Only cabinet can approve all future oil pipeline projects

This may give advantage to state-run companies, sideline others

ISLAMABAD: The government has decided that the building of all future oil pipelines will require approval of the federal cabinet - a decision that may restrict the Frontier Works Organisation (FWO) which is competing with Inter State Gas Systems (ISGS) for executing a pipeline project.

“The proposal approved by the federal government draws a line at activities of the FWO that will prevent it from building oil pipelines without approval of the federal government,” commented a senior government official.



FWO is an independent engineering company and the government’s policy only allows state-run companies to lay oil pipelines.

Earlier, the Oil and Gas Regulatory Authority (Ogra) held a public hearing in Peshawar for the grant of licence to the FWO for constructing an oil pipeline from Lahore to Peshawar. On that occasion, the Khyber-Pakhtunkhwa government supported the FWO, instead of ISGS, but it upset the Pakistan Muslim League-Nawaz (PML-N) government.



Following that development, the Economic Coordination Committee (ECC) of the cabinet decided in a meeting on April 17 that proposals for all future oil pipeline projects should be sent to the federal cabinet for consideration and approval, suggesting the FWO would first have to go to the government with its project plan.



During the public hearing, the FWO said it wanted to lay the oil pipeline from Machike to Tarujabba at an estimated cost of $370 million, which the K-P described as cheap.

However, the senior government official told The Express Tribune that the ECC had approved the pipeline project at a cost of $280 million, which was $90 million less than the cost estimated by the FWO.

The ECC was told that the composite tariff quoted was about 60% lower in comparison to the present trucking rate. It would lead to savings of Rs100 billion for the exchequer during the entire build, operate, own and transfer (BOOT) period and would bring down the cost for oil consumers.

Furthermore, as per BOOT contract, pipeline assets would be transferred to a nominated enterprise after 15 years at a price of Rs1 only. Resultantly, the tariff will be negligible because only the operating cost would have to be recovered.

During the meeting, Prime Minister Shahid Khaqan Abbasi noted that transportation of petroleum products through oil tankers was expensive compared to the pipeline. Moreover, he said, oil supply through the pipeline was safe and environment-friendly and a lot of time would be saved as issues like clogged roads would not crop up.

The premier pointed out that some oil tankers had met fatal accidents that caused hundreds of human causalities, adding the proposed pipeline would provide a safe and efficient way for the supply of petroleum products. The ECC was told that government funds would not be required for executing the project.

Calling it an important but sensitive project, the law minister emphasised that the security of proposed pipelines should be ensured. He called for including details of the pipelines along with route maps in the summary for proper scrutiny.

Published in The Express Tribune, May 9^th, 2018.

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