News
$432m Faisalabad-Rawalpindi-Peshawar Oil Pipeline Moves Toward Tariff Approval
By Mariam Khan
Real Estate Analyst
4 min read
Frontier Works Organisation is seeking recovery of approximately $432 million in investment within four years through a guaranteed transportation tariff for the proposed 437 kilometre Faisalabad to Peshawar white oil pipeline, under a petition filed with the Oil and Gas Regulatory Authority. The structure is specifically designed to secure the participation of Azerbaijan's state owned oil company, SOCAR, as a project partner.
The Route and Technical Scope
The pipeline would transport petrol and high speed diesel from Gatti in Faisalabad through Thalian near Rawalpindi to Tarujabba near Peshawar. The project comprises three sections: a 256 kilometre, 20 inch pipeline from Faisalabad to Thalian with an initial capacity of about 7 million tonnes annually, expandable to 10 million tonnes, a 172 kilometre, 12 inch section from Thalian to Tarujabba with 5 million tonnes capacity, and a 9 kilometre, 8 inch spur connecting Thalian to Faqirabad. Dedicated storage facilities are planned at 60,000 tonnes each at Faisalabad and Thalian, and 50,000 tonnes at Tarujabba.
How the Tariff Structure Actually Works
Under the proposed 30 year tariff period, transportation charges would start at roughly $64 per tonne in 2029, the project's targeted first year, before gradually declining to $14.5 per tonne by 2058 as capital costs are depreciated and project debt is repaid. Frontier Oil Company, the joint venture entity formed by FWO, Pakistan State Oil, and SOCAR, has told the regulator this declining structure is deliberately designed to pass the benefit of falling capital costs on to consumers over time, in direct contrast to road transportation costs, which have tended to rise rather than fall.
Why the Investment Terms Have Drawn Government Pushback
The project has not moved forward without internal government friction. Pakistan's Finance Ministry has proposed extending the payback period from four years to seven specifically to reduce the initial tariff burden on consumers, while the Power Ministry has separately questioned the underlying investment assumptions behind the guaranteed dollar based returns. The Economic Coordination Committee ultimately backed the project on strategic grounds despite these reservations, and the project's total estimated cost of roughly $432 million now sits meaningfully higher than the $300 million figure the ECC had originally cleared approximately five months earlier.
Why This Pipeline Matters for Pakistan's Fuel Logistics
Currently, around 70 percent of Pakistan's petrol and diesel moves by road, with the existing Karachi to Machike pipeline network handling roughly 28 percent and rail accounting for only about 2 percent. This new pipeline is specifically intended to shift a meaningfully larger share of that volume away from road transport, extending Pakistan's pipeline backbone further north from Machike toward Peshawar and completing a more continuous pipeline connection spanning from Karachi through to the country's northern industrial and population centres.
What Remains Unresolved
An OGRA official has indicated the regulator is expected to approve the construction stage tariff soon, but formal approval has not yet been confirmed as of this report. Given the documented reservations already raised by the Finance and Power Ministries over the guaranteed dollar based return structure, the final approved terms may still differ from what FWO has currently proposed.
What This Means for Industrial and Logistics Property Along the Corridor
A pipeline connecting Faisalabad, Thalian near Rawalpindi, and Tarujabba near Peshawar carries genuine relevance for industrial and logistics property along this specific corridor, since more reliable, lower cost fuel transport infrastructure tends to support surrounding industrial activity and reduce long term transport costs for businesses operating nearby. Investors and businesses evaluating industrial or logistics sites along the Faisalabad to Peshawar axis should watch for OGRA's final tariff determination as the concrete next milestone, since that decision will confirm the actual terms under which this infrastructure investment proceeds, and by extension how quickly construction is likely to follow.