Pakistan Refinery Ltd (PRL) previously imported Iranian crude under a long-term contract with the National Iranian Oil Company, but purchases were halted when US sanctions were imposed.
Since then, no Iranian oil has entered the country.
A temporary easing of US sanctions on Tehran has reopened the possibility of Pakistan sourcing discounted Iranian crude oil and refining it locally into higher-value petroleum products.
Industry experts say local refineries are technically capable of processing Iranian crude, though commercial and operational challenges remain. A former head of a leading Karachi refinery told Dawn that while conditions are shifting, the outcome over the next two months remains uncertain.
The key obstacle is the high furnace oil (FO) content of the Iranian crude, which makes it commercially unviable given the negligible domestic demand for FO in the power sector.
The price of Iranian crude is also a determining factor.
“If there is no discount, refining at the local refinery is not economical,” the former refinery head said. He added that any pricing must be benchmarked against Arab crude to make the economics work.
By contrast, Indian refineries are equipped with deep-conversion units including hydrocrackers, hydrocokers, and residue fluid catalytic cracking units, giving them the flexibility to process crude across a wide range of grades and convert it into higher-value products such as diesel and petrol.
Pakistani refineries lack similar upgrading capacity. Barring Pak Arab Refinery Ltd, which has a mild cracker unit, no other local refinery has hydrocracker technology.
Over the past 16 years, most Pakistani refineries have shifted their crude recipe from sour heavy to light and sweet grades for economic and sustainability reasons. Local refineries are currently meeting around 80 percent of domestic diesel demand.
The diesel sales in May stood at 455,000 tonnes, down 32 percent year-on-year and 17 percent month-on-month, amid rising stocks.
Diesel production in FY25 was 4.958 million tonnes, with imports of 2.037 million tonnes for the full year. In July–April FY26, production reached 3.787 million tonnes and imports totalled 1.239 million tonnes.
PRL is pursuing its Refinery Expansion and Upgrade Project (REUP), which aims to double crude processing capacity from 50,000 to 100,000 barrels per day, eliminate high-sulphur furnace oil, and produce Euro V refined products.
The project is contingent on government action restoring the taxable status of petroleum products and amendments to the brownfield refinery policy.
On the import side, Topline Securities analyst Sania Irfan said Pakistan imported nearly $17 billion worth of petroleum products and fuels in 2025.
Historical data from 2009–12 shows Pakistan paid discounted prices for Iranian crude compared to Saudi Arabian and UAE imports a pattern that appears to hold based on current reported prices, with Iranian light and heavy crude grades trading at a discount to Saudi benchmarks.
If Pakistan sources 10–20 percent of its total petroleum requirement from Iran at a discount, including freight savings, it could generate import cost savings of $170–340 million.
