THE Strait of Hormuz closed on Feb 28, 2026. Within days, QatarEnergy declared force majeure.
Pakistan, which sourced almost all its LNG from Qatar, asked Saudi Arabia to reroute crude through the Red Sea and released gas it had been holding back for weeks. There was no gas storage and very little oil storage to fall back on, because none had ever been built.
The timing made it worse. Years earlier, Pakistan signed long-term LNG contracts. Then IMF-driven tariff changes made gas too expensive for industries running captive power plants, and they switched to solar. Demand fell just as the country was locked into more gas than it needed. The pipelines reached the capacity threshold and the authorities curtailed up to 350 mmcfd of domestic gas. Then the strait closed, Qatari cargoes were stranded, and the curtailed fields had to be switched back on within weeks. Too much gas, then too little, and no storage to manage either.
This is not a new problem. Policymakers have known for decades that Pakistan needs oil and gas storage, but have done little about it.
Gas storage works by pumping surplus gas into depleted reservoirs when demand is low and drawing it back out when supply runs short.
As early as 2004, an ADB study examined 107 locations and recommended two depleted fields in Badin, and a 2022 study added a third. Exploration companies operate these fields and could convert them, but no commercial model has been settled. A guaranteed return for investors, the model that inflated power costs for two decades, would be a mistake. It paid for capacity whether used or not, and gave sponsors little reason to control costs.
Competitive bidding works the other way: developers compete on the fee they charge to store and return gas, overrun risk stays with them, and the state only sets the terms. Feasibility tenders were issued in 2024 and again in 2026, a month before the strait closed. Even then, the first facility will cover only 11 to 12 days of consumption, against the month officials say is needed.
Oil storage has failed for its own reasons. The main one is that no one is paid to hold it. Marketing companies must keep 20 days of cover, but prices are revised every fortnight, so extra stock risks a loss whenever prices fall, and the pricing formula does not recover the cost of tanks. Most companies stay near the minimum, and the state has never built a strategic reserve of its own.
Pakistan needs oil and gas storage.
The idea of letting foreign suppliers hold fuel in Pakistan was first floated in 2015. In 2023, the government approved it: suppliers could keep product in bonded storage without paying duty, pay only when they sold locally, and re-export freely. Not one supplier has used it — for three reasons.
First, the rules require a foreign supplier to register a presence in Pakistan. Large traders are used to storing oil in places like Fujairah in the UAE or Singapore without opening an office there. Asking them to do so here adds cost and paperwork for little benefit. Second, nothing guarantees a supplier can take its oil back out. A future government facing a shortage could block exports, just when it would want to sell elsewhere. Third, five bodies have a say: customs, the regulator, the State Bank, and the commerce and petroleum ministries. Each writes its own rules, and no one makes them fit together.
The current government has reopened the policy, an admission that it has attracted no investment.
The strait showed that fuel stored in the Gulf can be cut off without warning. Fuel held in Pakistan by foreign suppliers, available for local sale, would give the country a cushion next time. The fix requires detail, not reinvention. The rules must state who can take part without a Pakistani company, how ownership changes when part of a tank is sold, how banks process those sales, and which single office settles disputes. Traders choose where to store oil based on how fast licences come and whether rules stay stable. Fujairah attracts traders not because its government built the tanks, but because it made storage simple and predictable.
In both cases, the government need not spend its own money. Its job is to write clear rules, issue licences quickly, and honour its commitments.
Pakistan has paid for the lack of storage twice this year, first with more gas than it could use, then with too little. The gas sites were identified over 20 years ago; the oil policy has existed for years. What has been missing is the will to follow through.
Hormuz will not be the last disruption, and if storage is not ready before the next one, the cost will again fall on industry, on households, and on a treasury paying premium prices for emergency cargoes. The next closure will not wait for another feasibility study.
The writer is a corporate lawyer working in the energy and infrastructure sector across the Middle East and Pakistan.
Published in Dawn, November 3rd, 2026
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