Key Takeaways
- FWO has petitioned for a guaranteed transportation tariff to recover $432m investment in the pipeline.
- The tariff is projected to decline from $64 per tonne in 2029 to $14.5 per tonne by 2058.
- The project aims to transport petrol and high-speed diesel from Faisalabad to Peshawar, improving supply reliability.
The Frontier Works Organisation (FWO) has sought recovery of approximately $432 million in investment in the proposed 437km Faisalabad-Peshawar white oil pipeline within four years through a guaranteed transportation tariff.
Under a tariff petition filed with the Oil and Gas Regulatory Authority (Ogra), the transportation of petroleum products from Faisalabad to Thalian near Rawalpindi and onward to Tarujabba near Peshawar would cost about $64 per tonne in the first year, targeted for 2029, before gradually declining to $14.5 per tonne by 2058, the final year of the proposed 30-year tariff period.
The project, which is supported by the federal government, is intended to transport both petrol and high-speed diesel from Gatti in Faisalabad to Tarujabba, completing a pipeline backbone from Karachi to Peshawar. It is expected to meet increasing petroleum demand in northern parts of the country, including demand linked to CPEC-related development and increasing vehicle ownership.
FOC, a subsidiary of FWO, Pakistan State Oil, and Socar, told the regulator that while capital expenditure on the Faisalabad-Thalian-Tarujabba White Oil Pipeline would be substantially higher than road transportation, the pipeline tariff had been structured to decline over time as capital costs were depreciated or amortised and debt was repaid.
The project is proposed to have a 55:45 debt-to-equity ratio and is expected to rely largely on local resources while providing dollar-linked returns, allowing recovery of the investment in four years. The ministries of finance and power had raised objections to such an upfront return on investment.
The proposed pipeline comprises a 256km, 20-inch line from Faisalabad to Thalian, with a capacity of about seven million tonnes per annum, extendable to 10m tonnes. A 172km, 12-inch section would run from Thalian to Tarujabba with a capacity of 5m tonnes per annum, while an 8-inch, 9km spur would connect Thalian to Faqirabad.
The estimated cost has been put at $320m for the first section, $94m for the second, and $17.5m for the third. Ogra has assessed the project life at 30 years, and the tariff petition has already received backing of the Economic Coordination Committee and cabinet to satisfy Socar.
An official said Ogra was expected to approve the construction-stage tariff soon, with the project considered important for strategic and national reasons, aiming to improve the reliability and safety of supplies to northern Punjab and Peshawar, reduce dependence on road tankers, and lower carbon emissions.
