A landmark on the energy front

The inauguration of the white oil pipeline from Port Qasim to Mahmood Kot, by President General Pervez Musharraf in Karachi, on August 26, will certainly go down as a landmark in the history of Pakistan's economic development.
For while putting an instant end to a number of oil-related woes in the crisis ridden energy sector, it will also pave the way for reducing dependence on import of oil, thereby providing considerable financial relief in an environment of rising oil prices.
At the same time, as the President rightly pointed out in his address on the occasion, it will help boost the country's oil refining capacity to its growing advantage too. It will be noted that there is quite some substance in the President's observation that the world oil prices were rising more because of lack of refining capacity than production shortfalls.
In any event, there is tremendous scope of refining yet to be explored. Considering the big and increasing gap between demand and supply of refined oil, the President's idea of Pakistan concentrating on establishment more oil refineries should appeal to reason as the answer to the demands of the situation.
It would indeed be a source of great strength to the economy in view of efficient, cost effective, safer and environment friendly transportation to areas of consumption, the trend of which has been set by the PAPCO's White Oil Pipeline.
The gains accruing from the $480 million, 817 kilometres pipeline, built by Pak-Arab Pipeline Company (Papco), will be seen to be many and varied. For one thing, an estimated 60% of the petroleum products, imported and locally refined, are consumed in the central and northern areas.
Since the demand has been increasing at about 5% per annum, transporting increasing quantities to areas of consumption had been posing a formidable logistical challenge.
It will be noted that until the commissioning of PARCO's Mid-Country Refinery in 2000, its pipeline from Karachi to Mahmood Kot, which was commissioned in 1981, transported 4 to 5 million tons of products annually, 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 dependence on road transport. It will be recalled that the need of augmenting the transport infrastructure had been anticipated a decade ago in the 8th 5-year plan.
It had, as such, proposed construction of a second white oil pipeline from Karachi to Multan, pointing out that besides meeting the growing upcountry demand of petroleum products, it would reduce the highly undesirable movement of oil by road, which involved higher transportation costs and consumption of more energy, besides posing threats of road damage, traffic congestion and accidents.
However, although the project was initially tendered in 1998, the process slowed down as none of the bids was found fully compliant. With the revival of the process in 1999, PARCO, on its own merit was entrusted with implementing the project.
With Shell, PSO and Caltex becoming partners in the joint venture, it was named Pak-Arab Pipeline Company Limited (PAPCO). Again, in view of its long experience in operating cross-country pipelines, the contract for operating and maintaining the white oil pipeline was also awarded to PARCO.
Subsequently, PAPCO was incorporated as a private limited company with the construction and operation of the White Oil Pipeline as its main objective. PAPCO, which has emerged, as an ideal public-private partnership, in its own way, brings together PARCO's considerable experience of managing oil pipelines to meet the needs of the other partners for an efficient and cost-effective means of transporting petroleum products to a large bulk of customers, located upcountry.
Needless to point out, the White Oil Pipeline has added immensely to the country's energy infrastructure, which promises to generate dividends for many decades to come not only for its shareholders but also for the national economy.
Certainly, is has provided the most secure means of transporting oil products to the upcountry, leaving another pipeline for black oil varieties, thus, again, widening the scope for building more refining capacities, away from Karachi and at the fast developing deep-sea port at Gwadar.