Client Name

Pak-Arab Pipeline Company Limited - PAPCO

Faculty Advisor

Ms. Muniba Abdullah

SBS Thought Leadership Areas

Investment Decision Making

SBS Thought Leadership Area Justification

Our project aligns with Investment Decision Making as it evaluates the strategic and financial impact of maximizing Mogas transportation through PAPCO’s White Oil Pipeline. The project analyzes pipeline utilization, road versus pipeline transportation costs, IFEM-related inefficiencies, tariff implications, and national freight savings, thereby supporting better infrastructure and investment decisions in Pakistan’s petroleum logistics sector.

Aligned SDGs

GOAL 9: Industry, Innovation and Infrastructure

Aligned SDGs Justification

Our project aligns with Industry, Innovation and Infrastructure because it focuses on improving the utilization of PAPCO’s White Oil Pipeline, a critical national infrastructure asset. By shifting Mogas transportation from road tankers to pipeline, the project supports a more efficient, reliable, and cost-effective petroleum logistics system.

NDA

Yes

Abstract

This Experiential Learning Project (ELP) in partnership with Pak-Arab Pipeline Company Limited (PAPCO) examines the specific barriers to the full functionality of Pakistan's White Oil Pipeline (WOP) in transporting Motor Gasoline (Mogas) along with an empirical approach to develop a solution framework. PAPCO runs a 786 km long underground pipeline from Port Qasim in Karachi to Mahmoodkot in South Punjab. Constructed with a total investment of USD 680 million, the pipeline has a designed capacity of 8 MMTPA (million metric tonnes per annum). Although the cost of transporting Mogas through the pipeline is approximately PKR 2.3 per litre compared to PKR 12 per litre through a road tanker, the pipeline has never transported more than 5.2 MMTPA of Mogas in a year. This translates to about 35% of a national asset being unutilized, which costs Pakistan PKR 46 to 73 billion per year in avoidable freight costs. While the Mogas mandate has increased in October 2025 from 50 to 60 percent, there has not been a significant improvement in the utilization of the pipeline. The research design was a mix of primary and secondary methods. Primary data was collected via a formal, in-depth interview with a senior PAPCO official. The interview covered the operational, commercial, stakeholder and regulatory constraints and barriers. The secondary research included Oil and Gas Regulatory Authority (OGRA) tariff determination, Oil Companies Advisory Council (OCAC) petroleum consumption, Pakistan Credit Rating Agency (PACRA) sector studies, and government policy documents including the Petroleum Amendment Act 2025, Port Qasim Authority documents, and three international case studies on India, Kenya, and the TAZAMA Pipeline System. The study delineates five barriers to the root causes. First, the bottleneck of the (Fauji Oil Terminal and Distribution Company Limited (FOTCO) terminal, which is further exacerbated by the failure to uplift OMC products at Mahmoodkot, not terminal infrastructure issues. Second, OMC commercial impasse caused by an Inland Freight Equalisation Margin (IFEM) mechanism that integrates pipeline freight savings across firms, which incentivizes commercial transfer to a more economical mode. Third, resistance by transporters, particularly from the All Pakistan Oil Tankers Owners Association (APOTOA), is a result of a government-mandated investment of PKR 100 billion to ensure compliance with ADR without a commercial compensatory framework. Fourth, — viii — the existence of a stipulation is enforcement without measurement or significant commercial impact. Fifth, the lack of a publicly available Open Access Framework, which is legally binding and allows OMCs to guarantee pipeline volume. The key recommendations include establishing a Sharia-compliant Ijarah partnership with FOTCO for a specific Mogas discharge line, a Mudarabah-based Petroleum Products Pipeline Fund that turns the OMC deadstock capital into a Sukuk-earning investment (instead of a sunk cost), a gazette-notified Open Access Framework based on the TAZAMA guidelines, a Last-Mile Transport Framework providing ADR-compliant tankers with depot-to-pump exclusivity, and a conditional mandate escalation from 60% to 80%, with infrastructure-linked gates at each step. The target of the strategy is to increase the throughput from 5.2 MMTPA to a range of 7.0 to 7.5 MMTPA over the next 2 years, which would unlock approximately PKR 73 billion of national freight savings on an annual basis. All the financial instruments proposed are fully Sharia-compliant and are designed for certification by an independent Sharia Supervisory Board. The findings contribute to the IBA SBS thought leadership areas of Behavioral Studies, Investment Decision Making, and Islamic Business and Finance. Keywords: White Oil Pipeline; PAPCO; Motor Gasoline; Modal Shift; IFEM; Islamic Finance; Ijarah; Mudarabah; Open Access Framework; Petroleum Supply Chain; Pakistan.

Document Type

Restricted Access

Document Name for Citation

Experiential Learning Project

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