ISGS to invite tenders for Sheikhupura-Peshawar white oil pipeline

ISLAMABAD: Inter State Gas Systems (ISGS) is poised to float a tender by the end of current month to invite companies to build an oil pipeline from Sheikhupura to Peshawar, a project designed to stave off the threat of oil theft and break the monopoly of oil tanker operators who have frequently threatened to stop supplies across the country.

At present, a feasibility study is under way by a consultant hired by ISGS and it will be completed by the end of current month.

“We are now conducting feasibility study on a white oil pipeline and hope to float a tender for its laying by the end of January,” said ISGS Managing Director Mobin Saulat while talking to The Express Tribune.

The board of directors of ISGS, which was established by the government to handle gas import projects, has already cleared the pipeline project for implementation on the build, operate and transfer model. It is expected to be completed within a period of two years in financial year 2019-20.

The cost of the pipeline has been estimated at Rs56 billion, but it may vary as the bidding process will determine the cost for each section of the pipeline. Bidders will have the choice to file bids for one or all the sections.

ISGS will have the option to take over the pipeline after 15 years. At the end of the contract, the control of the pipeline will be handed over to ISGS in a maintained and operational condition at no cost and with assurances from a certified authority that it will continue to run for the next 25 years.

The pipeline will have a designed life cycle of 40 years which will be extended, as required, through proper maintenance work in future.

The Economic Coordination Committee (ECC) has already approved the pipeline construction which, along with the go-ahead from the ISGS board, paved the way for undertaking the feasibility study.

The pipeline was planned in the wake of strikes called by oil tanker operators at regular intervals that sometimes brought vital oil supplies to a halt across the country, sparking deep concern among government circles.

Many tanker operators have also been allegedly involved in oil theft at different depots of state-owned marketing major Pakistan State Oil (PSO) and power plants. According to estimates, furnace oil worth $200 million is stolen every year during transportation.

In an effort to ensure smooth and safe oil flows as well as avoid theft, the Petroleum Division has planned to lay the oil pipeline and tasked ISGS to float tenders. ISGS is already dealing with gas pipeline projects like Iran-Pakistan, Turkmenistan-Afghanistan-Pakistan-India and North-South.

Earlier, the Petroleum Division circulated a summary to the ministries concerned for their comments before tabling it in the ECC for formal approval of the pipeline.

Under the plan, ISGS will invite bids from interested parties to lay the pipeline from Machike to Tarru Jabba. Its tariff will be determined through competitive bidding.

At present, domestic refineries produce 13 million tons of petroleum products per annum compared to the demand for over 24 million tons. The demand is expected to jump to 26 million tons in coming years.

The balance is imported through tenders by PSO and private-sector oil marketing companies. The demand for petrol is growing at 20% per annum and for diesel at 10% per annum, which are the two highly consumed petroleum products.

Published in The Express Tribune, January 10th, 2018.

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