U.S. President Trump recently stated on social media that Pakistan and the United States have reached an agreement to jointly develop Pakistan’s “vast oil reserves.” He added, “Maybe one day, Pakistan will sell oil to India.” In response, the Pakistani Embassy in the United States issued a statement saying that Pakistan and the U.S. have reached a trade agreement, which will encourage U.S. investment in Pakistan. The oil cooperation deal quickly drew attention from both countries’ industries and media. Why is the U.S. targeting Pakistan’s oil reserves? What is the current state of development in Pakistan’s oil industry? And what challenges could this cooperation face in the future?
Is Pakistan Turning from a Major Oil Buyer into an Oil-Producing Nation?
“Why are the U.S. and Pakistan signing an oil deal?” German news outlet Deutsche Welle ran a headline on August 1, reporting that the new agreement to jointly develop Pakistan’s oil reserves signals a strengthening of trade and economic ties between the two countries. Trump described the deal as an “important beginning” of a potential long-term energy partnership. According to data from Pakistan’s central bank, oil is one of the country’s largest imports, accounting for nearly 20% of total imports. Most of that oil currently comes from countries in the Middle East.
Following Trump’s announcement of the new energy partnership with Pakistan, the White House unveiled a broader trade agreement with the country. Under this deal, the U.S. will impose a 19% tariff on Pakistani imports—down significantly from the 29% rate announced in April.
On August 1, Khurram Shehzad, Adviser to Pakistan’s Finance Minister, responded on social media to the trade agreement between Pakistan and the United States. “In addition to lowering tariffs, the U.S. will actively provide investment,” Shehzad stated. He noted that currently, 80% to 90% of Pakistan’s energy needs rely on imports. However, with U.S. investment, Pakistan could even have the opportunity to become an energy exporter.
Regarding the U.S. tariff adjustment on Pakistani goods, Finance Minister Aurangzeb pointed out that compared to neighboring India’s 25%, and 20% for major textile exporters like Bangladesh and Vietnam, the U.S. tariff on Pakistan is now the lowest in South Asia. According to Reuters, the U.S. is a major market for Pakistani textile exports.
“For now, though, oil still appears to be flowing in the opposite direction,” Deutsche Welle reported. On August 1, Pakistan’s largest refinery, Cnergyico, announced it had reached an agreement with a Texas-based company to purchase one million barrels of crude oil, to be shipped from the Gulf of Mexico to Karachi Port.
The refinery stated that due to Pakistan’s underdeveloped industrial base and low domestic demand for by-products of crude refining, its average operational capacity had been maintained at only 30%–35%. With potential U.S. investment in Pakistan’s energy sector, the company expects domestic demand for refining capacity to gradually increase.
A commentary published in Pakistan’s Dawn newspaper on July 31 analyzed the underlying reasons for this agreement. The article noted that during the India-Pakistan conflict in May of this year, Trump declared he had successfully mediated between the two nations. Pakistan expressed gratitude for his role. In June, Pakistan’s official government social media accounts announced that on June 21 (local time), Pakistan had officially nominated Trump for the 2026 Nobel Peace Prize, praising his “critical leadership” during the India-Pakistan standoff.
How Much Is the “Vast Oil Reserve,” Really?
According to a Business Today (India) report on August 2, analysts believe Trump may have been referring to a 2015 report by the U.S. Energy Information Administration (EIA). That report estimated that Pakistan has 9.1 billion barrels of “technically recoverable” shale oil resources, while India has an estimated 3.8 billion barrels. “Technically recoverable” means oil that could theoretically be extracted using existing technology, but these are not proven reserves. As the EIA clearly stated, these figures are based on geological modeling—not actual exploration or drilling results.
A report from Pakistan’s Dawn newspaper also noted that currently, Pakistan’s domestic oil fields are relatively small, covering only about 10% of national demand. However, the country has conducted a number of oil exploration activities along its southern Arabian Sea coastline. Exploration reports indicate that the region contains substantial oil-bearing formations, but until now, Pakistan has had no concrete extraction plans.
Experts point out two main reasons why large-scale oil extraction hasn’t taken off: first, Pakistan is close to Gulf oil-producing countries, where production costs are much lower; second, most of Pakistan’s potential oil fields are in Balochistan, a region with a complex and unstable security situation. Overall, large-scale oil development in Pakistan is not currently considered commercially viable.
Still, some analysts believe that changing political and economic conditions could make domestic oil extraction necessary in the future. Global oil prices remain high, and Iran is likely to continue facing long-term sanctions. If the U.S. pushes Pakistan to crack down on the smuggling of Iranian oil, it could become even harder for Pakistan to access cheap supplies.
Some reports suggest that if Pakistan can expand its refining capacity and begin producing and exporting petrochemical products, it could significantly increase its export volume, ease its foreign exchange shortage, and help boost economic growth. According to data from the Pakistan Business Council, in the 2023–2024 fiscal year, the country imported $16.9 billion worth of oil and gas—accounting for 31% of total imports—making it Pakistan’s single largest category of foreign exchange expenditure.
Stirring Nerves in India
The announcement of U.S.-Pakistan cooperation on oil has also triggered significant attention in India. According to a India Today report on August 1, New Delhi offered no comment on Trump’s remark that “Pakistan may soon sell oil to India.” Indian Foreign Ministry spokesperson Jaiswal stated on the same day: “Our relationships with other countries are based on their own merits and should not be viewed through the lens of a third country.”
Tensions between the U.S. and India over energy policy have been building in recent days. On August 2, The New York Times reported that despite President Trump’s threats to “punish” India for purchasing energy products from Russia, India has made clear it will continue to import Russian oil.
Some Indian media have compared oil reserves between Pakistan and India. Business Today reported that, based on various global oil reserve databases, Pakistan’s proven crude oil reserves are estimated between 234 million and 353 million barrels. In contrast, India holds between 4.8 and 5 billion barrels—nearly 14 times more than Pakistan. Globally, Pakistan ranks around 50th to 55th in terms of proven reserves, while India ranks in the 20s. Still, both countries rely heavily on oil imports to meet domestic energy demand.
On August 1, Indian news site livemint noted that “proven reserves” remain a tricky subject, as reported figures are often misleading and subject to change. So far, there is insufficient evidence to back up these reserve claims, and Pakistan has faced a series of failed offshore exploration attempts. Indian analysts noted that while Pakistan has carried out some exploration and developed preliminary estimates, these remain far from confirmed. They suggest it may take up to 10 years to overcome technical and logistical hurdles before actual oil and gas production begins.
Still, some Indian oil experts are concerned about the potential implications of the U.S.-Pakistan partnership. On August 1, oil analyst Piyush Pandey told livemint: “If a U.S.-Pakistan energy alliance materializes and proves sustainable, it could serve as a catalyst for Pakistan’s energy independence, infrastructure development, and industrial growth. If Pakistan becomes a net energy exporter—even at a small scale—it could reduce its import burden. And if Pakistan begins exporting downstream products or negotiating energy transit routes, India may face price pressures in the South Asian LNG and refined oil markets.”
Infrastructure Can’t Keep Up
“The unpredictability of current U.S. trade policy must be noted—Pakistan should be cautious about the risks posed by America’s fast-shifting trade and political priorities when pursuing cooperation,” Dawn pointed out in a commentary discussing the challenges facing U.S.-Pakistan energy cooperation.
So far, neither the U.S. nor Pakistan has released details on the exact locations or plans for oil extraction investments in Pakistan. In response, former Senate Chairman Raza Rabbani warned that before signing any mineral resource agreements with foreign governments, the Pakistani government must disclose the full terms to ensure fair distribution of benefits from resource development.
In fact, foreign companies have attempted oil drilling in Pakistan before—but not successfully. A Dawn article from 2024 noted that ExxonMobil (U.S.) and Eni (Italy) drilled to depths beyond 5,500 meters but failed to find oil or gas reserves. A Pakistani official later confirmed: “The drilling project has now been abandoned.” In recent years, major oil firms like Total, Shell, and Eni have all exited Pakistan, each citing various reasons.
Business Today (India) pointed out that developing a viable, export-scale oil industry requires billions in foreign investment, years of exploration, and extensive production infrastructure—all of which Pakistan currently lacks. Experts caution that technically recoverable reserves do not guarantee commercial viability. Without major discoveries, sustained investment, and long-term development timelines, the idea of Pakistan becoming a regional oil exporter remains largely speculative.
Some experts say that U.S. efforts to develop Pakistan’s oil resources won’t be easy. The U.S.-Pakistan partnership faces several hurdles, including technical challenges and inadequate local infrastructure. According to Deutsche Welle, industry experts are cautiously optimistic about the deal, suggesting it could help Pakistan attract investment, adopt advanced extraction technologies, and encourage new exploration efforts. However, without confirmed reserves and essential infrastructure, the actual production of oil remains highly uncertain.
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