Long term, Pakistan could, should, and in all likelihood must, move away from its dependency-cum-addiction on imported oil and gas. 

What: Pakistan needs to make the move away from its current over-dependency on oil and gas.

Why: Wars in geopolitical hotspots like Iran that shut down chokepoints such as the Strait of Hormuz will only ever serve to strangle supplies of crude and LNG to Pakistan's quarter of a billion people.

What next: A long, likely up and down and very long, shift away from hydrocarbons over the next few decades for Islamabad and the Pakistani people.

Pakistan is again considering importing discounted crude oil and natural gas from neighbouring Iran after a temporary easing of US sanctions on Tehran, as Islamabad moves to lower domestic fuel prices following an improvement in global oil supply conditions.

Petroleum Minister Ali Pervaiz Malik said recently that the government was examining the option of buying cheaper Iranian energy, according to Pakistan's Asia News Network (ANN). The proposal, while still unconfirmed, has re-emerged after Washington temporarily eased restrictions affecting Tehran, potentially reopening a supply route that had long been unavailable to Pakistan.

If realised, the proposal could provide significant savings for Pakistan, which remains heavily dependent on imported energy. Industry estimates suggest sourcing Iranian crude could reduce annual import costs by between $170mn and $340mn if Pakistan purchased 10-20% of its total petroleum requirements from Tehran at discounted prices.

The move would also allow Pakistan to increase crude imports rather than relying as heavily on imported refined fuels, enabling domestic refineries to process additional crude into higher-value petroleum products.

However, the proposal also presents technical and commercial obstacles. Industry specialists say Pakistani refineries are capable of processing Iranian crude, but that higher furnace oil yields remain a concern. Domestic demand for furnace oil has fallen sharply in recent years, raising questions over the commercial viability of refining larger volumes of Iranian crude.

Speaking to reporters in Lahore, Malik said the government was actively exploring ways to reduce fuel prices and was considering the Iranian supply option as part of those efforts, ANN added.

He said recent increases in petrol and diesel prices had placed considerable pressure on households and businesses, but argued that conditions had improved, with the government already delivering substantial reductions in retail fuel prices.

For tens of millions of Pakistanis taking to the roads each day, the comments came as the government announced a series of fuel price cuts, while imported LNG-fired power plants remained an important part of the country’s electricity system. Imported LNG supplied around 17–18% of Pakistan’s electricity generation in FY2024–25.

Pakistan generated a reported 127,159 GWh of electricity during the period, a figure almost identical to the previous year, with LNG-fired plants accounting for a significant share of overall output.

Early suggestions for FY2025–26, however, indicate LNG’s contribution could fall closer to 10% of total electricity generation as cheaper domestic sources, alongside renewables, coal and nuclear power, reduce reliance on imported gas.

Pakistan’s LNG position in 2025 was shaped by broader changes in the global gas market, with weaker Asian demand offsetting record growth in worldwide LNG trade, according to the latest annual report from the International Group of Liquefied Natural Gas Importers (GIIGNL).

GIIGNL’s 2026 Annual Report, which covers LNG market developments during 2025, does not publicly disclose Pakistan’s individual LNG import volumes. However, the report indicates that global LNG imports reached 428mn tonnes in 2025, a 5% increase from the previous year.

The GIIGNL report also highlighted continued global expansion of LNG infrastructure, with regasification capacity rising and liquefaction capacity reaching 524mn tonnes per annum.

Such expansion is unlikely to be replicated in Pakistan given its ongoing financial pressures and a growing shift towards alternative energy sources. Coal alone is estimated to supply between 20 and 25% of all power generation in 2026, compared with just 5-10% in 2020.

Renewable energy capacity too has also expanded rapidly, rising from just 4-6% six years ago, to up to 20% at present. Nuclear power generation is also expected to account for around 20% of electricity generation in 2026, representing a significant increase over the past six years.

At the same time, and over the same period, LNG’s share of electricity generation has fallen from 35-40% to an estimated 10%, reflecting the growing role of cheaper domestic and lower-cost energy sources.

On the street meanwhile, according to Arab News Pakistan, the government reduced petrol and high-speed diesel prices by a further PKR1.97 ($0.01) per litre for the week beginning July 4 as international oil markets continued to stabilise and global supplies improved. Following the latest adjustment, petrol will retail at PKR297.53 per litre, while high-speed diesel will cost PKR309.50 per litre, the Ministry of Energy's Petroleum Division said.

Islamabad had already reduced petrol prices during June after oil prices fell following the signing of the Islamabad Memorandum of Understanding between the US and Iran, which contributed to expectations of improved market stability.

The easing in prices in Islamabad, Karachi and elsewhere reflects not only changing conditions in global energy markets after a period of heightened volatility, but also efforts by the government to ease pressure on a population facing a prolonged cost-of-living crisis since 2022.

For now, whether or not Pakistan proceeds with Iranian crude imports at scale will depend on the durability of sanctions relief, commercial negotiations and the operational considerations facing domestic refiners.

Islamabad currently appears focused on taking advantage of lower global energy prices while exploring new supply options that could reduce costs further over the long term.

Yet Pakistan’s broader energy strategy points towards reducing, rather than deepening, its exposure to imported hydrocarbons. The shock of recent years, from volatile oil markets and costly LNG cargoes to risks highlighted by disruptions around the Strait of Hormuz, has reinforced the vulnerability of countries heavily dependent on overseas energy supplies.

For Islamabad therefore, greater energy security increasingly means expanding domestic alternatives rather than simply finding cheaper sources of imported fuel. The potential Iranian supply option thus represents a short-term cost-saving measure rather than a reversal of Pakistan’s longer-term direction.

Renewables and nuclear power on the other hand are expected to play a larger role in Pakistan’s electricity mix in the coming years, helping to limit exposure to global fuel price swings and geopolitical disruptions. And while crude oil and LNG will remain important for transport, industry and some power generation, their overall importance is expected to decline as domestic energy sources expand.

This gradual shift towards cleaner domestic sources reflects a broader effort to reduce exposure to external energy shocks. Iranian supplies may provide short-term relief, but Pakistan’s longer-term strategy must centre on reducing its dependence on imported hydrocarbons altogether.