- Insights, competitive analysis, and forecast to 2027
Introduction
Pakistan’s oil and gas sector is a cornerstone of its economy, providing the energy required to fuel transportation, industry, and power generation. According to the Pakistan Oil and Gas Market Summary, Competitive Analysis and Forecast to 2027 by Research and Markets, the oil and gas market in Pakistan was valued at $60.2 billion in 2022, with a compound annual growth rate (CAGR) of 21.4% between 2017 and 2022. The oil segment, which includes refined petroleum products such as High-Speed Diesel (HSD), Motor Gasoline (MS), and Furnace Oil (FO), plays a critical role in this market, driven by the activities of Oil Marketing Companies (OMCs) and refineries.
1- Overview of Pakistan’s Oil Market
1.1 Market Size and Growth (2017–2022)
The oil and gas market in Pakistan has experienced significant growth over the past five years, driven by rising energy demand and increasing industrial activity. According to Research and Markets, the market’s value reached $60.2 billion in 2022, reflecting a robust CAGR of 21.4% from 2017 to 2022. The oil segment, which constitutes the total volume of refined petroleum products (including refinery consumption and losses) multiplied by the hub price of crude oil, accounted for a significant portion of this value. In 2022, Pakistan’s oil market volume was measured in millions of barrels of oil equivalent (BoE), with key products including HSD, MS, FO, and Liquefied Petroleum Gas (LPG).
The growth in the oil market was fueled by several factors, including population growth (Pakistan’s population reached 235.8 million in 2022), urbanization, and the expansion of the transportation and industrial sectors. However, this growth was tempered by challenges such as the COVID-19 pandemic, which led to a 34.8% market value decline in 2020 due to reduced demand and collapsing global oil prices. Despite this setback, the market rebounded strongly in 2021 and 2022, driven by economic recovery and rising global oil prices.
1.2 Market Segmentation
The oil market in Pakistan is segmented by product type and end-user application. Key product categories include:
- High-Speed Diesel (HSD): The most widely consumed petroleum product, used primarily in transportation and heavy machinery. In 2023, domestic refineries met 60% of Pakistan’s diesel demand.
- Motor Gasoline (MS): Used in passenger vehicles and motorcycles, with domestic refineries supplying 30% of demand in 2023.
- Furnace Oil (FO): Primarily used for power generation, though its demand has declined due to a shift toward alternative fuels like natural gas and coal.
- Liquefied Petroleum Gas (LPG): Used for domestic cooking and industrial applications, with 50% of supply imported in 2023.
Geographically, the market is segmented into urban and rural regions, with major consumption centers in Karachi, Lahore, and Islamabad. The transportation sector is the largest consumer, followed by industry and power generation. According to Research and Markets, the oil segment’s value in 2022 was driven by the transportation sector’s demand for HSD and MS, which accounted for a significant share of the market’s $60.2 billion valuation.
1.3 Forecast to 2027
Research and Markets projects that Pakistan’s oil and gas market will grow at a moderate pace through 2027, with the oil segment expected to reach a value of approximately $75 billion by 2027, driven by a CAGR of around 4.5%. This forecast is based on anticipated increases in oil consumption (measured in million BoE) and stable global oil prices. However, the report highlights potential constraints, including geopolitical risks, economic instability, and the global shift toward renewable energy. The market volume is expected to grow modestly, with a projected increase of 1.8 million BoE by 2027, reflecting steady demand growth in transportation and industry.
2- Competitive Landscape
2.1 Leading Players
The oil market in Pakistan is dominated by a few key players, with Pakistan State Oil (PSO) holding the largest market share. According to Research and Markets, the leading companies in the oil and gas market include:
- Pakistan State Oil (PSO): With a 48% market share in June 2023, PSO is the market leader, operating an extensive network of fuel stations, storage terminals, and logistics infrastructure. In the first half of FY25, PSO reported gross sales of PKR 1.74 trillion and a net profit of PKR 11.2 billion.
- Shell Pakistan Limited: Holding a 7.1% market share, Shell leverages its global expertise to offer high-quality fuels and lubricants. Despite a 37% year-on-year sales decline in June 2023, Shell remains a key player due to its brand reputation and customer-centric services.
- Attock Petroleum Limited (APL): With an 11.2% market share, APL has expanded its presence in urban centers like Karachi and Punjab, focusing on quality assurance and on-site testing to build consumer trust.
- Oil & Gas Development Company Limited (OGDCL): While primarily an upstream player, OGDCL contributes to the oil market through exploration and production activities, supplying crude oil to refineries.
- Pakistan Petroleum Limited (PPL): Another upstream player, PPL supports the oil market by providing crude oil and natural gas, which are critical inputs for refining.
These companies operate in a partially consolidated market, with global giants like Shell competing alongside domestic players like PSO and APL. The competitive landscape is characterized by strategic alliances, distribution agreements, and investments in product innovation.
2.2 Competitive Strategies
Leading players employ various strategies to maintain their market positions, as outlined by Research and Markets:
- Product Innovation: PSO’s introduction of Carient S-PRO, a fully synthetic motor oil with Opticore Technology, exemplifies efforts to offer advanced, fuel-efficient products. Similarly, Shell and APL focus on developing high-performance lubricants to meet consumer demand.
- Distribution Networks: PSO’s nationwide network of fuel stations and convenience stores, coupled with mobile fueling services like PSO on Wheels, enhances its market reach. APL’s expansion into urban areas and Hascol Petroleum’s commissioning of over 500 retail outlets demonstrate the importance of distribution infrastructure.
- Strategic Alliances: Companies like Shell and Chevron collaborate with local distributors to strengthen their market presence. These partnerships allow global players to leverage local market knowledge while maintaining operational flexibility.
- Cost Efficiency:
- In response to fluctuating oil prices, OMCs focus on optimizing supply chain operations and reducing logistics costs. For example, PSO’s investments in storage terminals and pipeline infrastructure aim to minimize losses and improve efficiency.
2.3 Market Share Analysis
The market share dynamics in Pakistan’s oil market are highly competitive, with PSO dominating due to its scale and government backing. Research and Markets notes that the top three players (PSO, APL, and Shell) collectively hold over 65% of the market share in the downstream oil segment. The remaining share is distributed among smaller players like Hascol Petroleum, TotalEnergies, and local distributors. The report’s Porter’s Five Forces analysis highlights moderate buyer power due to the essential nature of petroleum products and high supplier power due to Pakistan’s reliance on imported crude oil.
3- Market Dynamics
3.1 Drivers
Several factors drive the growth of Pakistan’s oil market, as identified by Research and Markets and other sources:
- Rising Energy Demand: Pakistan’s population growth and urbanization have increased demand for petroleum products, particularly HSD and MS. The transportation sector, with 188,318 passenger cars sold in 2022, is a key driver.
- Industrial Growth: The cement, textile, and manufacturing sectors rely on diesel and furnace oil for production and power generation. The positive outlook for Pakistan’s automotive industry, supported by the National Electric Vehicles Policy (NEVP), is expected to boost demand for lubricants and fuels.
- Infrastructure Investments: Government policies supporting refinery upgrades and new storage terminals encourage OMCs to expand their operations. The 2023 Refinery Upgradation Policy offers incentives for producing Euro-5 grade fuels, driving investment in downstream infrastructure.
- Recent Discoveries: The discovery of potentially the world’s fourth-largest offshore oil and gas reserves in Pakistan’s territorial waters, as reported by Offshore-Technology.com in September 2024, presents significant growth opportunities. This find could reduce import dependence and boost domestic production.
3.2 Restraints
Despite its growth potential, the oil market faces several challenges:
- Economic Instability: High inflation (nearly 30% in 2023) and a growing trade deficit strain Pakistan’s ability to finance oil imports, which accounted for $17.5 billion in 2023. Fluctuating exchange rates further exacerbate costs for OMCs.
- Security Risks: Security concerns, particularly in Balochistan and Khyber Pakhtunkhwa, increase operational costs and deter foreign investment. The March 2024 attack on Chinese engineers in Khyber Pakhtunkhwa highlights these risks.
- Global Oil Price Volatility: Crude oil prices, which fell to $65.98 per barrel on July 7, 2025, down 19.86% from the previous year, create uncertainty for OMCs. Price fluctuations impact profitability and consumer affordability.
- Environmental Regulations: The government’s push for cleaner fuels, such as Euro-5 standards, requires significant investment in refinery upgrades, posing financial challenges for OMCs.
3.3 Opportunities
The oil market offers several opportunities for growth, as outlined by Research and Markets:
- Offshore Reserves: The recent discovery of offshore oil reserves, potentially rivaling those of major oil-producing nations, could transform Pakistan’s energy landscape. Partnerships with international firms like Turkey’s TPAO enhance exploration capabilities.
- Refinery Upgrades: The 2023 Refinery Upgradation Policy encourages investment in hydro desulfurization units and isomerization plants, enabling OMCs to produce higher-quality fuels and meet environmental standards.
- Digitalization and Automation: OMCs are adopting technologies like AI and IoT to optimize supply chain operations and reduce costs. For example, ADNOC’s use of AI generated $500 million in value in 2023, a model that Pakistani OMCs could emulate.
- Blue Water Economy:
- The offshore reserves open avenues for OMCs to participate in marine-related activities, such as supplying fuels for shipping and supporting marine biotechnology.
4- Porter’s Five Forces Analysis
Research and Markets employs Porter’s Five Forces to assess the competitive intensity of Pakistan’s oil market:
- Buyer Power (Moderate): Consumers, including industrial and retail customers, have moderate bargaining power due to the essential nature of petroleum products. However, price sensitivity and the availability of alternative fuels like LPG and natural gas temper this power.
- Supplier Power (High): Pakistan’s reliance on imported crude oil (85% of total supply) gives suppliers significant leverage. Major suppliers, including Saudi Aramco and Kuwait Petroleum Corporation, influence pricing and supply terms.
- Threat of New Entrants (Low): High capital requirements, regulatory barriers, and security risks deter new entrants. Established players like PSO benefit from economies of scale and extensive infrastructure.
- Threat of Substitutes (Moderate): The shift toward natural gas, coal, and renewable energy poses a moderate threat to oil products, particularly furnace oil. However, the transportation sector’s dependence on HSD and MS limits substitution in the short term.
- Degree of Rivalry (High):
- The market is highly competitive, with PSO, Shell, and APL vying for market share through product innovation, pricing strategies, and distribution networks.
5- Industry Trends and Developments
5.1 Recent Discoveries
The discovery of potentially the world’s fourth-largest offshore oil and gas reserves in Pakistan’s territorial waters, reported in September 2024, marks a significant milestone. This find, estimated to rival the reserves of major oil-producing nations, could reduce Pakistan’s $17.5 billion oil import bill and enhance energy security. OMCs are poised to benefit by expanding their distribution networks to handle increased domestic production.
5.2 Refinery Upgradation Policy
The 2023 Refinery Upgradation Policy incentivizes refineries to produce Euro-5 grade fuels, addressing environmental concerns and improving fuel quality. Companies like Cnergyico PK Limited, which operates Pakistan’s largest refinery (156,000 bpd), are investing in hydro desulfurization units to comply with these standards. This policy presents opportunities for OMCs to market cleaner fuels and expand their customer base.
5.3 Digital Transformation
OMCs are increasingly adopting digital technologies to enhance efficiency. PSO’s fuel card system and mobile apps streamline transactions, while Shell’s partnerships with technology firms improve supply chain management. These innovations align with global trends, as seen in ADNOC’s $500 million AI-driven value creation in 2023.
5.4 Declining Furnace Oil Demand
The shift away from furnace oil for power generation, driven by cheaper alternatives like natural gas and coal, has reduced FO sales by 49% in FY23. OMCs are adapting by focusing on HSD, MS, and LPG, which are in higher demand.
6- Economic and Environmental Impacts
6.1 Economic Contributions
The oil market contributes significantly to Pakistan’s economy, supporting employment, tax revenue, and industrial productivity. OMCs employ thousands directly and indirectly through retail networks and logistics operations. The sector’s $60.2 billion valuation in 2022 underscores its role in GDP growth, with tax revenues from petroleum products funding public infrastructure and services.
6.2 Environmental Considerations
The oil market’s reliance on fossil fuels raises environmental concerns, particularly CO2 emissions. According to a ScienceDirect study, crude oil accounts for 22.6% of Pakistan’s primary energy supply, contributing to carbon emissions. The government’s push for Euro-5 fuels and renewable energy adoption aims to mitigate these impacts, but OMCs must invest in cleaner technologies to align with global sustainability goals.
7- Forecast and Future Prospects
7.1 Market Value Forecast
Research and Markets projects the oil market to grow to $75 billion by 2027, with a CAGR of 4.5%. This growth will be driven by increasing demand for HSD and MS, supported by the transportation sector’s expansion and the NEVP’s targets for electric vehicle adoption (30% of passenger car sales by 2030). However, the market’s growth may be constrained by global oil price volatility and economic challenges.
7.2 Market Volume Forecast
The oil market’s volume is expected to increase by 1.8 million BoE by 2027, driven by rising consumption in transportation and industry. Domestic refineries, with a combined capacity of 450,000 bpd, will play a crucial role, supported by the recent offshore discoveries.
7.3 Strategic Recommendations
To capitalize on market opportunities, OMCs should:
- Expand Distribution Networks: Invest in retail outlets and storage terminals to handle increased domestic production from offshore reserves.
- Adopt Digital Technologies: Leverage AI and IoT to optimize supply chain operations and reduce costs.
- Align with Environmental Standards: Invest in cleaner fuels and renewable energy solutions to meet regulatory requirements and consumer expectations.
- Strengthen Partnerships: Collaborate with international firms to enhance exploration and refining capabilities.
Conclusion
Pakistan’s oil market valued at $60.2 billion in 2022. It has demonstrated resilience despite challenges like economic instability, security risks, and global oil price volatility. Leading players like PSO, Shell, and APL drive competition through innovation, distribution networks, and strategic alliances. The discovery of offshore reserves and supportive government policies present significant opportunities for growth, while digitalization and sustainability initiatives align the market with global trends. By addressing challenges and leveraging opportunities, Pakistan’s oil market is poised to play a pivotal role in driving economic progress through 2027 and beyond.
The author, Nazir Ahmed Shaikh, is a freelance writer, columnist, blogger, and motivational speaker. He writes articles on diversified topics. He can be reached at nazir_shaikh86@hotmail.com