High dollar returns on Faisalabad-Peshawar oil pipeline raise eyebrows

Stakeholders at a public hearing held by the Oil and Gas Regulatory Authority (Ogra) on Thursday challenged the dollar-linked guaranteed returns sought for a $432 million oil pipeline between Faisalabad and Peshawar. Several said the incentives needed substantial scaling back to prevent the emergence of a so-called super IPP. Dawn reported that participants still backed the project for its advantages over road transport.

The Frontier Works Organisation (FWO) petition seeks a tariff for the 437km line, with investment recovered within four years to secure the participation of Azerbaijan's State Oil Company (Socar). Under the proposal, the charge would be about $64 per tonne during the first year, aimed at 2029, and fall to $14.5 per tonne by 2058, the closing year of the three-decade tariff period. Neither the petitioners nor Ogra answered whether any precedent existed for a private investor recovering its full outlay in four years.

FWO representatives argued the project should be judged over the long term, since early tariffs could exceed road freight costs before tapering off. Ogra Senior Executive Director Misbah Yaqoob said the regulator will assess whether dollar-linked returns are warranted and at what level. She added that Ogra would also weigh limiting the ship-or-pay allowance to a specified period rather than the project's full life, and ensure the tariff stays within the inland freight equalisation margin used for uniform petroleum pricing.