KARACHI: Pakistan could once again tap Iranian crude oil supplies following a temporary easing of US sanctions on Tehran, reopening the possibility of sourcing discounted crude and refining it locally to produce higher-value petroleum products.
While industry experts say local refineries are technically capable of processing Iranian crude, commercial and operational challenges remain, particularly due to the high furnace oil yield and the absence of significant domestic demand for the fuel.
Pakistan Refinery Ltd (PRL) had previously imported Iranian crude under a long-term contract with the National Iranian Oil Company, but purchases halted after US sanctions were imposed. Since then, no Iranian oil has been imported into the country.
Commenting on the prospects for refining Iranian crude oil, a former head of a leading refinery in Karachi told Dawn that the scenarios are changing and sanctions are being lifted temporarily. The outcome remains uncertain over the next two months.
Discounts, demand and tech upgrades will decide prospects for refining heavy crude grades
“We can refine Iranian light crude oil, but due to high furnace oil (FO) content, it is not a commercially viable option, particularly when there is no domestic market for the FO due to its negligible usage in the power sector.
“The most notable aspect is the price of Iranian crude oil and whether it is pegged to an international benchmark, with parity to Arab crude. If there is no discount, refining at the local refinery is not economical,” he said.
When asked whether India is refining Iranian crude, he said Indian refineries are mostly deep-conversion units equipped with hydrocrackers, hydrocokers, residue fluid catalytic cracking units, etc. This gives them the flexibility to process crude ranging from heavy to light grades into value-added products like diesel and petrol.
“If Pakistani refineries are upgraded in near future then we will have a choice to process heavy crude,” he said.
During the last 16 years, he said, most of the refineries have changed their crude recipe from sour heavy to light and sweet crude for the refinery economics and sustainability.
Currently, local refineries are meeting the 80pc of diesel demand due to change in the crude recipe and modification. Diesel has been facing demand destruction due to high stocks. Refineries are producing diesel at maximum throughput, he said.
Pakistan’s diesel sales in May stood at 455,000 tonnes, down 32pc year-on-year and 17pc month-on-month.
Diesel production during FY25 stood at 4.958m tonnes while in July-February FY26 it was 3.787m tonnes. Import of diesel during FY25 was 2.037m tonnes while total imports during July-April FY26 were 1.239m tonnes.
He said barring Pak Arab Refinery Ltd, which has a mild cracker unit — other refineries in Pakistan do not have hydrocracker units.
Pakistani refineries need cracking units like India. As per the quarterly report ending March 31, Pakistan Refinery Ltd is reportedly working on this as it is engaged with the government for restoration of taxable status of petroleum products and brownfield policy amendments, which remain critical for the company’s sustainable operations as well as successful execution of the Refinery Expansion and Upgrade Project (REUP).
PRL is committed to the REUP, which will double the refinery’s crude processing capacity from 50,000 barrels per day to 100,000 barrels per day, practically eliminating high sulphur furnace oil and producing Euro V refined products.
Sania Irfan of Topline Securities said Pakistan also stands to benefit on the import side. The country imported nearly $17bn worth of petroleum products and fuels in 2025. Historically, Pakistan imported Iranian crude at a discounted realised price compared to imports from Saudi Arabia and the UAE, with discounts on average during 2009-12. Even according to the latest reported prices, Iranian light and heavy crude grades are priced at discounts compared to Saudi Arabia’s prices.
Sourcing crude oil from Iran could generate import cost savings of $170-340 million for Pakistan, assuming it imports 10-20pc of its total petroleum requirement at a discount, including freight savings.
Published in Dawn, June 26 , 2026