Pakistan Turns to U.S. Oil as Hormuz Disruption Exposes Energy Risks

Pakistan Turns to U.S. Oil as Hormuz Disruption Exposes Energy Risks

Pakistan’s largest oil refiner is increasing its purchases of American crude as the ongoing disruption around the Strait of Hormuz forces the country to rethink its heavy dependence on traditional Middle Eastern supply routes.

Cnergyico Pk Limited is buying more crude oil from the United States as Islamabad seeks to diversify where the country gets its energy, according to a Reuters report published Monday, August 17.

The move comes against the backdrop of the Iran war and continuing uncertainty surrounding the Strait of Hormuz, one of the most important energy shipping corridors in the world. The conflict has exposed the risks Pakistan faces because of its dependence on crude transported through Gulf shipping routes.

Cnergyico only began importing American crude last year, but the company has already significantly expanded those purchases.

Vice Chairman Usama Qureshi said Cnergyico imported approximately 8.1 million barrels of U.S. crude over a nine-month period. Of that amount, around 7.1 million barrels valued at roughly US$750 million were imported during the fiscal year that ended in June.

The purchases have become a major component of Pakistan’s growing imports from the United States. Reuters reported that the crude shipments represented about 80 percent of the approximately US$914 million increase in Pakistan’s payments for U.S. imports.

Cnergyico is now examining whether to purchase additional crude on the spot market rather than relying exclusively on longer-term arrangements with suppliers such as international commodity trader Vitol.

According to Qureshi, decisions will be influenced by three major considerations: price, reliability and security of supply.

The strategy reflects a wider concern across Asia.

With the Strait of Hormuz remaining heavily disrupted, refiners in several Asian countries have been looking farther afield for crude. Reuters reported last week that U.S. crude exports to Asia reached a record 2.35 million barrels per day in July, as refiners sought alternatives to supplies normally obtained from the Middle East.

For Pakistan, however, the move also has a significant trade dimension.

Islamabad is seeking to increase imports of American products as part of efforts to reduce its trade surplus with the United States and potentially secure reductions in U.S. tariffs. Energy purchases provide Pakistan with one way of rapidly increasing the value of goods it buys from America.

Cnergyico could expand its American purchases even further if it gains access to a proposed U.S. Export-Import Bank financing facility being considered by Islamabad.

Such an arrangement could allow deferred payments to U.S. exporters, potentially making American crude more attractive to Pakistani buyers.

At the same time, Cnergyico is planning a major US$1.2 billion upgrade of its operations.

The project includes plans for a second offshore mooring facility, which could improve the company’s ability to receive, store and move large volumes of crude. The company also plans upgrades associated with producing cleaner Euro V-standard fuels.

Improved offshore infrastructure could become particularly important if Pakistan continues sourcing greater quantities of oil from distant suppliers.

American crude can be transported aboard larger tankers, and greater handling capacity could help reduce freight costs and make the longer journey to Pakistan more commercially viable.

Pakistan’s shift is therefore about more than simply buying American oil. It highlights how instability surrounding Hormuz is beginning to reshape international energy trade.

The Strait historically carried roughly one-fifth of global oil flows, meaning prolonged disruption can have consequences far beyond the Gulf. Recent tensions have already pushed refiners across Asia to search for alternative supplies from the United States and elsewhere.

For Pakistan, expanding U.S. crude imports provides an alternative source of supply while strengthening commercial ties with Washington.

But the longer-term scale of those purchases will ultimately depend on economics.

If American crude remains competitively priced, reliable and easier to finance, Pakistan’s emergency diversification strategy could develop into a much more permanent shift in how the country secures its oil.