Pakistan, which imports 80% of its oil through the Strait of Hormuz, found itself at the epicentre of an energy crisis after the outbreak of the US war against Iran — and is now rapidly restructuring its energy strategy through diversification, domestic production, and renewables.
Pakistan’s economy had previously seemed to be recovering in 2026; however, rising energy and oil prices have added to Pakistan’s import costs, leading to slower growth. Energy crises and disruptions in supply chains, rising fuel prices, rising electricity generation costs, shortages of liquefied petroleum gas (LPG), etc., have weakened the country’s energy sector.
Pakistan Government Approach
Energy security has a central and strategic position in Pakistan’s foreign policy and is one of the main priorities of Pakistan’s foreign policy, at the center of the country’s economic and security diplomacy.
In recent years, the discovery of oil and gas fields in the offshore areas of Indus and Makran has created a bright future. Oil reserves in Pakistan have increased by 26 percent, and gas reserves by 2 percent, by the end of the fiscal year.
Pakistan’s proven oil reserves are currently estimated at around 353 million barrels, with nine billion barrels of recoverable shale oil and 235 trillion cubic feet of gas reserves. To reduce its energy dependence, the Pakistani government has decided in recent months to intensify exploration operations, sign contracts and tenders, and invite foreign investors in domestic oil and gas.
Pakistan has practically no strategic oil reserves, and its strategic oil reserves are only for 5 to 7 days. Therefore, in recent months, Pakistan has emphasized the need to strengthen energy storage infrastructure, improve strategic reserve capacity, and increase resilience to potential crises in the global energy market.
In fact, Gwadar is the “crown” of CPEC, a transit hub for Pakistan. It also acts as a logistics base for storing and transporting energy (including oil and LNG). The port can provide a shorter and safer route for importing oil and gas from the Middle East to western China (replacing Malacca).
From this perspective, by establishing Gwadar energy storage facilities, or even a network of liquefied gas and oil pipelines between Gwadar and Iran, Pakistan can create real emergency shields, an energy hub.
Any continued conflict in the Persian Gulf would have immediate consequences for inflation, energy security, and economic recovery. Pakistan is therefore diversifying its partners and increasingly exploring alternative routes for energy delivery. Pakistan is increasingly seeking to source crude oil from alternative sources, including Russia and Nigeria, and to make up for its gas shortage by importing LNG cargoes.
Islamabad has also made efforts to reduce its total reliance on a single maritime supply corridor. In this regard, Pakistan has already formally requested Saudi Arabia to shift its oil supply route through the Red Sea port of Yanbu.
From the view of many in Pakistan, an energy transition could bring economic resilience, accelerate progress, strengthen security, and increase Pakistan’s energy self-sufficiency.
Solar energy has become the largest source of electricity generation in Pakistan, with a share of more than 25 percent. The government is also trying to secure its share of renewable energy by investing more in solar energy. (Pakistan’s installed solar capacity is expected to reach about 51 gigawatts by 2026).
By prioritizing energy efficiency, Pakistan is seeking to establish a sustainable, resilient, and affordable energy system by 2050 that effectively addresses the growing energy demand. Therefore, it is important to accelerate Pakistan’s shift towards domestic energy sources, especially renewable energy, and a gradual transition to domestic sources such as hydropower and coal.
In this regard, Islamabad has decided to create a new “security force” to provide dedicated security for large infrastructure projects in the hydropower sector.
The China-Pakistan Economic Corridor (CPEC) has brought Pakistan an addition of over 8-12 gigawatts of capacity (mainly coal, hydro, and renewable) and 886 kilometers of transmission network.
Pakistan wants to benefit from China’s advances in artificial intelligence, green energy cooperation, and sustainable development of solar energy, wind energy, electric transportation, and energy storage systems in the second phase of CPEC.
Islamabad has tried to make better use of the China-Pakistan Economic Corridor (CPEC) to redesign Pakistan’s energy security architecture and invest in sectors such as energy.
As for May 25, 2026, during the visit of Pakistani Prime Minister Shahbaz Sharif to China, a series of memorandums of understanding and trade agreements worth more than $7 billion were signed, including artificial intelligence, energy, mining, and a battery production hub for electric vehicles. In the new context, with a focus on economic diplomacy, Islamabad sees energy as a tool to diversify partners (China, the Persian Gulf, Russia, the West, and Iran) and reduce vulnerability.
Islamabad wants to reduce energy import costs and increase crude oil processing capacity with the participation of Russian companies, and help improve energy security. Also, reducing the cost of solar energy production in China can be a major driver of Pakistan’s energy transition.
The competition between the United States and China over vital minerals is also an opportunity for Pakistan. In recent months, Pakistan, relying on its mining capacities, has also tried to find a role in geoeconomic equations and supply its mineral capacity with a $500 million agreement with the American company U.S. Strategic Metals.
In another dimension, Islamabad’s active diplomacy and its relations with Tehran have allowed Pakistan to prevent disruptions in energy supply through diplomatic management and regional cooperation.
As in the recent official visit of the Iranian president to Pakistan, new ways to further deepen cooperation in various sectors, including trade and energy, were explored, which could also be a step toward solving the challenge of importing gas from Iran. In fact, Pakistan’s role in helping reduce tensions between the United States and Iran and improve regional stability could be crucial for formal energy trade with Tehran, and the formalization of trade with Iran, especially in the energy sector, petroleum products, and fuel.
However, despite some domestic calls for the initiation of free trade with Iran and the acceleration of the completion of the Iran-Pakistan gas pipeline project, Islamabad could either focus on importing gas directly from Iran or benefit from the much lower cost (up to 18 percent) of transferring Qatari gas to Iran via a swap through Iran.
Outlook
Pakistan’s energy sector faces significant challenges of widespread dependence on imports, lack of sufficient strategic reserves, and limited alternative options in the face of any new tensions.
To address the energy crisis, Pakistan is likely to pursue a priority on energy efficiency, accelerating the shift towards domestic energy sources, especially renewables, to strengthen energy security, increase Pakistan’s energy self-sufficiency, and advance economic resilience.
Although Pakistan is stuck in a cycle of debt dependency, high-energy costs, and external shocks, complete success in the process of exploration, investment, and indigenous extraction of oil and gas could also transform Pakistan into an energy power in the long term.
Samyar Rostami, a political observer and senior researcher in international relations
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