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Karachi, CPEC and oil


Furnace oil is mainly transported through railways and oil marketing companies which transport their product by road. It is interesting to note that pipeline transportation can drastically reduce transport time from five days to six hours

Razeen Ahmed

SEPTEMBER 6, 2018

Pakistan has developed its oil pipeline transport infrastructure since the eighties and this can be tapped into by the CPEC project. If the oil transportation need of China can be met from the existing infrastructure of Karachi port then the CPEC grid maybe re-aligned. After all locomotives originating from China laden with low quality household goods will go back empty as the configuration of locomotives carrying fuel are different. The sea route of cargo remains significantly cheaper in terms of tonnage as compared to any proposed overland route.

The oil transportation pipeline network of Pakistan comprises of two parallel pipelines originating from the port city of Karachi and connecting the mid-country refinery located in the proximity of Multan. The Black Oil Pipeline started operations in 1981, with a length of 871 km, designed for hauling crude oil northwards having the pumping capacity of up to 6 million tons per year. The other pipeline network known as White Oil Pipeline (WOP) commenced operations in 2007, designed to haul diesel calculated to transport 12 million tons annually to the central regions of Pakistan. The WOP, constructed at a cost of almost $480 million, caters to almost 60 percent of the diesel consumption of Pakistan.

The motive behind launching the oil pipelines is to drastically reduce oil transportation costs, prevent environmental degradation and dispersing of toxic material and remain within environmentally safe noise standards. Furthermore the pipeline will eliminate the movement of around 14,000 bowsers nationwide with their incidental wear and tear on the highways and associated traffic safety hazards. The existing pipeline network is being enlarged to transport Motor Gasoline (Mogas) which strategically complements storage of 255,000 Tons.

Furnace oil is mainly transported through railways and oil marketing companies which transport their product by road. It is interesting to note that pipeline transportation can drastically reduce transport time from five days to a mere six hours. The share of pipeline works out to approximately 37 percent and use of railways for refined products stand at around 4 percent.

The third major oil pipeline is covering a distance of 362 km and travels from  Mahmoodkot to Faisalabad transporting refined products including diesel and kerosene to Lahore (Machike) with a designed pumping capacity in the range of 3.7 million tons annually. The point of origin of the oil pipelines is bolstered by a 22 km Korangi to Port Qasim link tactically connecting both the port of Karachi with Port Qasim and the existing cross country pipeline systems enabling pipeline operations to remain flexible whether receiving crude or refined products.

Investment in refineries and oil pipelines is warranted in view of projected demands of fuel as the demand of petrol in Pakistan is expected to grow by over nine million tonnes by the year 2012-21, while diesel demand would reach 12.5million tonnes. The annual consumption of petroleum products in the country was around 26 million tons during the financial year 2016-17.

During the period July-Feb in the financial year 2017-18 60.4 million barrels of crude oil were imported while 21.8 million barrels were locally extracted. Indigenously extracted crude meets around 15 percent of the country’s total requirements, while 85 percent requirements are met through imports in the shape of crude oil and refined petroleum products.

Imported as well as indigenous crude is refined by six major and two small refineries. The refineries in Pakistan produced 1.8 m tonnes and 4.5 m tonnes of petrol and high speed diesel in 2016-17 respectively and the import of petrol was 6.7 m tonnes inclusive of Refined Octane Number (RON) 87, 92, 95 and 97. During the same period import of diesel was 3.89m tons.

Pipeline development will encourage investment in refineries which will reduce the refined products import bill as excessive imports of liquefied natural gas for operating power plants has impacted profitability of refineries. Development and up gradation of multi grade pipelines will expand the oil supply chain and reduce fuel transportation costs. While negotiating any international energy infrastructure projects one must remain mindful that cost effectiveness takes precedence over visible developmental agenda.

Forsaken, remote and backward areas need to be focused on through mainstreaming health, education and capacity building rather than being brought on the dole for political expediencies. The electricity and gas distribution network has been extended to such an extent which has burdened the utility companies with the result that the tariff for consumers in developed areas is exorbitant thereby increasing the cost of doing business which ultimately impacts on Pakistan’s export competitiveness.

The writer has done his Bachelor of Science in Business and Management from the London School of Economics and is involved in research in the areas of finance and energy

Published in Daily Times, September 6th 2018.



https://dailytimes.com.pk/293506/karachi-cpec-and-oil/

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