KARACHI: The share of motor gasoline (Mogas) transported through the White Oil Pipeline (WOP) has increased to 70 per cent, a development expected to support higher throughput volumes in the period ahead.
According to the study conducted by the Pakistan Credit Rating Agency (Pacra), the planned MTT-WOP pipeline expansion, spanning 477 kilometres from Machike to Taru Jabba, could add capacity over the medium term. However, physical construction has yet to begin as the financing and tariff framework remains under finalisation.
The study added that Mogas transportation through the WOP has been assigned a separately determined tariff by the Oil and Gas Regulatory Authority (Ogra), fixed for 20 years in line with the project’s lifespan. The tariff is dollar-denominated and payable in rupees at the prevailing exchange rate on the date of payment, providing the sector with a natural hedge against rupee depreciation.
The high-speed diesel (HSD) tariff was finalised with the Pakistan government at the pipeline’s inception in FY00, accompanied by a minimum throughput guarantee for eight years to support initial operations. The 25-year framework has completed its original cycle; however, based on Papco’s continued revenue recognition and ongoing operations, the tariff arrangement appears to remain in effect, although an official announcement is still awaited.
The report said sales tax applicable to the sector stands at 18 per cent, unchanged in FY26. Crude oil imports are subject to a 3.0 per cent customs duty, 2.0 per cent additional customs duty, 5.0 per cent federal excise duty (FED) and 12 per cent income tax. Among petroleum products, Mogas and HSD are each subject to a 2.0 per cent additional customs duty, a 10 per cent regulatory duty and 12 per cent income tax.
It added that Pakistan’s oil transportation sector benefits from a natural monopoly in commercial pipeline operations, USD-indexed tariffs and government-backed ownership. These features limit exposure to competitive pressures and provide a degree of revenue stability not commonly seen across other industries.
During 9MFY26, the sector recorded throughput of four million tonnes and gross revenue of Rs22,702 million. Gross margins stood at 61 per cent, operating margins at 56.2 per cent and net margins at 42.8 per cent, with a largely fixed cost base and USD-denominated tariff receipts supporting margin stability over the period.
Leverage declined to 9.4 per cent in 9MFY26 following the full repayment of a foreign currency loan. The remaining local currency facility continues to be repaid through scheduled quarterly instalments, reducing finance costs and easing the overall debt burden.
The report noted that sustained high fuel prices could weigh on domestic petroleum product consumption and, in turn, pipeline throughput. However, the USD-indexed tariff structure provides some offset, as rupee depreciation improves rupee-equivalent tariff realisations, although the net impact on volumes would depend on broader demand conditions.
It further said road transport continues to account for around 69-70 per cent of total oil movement in Pakistan, indicating that pipelines currently handle a relatively small share of overall logistics. Any meaningful shift towards pipeline transport, whether driven by policy or economics, would support sector throughput, although the pace and scale of such a transition remains uncertain.
