Oil transport sector set for growth on rising demand: study

KARACHI: The oil transportation and storage sector is expected to record higher throughput volumes, driven by the relaxation on imports and rising demand for petroleum products, a study by the Pakistan Credit Rating Agency (Pacra) revealed on Tuesday.

Pipelines are recognised as a cost-effective and environmentally friendly mode of transporting oil products. This method not only enhances efficiency in domestic goods transport but is also utilized for cross-border movement of oil and gas. The sector holds strategic importance due to its critical role in the country’s energy system.

There are two types of oil pipelines: crude oil pipelines and product pipelines. While crude oil pipelines transport oil to refineries, product pipelines carry refined products such as gasoline, kerosene, jet fuel and heating oil, either imported or produced locally, to markets. After extraction, pipelines move oil or gas to processing or storage facilities, where they are stored before being fed into feeder pipelines that connect to the national pipeline network.

Once refineries receive crude oil from the nationwide pipelines, they refine it and pump the finished petroleum products into the pipeline. These products are then delivered to storage facilities, from where they are transported by oil tankers to fuel stations or ports for export. The petroleum product supply chain, whether for refined or unrefined products, primarily relies on oil tankers, trucks, railroads, and pipelines, according to the study.

In Pakistan, road transport accounts for 69 per cent of total oil movement across the country, followed by pipelines at 29 per cent, while railways cater to the remaining 2.0 per cent.

With regard to road transport, there are an estimated 14,000-16,000 oil tankers, known as road bowsers, with capacities ranging between 10-30 metric tonnes (MT). In contrast, Pakistan Railways operates 5,400 tank wagons for transporting fuel oil, but its capacity is severely constrained by infrastructure limitations and locomotive shortages.

The country’s pipeline network extends over 16,000 kilometres, with 80 per cent dedicated to gas transport. The operational oil pipeline network spans over 2,000 kilometres and is used to transport High-Speed Diesel (HSD), Motor Gasoline (Mogas), and crude oil.

Papco, the sole commercial operator of the white oil pipeline, completed its upgrade in fiscal year 2021, enabling the movement of both Mogas and HSD through the pipeline. In the long term, the planned expansion of the pipeline network to connect Karachi ports with Peshawar will play a critical role in improving the country’s energy system, especially for the northern regions, the report noted.

The study also highlighted that fixed tariffs and USD indexation stabilise the sector’s revenues, reducing volatility risks. The sector benefits from a natural hedge against exchange rate fluctuations and minimal price sensitivity, which supports profit margins. However, growth remains dependent on volume increases, the study stated.