White Oil Pipeline - the need and its corporate structure

White Oil Pipeline - the need and its corporate structure. An estimated 60% of the petroleum products, imported and locally refined, are consumed in the central and northern regions of the country. The demand has been increasing at about 5% per annum.
Transporting increasing quantities to upcountry areas is a major logistical challenge. Until the commissioning of PARCO's Mid-Country Refinery in September 2000, PARCO's existing pipeline from Karachi to Mahmood Kot (near Multan), which was commissioned in 1981, transported 4 to 5 million tons of products per year with the remaining quantities being carried by rail and road. Since then, a large proportion of the pipeline capacity has been used for transporting crude, consequently, increasing oil marketing companies' dependence on road transport.
The need for augmenting the transport infrastructure had been anticipated a decade ago by the makers of the 8th 5-year plan.
Among other things, they recommended the construction of a second white oil pipeline from Karachi to Multan which, while meeting the growing upcountry demand of petroleum products, would also reduce the highly undesirable movement of oil by road involving higher transportation cost, consumption of more energy, road damages, and traffic congestion's and accidents.
The project was initially tendered by the Government in 1998. As none of the bids was fully complaint, the bidding process was reopened in 1999 when PARCO's proposal was found to be fully responsive and most competitive. PARCO was therefore, entrusted with implementing the project and on its invitation, Shell, PSO and Caltex became partners in the joint venture which was named Pak-Arab Pipeline Company Limited (PAPCO). In view of its long experience of operating cross-country pipelines, the contract for operating and maintaining the white oil pipeline was also awarded to PARCO.
PARCO and its three partners in the joint venture had remained keenly interested in the project since very early days and had co-operated in the development of the terms of reference for its consultancy services submitted to the Government in 1993.
PAPCO was incorporated on August 17, 2000 as a private limited company, wholly owned by PARCO, with construction and operation of the White Oil Pipeline as its main objective. Pursuant to an agreement dated August 10, 2000 Shell, PSO and Caltex also became PAPCO's shareholders. PAPCO's equity is divided among the four shareholders in the proportions given below.
Based on a shareholders' special resolution dated August 8, 2002, PAPCO was converted into a public limited company (unlisted) with its authorised share capital increased from Rs 5.0 billion to Rs 10.0 billion.
PAPCO is an ideal public-private partnership which has helped to bring together PARCO's considerable experience of managing oil pipelines and needs of the other partners for an efficient and cost-effective means of transporting petroleum products to meet the requirements of their upcountry customers.
The White Oil Pipeline has immensely enhanced the country's energy infrastructure. It represents a highly strategic investment that will continue to generate dividends for many decades to come, not only for PAPCO shareholders, but also for the national economy.
(The write is CEO PEPCO & Managing Director , PARCO)