OGRA proposes bid float for laying 430km oil pipeline

Wants to ensure competitive tariff in line with existing oil transportation fee

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has proposed the floating of bids for building a 430-kilometre-long oil pipeline from Machike (Sheikhupura) to Tarru Jabba (Peshawar) on a 15 to 30-year contract to ensure competitive tariff.

However, the Petroleum Division wants to invite bids for laying the oil pipeline for 15 years on build, operate and transfer basis with Inter-state Gas Systems (ISGS) having the option to take over the pipeline after 15 years.

Talking to The Express Tribune, a senior Ogra official revealed that the regulator in a letter to the Petroleum Division suggested that considering the economic life of more than the proposed 15 years for the pipeline, the tariff received through the bidding process might be uneconomical compared to that for the existing mode of oil transportation.



It proposed that bids may be invited for 15, 20, 25 and 30 years with a view to ensuring viability of the tariff relative to the existing tariff for oil shipment through the same route that the project intends to serve.

The oil pipeline plan comes in the backdrop of repeated threats by oil tanker owners and operators that they would halt fuel transportation if their demands were not met. They even called strikes a couple of times this year to force the government to pay heed to their demands.

Deadly accidents involving oil tankers from time to time have been a cause for major concern for the government. Tanker owners and drivers have also been allegedly found involved in oil theft at different depots of Pakistan State Oil (PSO) and power plants.

In an effort to ensure a smooth oil supply and curb its theft, the Petroleum Division is planning to build the oil pipeline and wants to give the task to state-owned ISGS to invite investors interested in the project. Since its creation, ISGS has been dealing with gas pipeline projects like Iran-Pakistan, Turkmenistan-Afghanistan-Pakistan-India (Tapi) and North-South gas pipelines.

According to experts, oil pipelines are a safer mode of transportation as an estimated $200 million worth of furnace oil is stolen every year during transportation through tankers.

Tariff for the pipeline will be determined through competitive bidding. The project will be executed in three phases based on the build-operate-transfer model with concession period spanning 15 years.



Earlier, Pak-Arab Refinery (Parco) - a joint venture between Pakistan and Abu Dhabi - was offered to lay the pipeline, but it stayed away, arguing that the project was not financially viable because of expected low volumes.

At present, domestic refineries produce 13 million tons of petroleum products per annum against the demand for over 24 million tons. The rest is imported by PSO and private oil marketing companies. Demand for petrol is growing at a pace of 20% and diesel at 10% per annum.

Published in The Express Tribune, November 7^th, 2017.

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