Stakeholders object to dollar returns on Faisalabad-Peshawar oil pipeline

ISLAMABAD: Stakeholders at a public hearing on Thursday raised serious objections to dollar-based guaranteed returns proposed for a $432 million oil pipeline from Faisalabad to Peshawar, Dawn reported.

The Oil and Gas Regulatory Authority (Ogra) had called the hearing to consider a petition from the Frontier Works Organisation (FWO) seeking a transportation tariff for the 437-kilometre pipeline. According to Dawn, participants at the hearing described the proposed returns as unusually lucrative and demanded substantial rationalisation of the incentives before any tariff is approved. They warned that the structure as proposed risked creating a new "super IPP", a term associated with independent power producers whose contracts guaranteed high dollar-indexed payments.

The FWO petition envisages recovery of the entire investment within four years. Dawn reported that the fast recovery timeline is designed to help secure participation by Azerbaijan's State Oil Company. Stakeholders argued that combining dollar returns with such a short payback period would lock in high costs and shift exchange-rate risk onto consumers or the public exchequer. They called for lower guaranteed returns and a reconsideration of the currency in which the tariff would be paid.

Dawn did not name the stakeholders in its initial report, and no immediate comment from Ogra or FWO was reported. The public hearing is part of the regulator's process for setting pipeline tariffs. It was not immediately clear when a decision would be made.

The proposed pipeline would carry oil products between Faisalabad in Punjab and Peshawar in Khyber Pakhtunkhwa, two major demand centres. The tariff decision will determine how much the pipeline operator may charge for transporting fuel, which in turn affects fuel logistics costs across the two provinces.