ECC asked to decide fate of white oil pipeline

Petroleum Division prepares summary on the project for review in ECC meeting

Zafar Bhutta February 08, 2019

ISLAMABAD: The Petroleum Division has approached the Economic Coordination Committee (ECC) for deciding the fate of a white oil pipeline project as the Oil and Gas Regulatory Authority (Ogra) has granted licence to Frontier Oil Company for laying another pipeline on the same route.

According to sources, the Petroleum Division has sent a summary to the ECC, asking it to take a decision on the matter. It was also on the agenda of the last ECC huddle, but the issue was deferred. The board of directors of Inter State Gas Systems (ISGS) has already passed a resolution, requesting the federal government to decide the fate of the white oil pipeline project. The previous Pakistan Muslim League-Nawaz (PML-N) government had tasked ISGS - a state-owned company - with laying the white oil pipeline between Sheikhupura and Peshawar.

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Thereafter, ISGS invited tenders from interested companies for building the pipeline at an estimated cost of $280 million with the intention of tackling oil theft and breaking the monopoly of oil tanker owners, who time and again threaten to stop fuel transportation across the country.

A feasibility study of the pipeline has already been conducted. The quoted composite tariff is about 60% lower than the present trucking rate. It will lead to savings of Rs100 billion for the national exchequer during the entire build, own, operate and transfer (BOOT) period of the project and will bring down the cost of oil transportation.

After the mandate was given by the federal government, ISGS applied for a licence but Ogra has not yet given its approval. However, “the pipeline, which is planned to be built by Frontier Oil Company, a subsidiary of Frontier Works Organisation (FWO), will cost $370 million, $90 million higher than the cost of the white oil pipeline,” an official said. Following this development, the ISGS board passed a resolution which said the federal government should decide the fate of the white oil pipeline. It decided to put the case before the new government of PTI.

In a public hearing held by Ogra in Peshawar for the grant of licence to FWO for constructing the oil pipeline from Lahore to Peshawar, the Khyber-Pakhtunkhwa government, led by the PTI, supported FWO instead of ISGS.

Under the white oil pipeline project, pipeline assets, as per BOOT contract, will be transferred to a nominated enterprise after 15 years at a price of one-rupee only. As a result, the tariff will be negligible because only the operating cost will have to be recovered.

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At a meeting, then prime minister Shahid Khaqan Abbasi noted that the transportation of petroleum products through oil tankers was expensive compared to a 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.

Apart from that, some oil tankers met fatal accidents, which caused hundreds of human lives and the proposed white oil pipeline would provide a safe and efficient way for the supply of petroleum products.

Oil tanker owners have also called strikes in the past to stop fuel supply across the country, which has been a matter of grave concern for the government. They have also been allegedly involved in oil theft at different depots of Pakistan State Oil (PSO) and power plants.

Published in The Express Tribune, February 8th, 2019.

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