, storage utilisation, customer commitments, service pricing and operating efficiency.

Illustrative commercial scenario

The following is an analytical illustration, not a forecast, project budget or verified market quotation.

Assume a facility with 5 million barrels of working storage capacity, 80% average occupancy and annual throughput of 100 million barrels.

Revenue stream Illustrative annual revenue Storage USD 30.5 million Terminal handling USD 30.0 million Pipeline services USD 15.0 million Blending services USD 1.0 million Other services USD 8.0 million Total illustrative revenue USD 84.5 million

At an illustrative EBITDA margin of 55%, the resulting EBITDA would be approximately USD 46.5 million.

These assumptions require independent validation. Actual performance would depend on storage tariffs, throughput, product mix, utilisation, capital structure, financing costs, energy consumption, maintenance, insurance, taxes and contractual arrangements.

8. What Pakistan Gains

A commercially successful international petroleum inventory business could provide benefits beyond the immediate storage and terminal operators.

Foreign investment: International energy companies may bring capital into storage, terminal, pipeline, marine and supporting infrastructure.

Foreign exchange earnings: Pakistan could earn foreign exchange through eligible storage, handling, pipeline and other service charges, as well as associated commercial activity.

Infrastructure utilisation: Existing offshore and onshore petroleum facilities could support a wider range of commercial activities, subject to licences and available capacity.

Employment and skills: Terminal operations, marine services, inspection, engineering, logistics and trading-related activities could create skilled employment.

Energy supply resilience: Greater commercial inventory availability could support supply flexibility. However, foreign-owned bonded stock should not automatically be counted as national strategic petroleum reserves.

Regional trade: Pakistan could strengthen its position in regional petroleum logistics and potentially attract international traders seeking additional inventory locations.

Industrial development: Additional storage, refining and petrochemical investment could support a broader energy and industrial ecosystem.

9. Key Considerations for International Investors

The policy opportunity is promising, but international investors will assess the practical details before committing capital.

The principal considerations include:

• Confirmation of the final operative bonded-storage policy and its tax treatment.
• Eligibility of foreign suppliers, products and participating entities.
• Customs licensing, OGRA approvals and operating permissions.
• Ownership rights and transferability of bonded inventory.
• Procedures for domestic sale, re-export and inventory reconciliation.
• Availability of suitable tank capacity and independent terminal access.
• Vessel compatibility, marine operating conditions and insurance.
• Product quality standards and independent inspection.
• Foreign exchange arrangements, banking and repatriation of proceeds.
• Sanctions screening and counterparty due diligence.
• Contract enforcement, dispute resolution and regulatory predictability.

In the current geopolitical environment, international investors will also examine the reliability of cargo provenance, vessel tracking, insurance and payment arrangements.

Confidence in the legal treatment of inventory and the ability to conduct transparent, compliant transactions will be essential.

10. Conclusion: From Petroleum Importer to Regional Inventory Location

The geopolitical developments of 2026 have demonstrated that the international petroleum business is increasingly shaped by the security of maritime routes, sanctions exposure, supply disruption and the strategic positioning of commercial inventories.

The Strait of Hormuz and Bab el-Mandeb remain important to the movement of global energy supplies. Disruptions in these routes affect freight, insurance, delivery schedules and the commercial decisions of international suppliers and traders.

In this environment, diversified inventory locations can become an important part of international energy risk management.

Pakistan’s announced tax-neutral bonded petroleum storage policy creates an opportunity to participate in this changing market.

The proposition is strengthened by Hub’s existing operational petroleum-import infrastructure. Cnergyico’s SPM at Khalifa Point has been operating since 2012, demonstrating that offshore tanker-based petroleum imports are already an established activity at this location. PARCO’s proposed Oil Import Terminal and the Government’s wider Hub development vision offer further potential for infrastructure expansion.

For international suppliers and commodity traders, Pakistan could become an additional location for holding foreign-owned petroleum inventory, serving eligible domestic buyers and supporting selected regional markets.

The opportunity should be judged by its ability to attract international inventory owners, secure anchor customers, deliver competitive storage and handling services, and provide confidence in the regulatory and commercial framework.

The strategic ambition is to position Pakistan not only as a petroleum-importing market, but also as a competitive destination for international petroleum inventory and regional energy logistics.

Primary Sources and Reference Documents

1. Government of Pakistan, Press Information Department, announcement on the tax-neutral bonded petroleum storage policy, 30 October 2026. https://pid.gov.pk/site/press_detail/34606
2. Government of Pakistan, Press Information Department, ECC approval of petroleum imports on foreign suppliers’ accounts through customs-bonded storage facilities, 24 August 2026. https://pid.gov.pk/site/press_detail/33702
3. Federal Board of Revenue, SRO 568(I)/2024, Customs Rules, 2001, Chapter XLV. https://download1.fbr.gov.pk/SROs/2024415154937354SRO568-2024.pdf
4. Ministry of Commerce, SRO 1259(I)/2023 and related amendments to the Import Policy Order. https://tipp.gov.pk/site/display/471
5. Cnergyico, official corporate information on its Single Point Mooring and petroleum infrastructure. https://www.cnergyico.com/single-point-mooring/
6. Cnergyico, Offshore Excellence: Pakistan’s Only Single Point Mooring Completes Ten Years. https://www.cnergyico.com/files/currentwinter2023.pdf
7. PARCO, official project information on the Coastal Refinery and proposed Oil Import Terminal at Hub. https://www.parco.com.pk/future-projects/
8. Pakistan-Arab Pipeline Company (PAPCO), Expression of Interest for EPC Contractor Services, Oil Import Terminal at Hub. https://papco.com.pk/wp-content/uploads/2025/04/EOI-EPC-6.PAPCO_.Final_.pdf
9. US Energy Information Administration, Short-Term Energy Outlook: Global Energy Security Data, 6 October 2026. https://www.eia.gov/outlooks/steo/report/energysecurity/article.php
10. International Energy Agency, Middle East Maritime Chokepoints Shipping Monitor, updated 7 October 2026. https://www.iea.org/data-and-statistics/data-tools/middle-east-maritime-chokepoints-shipping-monitor
11. US Department of the Treasury, Office of Foreign Assets Control, Iran sanctions programme and October 2026 actions. https://ofac.treasury.gov/sanctions-programs-and-country-information/iran-sanctions
12. US Department of the Treasury, Operation Economic Outcast Neutralizes Iranian Regime’s Remaining Shadow Fleet Network, 8 October 2026. https://home.treasury.gov/news/press-releases/sb0653
13. US Maritime Administration, Maritime Security Advisory 2026-011, Persian Gulf, Strait of Hormuz and Gulf of Oman, Iranian attacks on commercial vessels. https://www.maritime.dot.gov/msci/2026-011-persian-gulf-strait-hormuz-and-gulf-oman-iranian-attacks-commercial-vessels