Cheaper Iranian Oil offers Pakistan Millions in Savings, but there’s a catch

ISLAMABAD – For years, Iranian crude oil remained off Pakistan’s import list due to US sanctions, despite once being a key source of supply. Now, with Washington temporarily easing restrictions on Tehran, an old option is back on the table. The prospect of cheaper Iranian oil revived hopes of cutting Pakistan’s massive fuel import bill by hundreds of millions of dollars. But while the opportunity appears promising, refinery limitations, weak demand for furnace oil, and commercial realities could determine whether the long-dormant trade route is reopened. Pakistan Refinery Limited (PRL), which previously imported Iranian crude under a long-term agreement with the National Iranian Oil Company, suspended purchases after US sanctions were imposed. With restrictions now showing signs of easing, policymakers and refiners are once again evaluating the viability of bringing Iranian crude back into Pakistan’s energy mix. Pakistan spent nearly $17 billion on petroleum products and fuel imports in 2025. If the country meets 10–20% of its petroleum requirements through discounted Iranian crude, while also benefiting from lower freight costs, annual savings could range between $170 million and $340 million. Despite the attractive pricing, refinery executives warn that economics, not politics, will determine whether imports resume. A former head of a leading Karachi refinery said Pakistani refineries can technically process Iranian crude, but the outcome will depend on pricing and market conditions over the coming months. The biggest obstacle is the high furnace oil (FO) yield associated with Iranian crude. As demand for furnace oil in Pakistan’s power sector has largely disappeared, refiners have limited opportunities to market the excess product. Industry experts argue that unless Iranian crude is offered at a substantial discount compared with Arab crude benchmarks, processing it locally would remain commercially unattractive. Pakistan’s refining