ISLAMABAD: Pakistan is seeking a $6.7 billion concessional oil financing arrangement from Saudi Arabia over 15 years as the government looks for longer-term protection against costly energy imports and pressure on foreign exchange reserves.
Finance Minister Muhammad Aurangzeb also raised the revival of Pakistan’s previous $1.2 billion annual Saudi oil facility on deferred payments during talks with the Saudi Fund for Development.
The discussions come as Pakistan faces a rising petroleum import bill amid elevated international prices and continuing instability in the Middle East.
Pakistan Seeks Two Saudi Oil Financing Arrangements
Two related but separate proposals are currently under discussion.
Pakistan wants to revive the $1.2 billion annual oil facility under which Saudi petroleum supplies were provided on deferred payments. The most recent arrangement was signed in February 2025 and expired earlier this year.
Separately, Islamabad is seeking a longer-term concessional oil financing facility worth $6.7 billion spread over 15 years.
The proposed arrangement is intended to ease immediate pressure on Pakistan’s external financing requirements while providing greater certainty over energy supplies.
Saudi Arabia is reportedly reviewing the request.
Previous Saudi Oil Facility Carried Around 6% Interest
According to officials cited in the report, the previous Saudi oil facility carried an interest rate of about 6%.
Since 2019, the Saudi Fund for Development has provided Pakistan with approximately $6.7 billion worth of oil derivatives under different arrangements.
Saudi Arabia has also extended billions of dollars in deposits and other financial assistance to Pakistan over the years.
The latest proposal would mark a shift away from relying primarily on shorter-term arrangements by extending the financing period over 15 years.
Pakistan’s Petroleum Import Bill Continues to Rise
Pakistan remains heavily dependent on imported petroleum products.
The country’s petroleum-group import bill reached approximately $16.8 billion during the last fiscal year, representing an increase of 5.8%.
Crude oil imports alone cost around $7.2 billion, up 32%.
The trend has continued into the current fiscal year, with crude oil import costs reportedly rising by another 40% during July and August.
The increase leaves Pakistan exposed to fluctuations in global oil prices as well as higher costs associated with securing cargoes during periods of regional disruption.
Earlier reports indicated that Pakistan had been paying record premiums on petroleum imports as tensions in the Middle East made fuel procurement more expensive.
The domestic oil industry has also warned that the existing petrol import pricing formula could discourage future imports.
Saudi Arabia Remains an Important Energy Supplier
Saudi crude has become increasingly important as Pakistan seeks to diversify energy supply routes amid instability around the Strait of Hormuz.
Saudi Arabia has previously discussed supplying Pakistan through the Yanbu port on the Red Sea, providing an alternative route to shipments originating from the Gulf.
Pakistan has also been exploring potential oil suppliers outside the Middle East as part of efforts to reduce supply risks.
A long-term financing agreement with Saudi Arabia could therefore serve two purposes: improving energy security and easing immediate pressure on foreign exchange reserves.
Would the Deal Make Petrol Cheaper?
A concessional or deferred-payment oil facility would not necessarily result in lower petrol prices for consumers.
Such an arrangement changes the timing and terms under which Pakistan pays for imported petroleum but does not automatically reduce the international price of crude oil or refined fuel.
Domestic pump prices would still depend on several factors, including international petroleum prices, import premiums, the exchange rate, freight costs, petroleum levy and other government charges and margins.
The principal benefit of a long-term Saudi oil facility would therefore be greater financing stability rather than an automatic reduction in petrol prices.
15-Year Saudi Oil Deal Not Finalised Yet
The proposed facility has not yet been finalised.
One significant point is that the International Monetary Fund has not included the proposed Saudi oil financing arrangement in its projected financing inflows for FY2026-27 or FY2027-28.
Pakistan has submitted the request and Saudi Arabia is reportedly considering it, but no final agreement on the proposed 15-year facility has been announced.
If approved, the $6.7 billion arrangement would provide Pakistan with another mechanism to manage its increasingly expensive and unpredictable petroleum import requirements.