FWO Seeks to Recover $432 Million Pipeline Investment in 4 Years

Pakistan's Frontier Works has sought to recover regarding $432 million invested in a proposed 437-kilometer white oil pipeline within four years through a guaranteed transportation tariff, a structure aimed at securing the participation of Azerbaijan's state oil business, SOCAR.

Key points

• The Faisalabad to Peshawar pipeline would transport petrol and high-speed diesel from Gatti in Faisalabad through Thalian near Rawalpindi to Tarujabba near Peshawar.
• While a nine kilometer spur would connect Thalian to Faqirabad, a further 172 kilometer section would connect Thalian with Tarujabba with capacity of five million tonnes.
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• The project is being developed by Frontier Oil Firm, a subsidiary of FWO, Pakistan State Oil and SOCAR.
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In practice, the Faisalabad to Peshawar pipeline would transport petrol and high-speed diesel from Gatti in Faisalabad through Thalian near Rawalpindi to Tarujabba near Peshawar. The proposed tariff would start at regarding $64 per tonne in 2029 and gradually fall to $14.5 per tonne by 2058 as capital costs are recovered and debt is repaid.

Meanwhile, the project is being developed by Frontier Oil Firm, a subsidiary of FWO, Pakistan State Oil and SOCAR. While the Oil and Gas Regulatory Authority is projected to approve the construction-stage tariff, it has received backing from the Economic Coordination Committee and the federal cabinet.

For context, the project would include a 256 kilometer section from Faisalabad to Thalian with an initial capacity of regarding seven million tonnes per year, expandable to 10 million tonnes.

For context, the proposed investment has triggered concern within the administration over the four year payback period and guaranteed dollar based returns. While the Power Ministry additionally questioned the investment assumptions, the Finance Ministry had proposed extending the payback period to seven years to reduce the initial tariff burden. The ECC ultimately backed the project on strategic grounds. Pakistan Sets New Fish Exports Record of $0.57 Billion.

SOCAR has sought a "ship or pay" arrangement under which payment would be created for committed pipeline capacity even if the full capacity is not employed.

While any shortfall would be covered through the Inland Freight Equalization Margin, under the proposed framework, oil marketing firms would commit minimum annual volumes.

While 28 percent is transported through the existing pipeline network and 2 percent by rail, regarding 70 percent of Pakistan's petrol and diesel at present moves by road. While reducing reliance on road tankers and improving fuel supply to northern Pakistan, the new pipeline is projected to rise the share transported through pipelines by around 10 percent. Stay Connected with ProPakistani.

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Taken together, the developments around FWO Seeks to Recover $432 Million Pipeline Investment in 4 Years point to a situation that is still moving, and the coming days should bring more clarity.