$370m oil pipeline from Punjab to KPK

Ogra reserves decision on grant of permission to FOC

The decision regarding awarding permission to Frontier Oil Company-1 (FOC) for construction of new oil pipeline from Punjab to Khyber Pakhtunkhwa at a cost of $370 million has been reserved by The Oil and Gas Regulatory Authority (Ogra).

The FOC has applied for grant of license to carry out the regulated activity of ‘construction of new oil pipeline’ from Machike (Sheikhupura) to Taru Jabba (KP). The total length of the intended oil pipeline is 460kms including branch pipeline. Oil terminal at Thallian is also intended to be connected with Attock Oil Refinery (Rawalpindi) through a branch oil pipeline.

The capacity of the oil pipeline is 7 million tons per annum. The project timeline is two years. The project financing is based on a maximum debt equity ratio of 70:30.

Under the proposed pipeline project, in phase-I, infrastructure such as oil jetty and additional storages will be connected through pipeline backbone from south to north in order to cater for projected needs of petroleum products, besides avoiding reliance on road transport – 148,157 million tons.

In phase-II, considering the current sociopolitical conditions in Afghanistan, fuel supply is key towards enhancing the influence of Pakistan in Afghanistan and other landlocked countries including Tajikistan, Uzbekistan and Turkmenistan. Currently, the fuel is supplied from Iran through road transport. The Frontier Works Organization (FWO) intends to extend the planned pipeline backbone from Taru Jabba to Jalalabad supported by fuel influx from refinery at Karak, KP.

In its petition, the FWO proposed no throughput guarantee is required from the government of Pakistan. The FWO project is based on throughput guarantee by potential oil marketing company for 3 MT per annum and for 2 MT per annum, it is under negotiation.

Oil storage facility at Thallian will be operational for 68,000 MT. Line fill charges, line losses and system use oil are all parts of the project cost. Pipeline will be constructed as single segment on BOO (build, own, operate) basis with no sovereign guarantee required.

Target connectivity of locations are: Machike, ARL facility to PSO Morgah depot, PSO Sihala Depot, SPL Depot Chaklala TPML Depot, ARL Terminal, Thallian and Taru Jabba.

To maintain strategic reserves in the country especially up north, the FWO has initiated the venture to complete the backbone of pipeline from South (Port Qasim) to North (Taru Jabba) along with a jetty at Port Qasim and requisite storages all along the pipeline backbone and a modular refinery of 40,000 bpd at Karak, KP.

According to petitioner, in view of huge financial requirements they have opted for the project commercially with potential investors. The petitioner further argued that oil marketing companies are supposed to have storage of 25 days for emergent strategic needs but these strategic reserves are not maintained in true spirit and quantum and the worst-hit area for strategic need is up north.

According to Pakistan Energy Outlook, Pakistan’s longitudinal market for petroleum products included ports located in south and bulk consumption in north. MOGAS transported through road for up country oil depots is major cause of shortages and environmental hazards. Upper Punjab is worst hit in case of petroleum product shortages.

Petroleum product usage during financial year 2014-15 was 22 million ton per year and has reached up to 26 million ton per year in 2016-17.

Based on study conducted by Frontier Works Organization (FWO), which was approved by Oil Companies Advisory Council (OCAC), existing facilities for oil handling will choke in year 2020-21 and future planned facilities in 2022-23.