Islamabad – Pakistan – The government has approved dollar-based guaranteed returns for the 477-kilometre Machike-Thallian-Tarujabba White Oil Pipeline, a project valued at $300 million. The initiative will be executed through a government-to-government arrangement involving Azerbaijan’s state-owned SOCAR, Pakistan State Oil (PSO), and the Frontier Works Organisation (FWO).
The Economic Coordination Committee (ECC) of the Cabinet approved the Petroleum Division’s proposed terms, despite reservations from the finance and power ministries. Officials cited the project’s potential to strengthen bilateral ties with Azerbaijan and attract future foreign investment as key reasons for approval.
SOCAR had requested a “ship-or-pay” arrangement, ensuring full payment for the pipeline’s annual capacity of 7-8 million tonnes regardless of actual throughput. While the finance ministry proposed linking dollar-based returns strictly to foreign investment and extending the payback period to mitigate early tariff impacts, the ECC sided with the Petroleum Division, deeming the project a strategic opportunity.
Currently, about 70% of petroleum products in Pakistan are transported by road, 28% via an existing Karachi-to-Machike pipeline, and only 2% by rail. The new pipeline aims to shift a larger share of transport to pipelines, improving efficiency and reducing costs. Transportation tariffs will be denominated in US dollars where foreign investment is involved, and Oil Marketing Companies will be required to commit to minimum annual pipeline volumes, with any shortfall covered through national mechanisms.
This story has been reported by PakTribune. All rights reserved.