Ministry of Finance is said to underwrite tariff differential of Machike-Taru Jabba Oil Pipeline Project (MTOPP) to be undertaken by the Inter State Gas Systems (Private) Limited (ISGS), well informed sources in Petroleum Division told Business Recorder.
Giving the background, the sources said, on April 17, 2018, a high level meeting approved the tariff received from the competitive bidding for three sections of MTOP, issuance of policy guidelines to Oil and Gas Regulatory Authority (Ogra) under section 21 of the Ogra Ordinance, 2002 to approve the tariff and facilitation agreement for execution between ISGS and Petroleum Division.
The sources said comments of Ogra could not be obtained in time on the proposal due to paucity of time. Ogra, however, through letters of April 17, 2018 and April 26, 2018 provided comments in the matter conveying that the Authority is exclusively empowered to determine the transportation tariff for the project under section 2(1) (xxxix), 6(2)(s) and 7, more particularly 7(2) of Ogra Ordinance, 2002; and keeping in view the stipulated criteria while the federal government has the power to issue policy guidelines under section 21 of the Ogra Ordinance, 2002 this shall be considered by the Authority in making decision.
In order to ascertain the viewpoint of both the organisations, a meeting was convened by the Secretary Petroleum Division on May 9, 2018 which was attended by Chairperson Ogra, Managing Director Inter State Gas Systems (Private) Limited (ISGS) and other concerned officials of the two organisations.
During the meeting, Managing Director ISGS opined that in cases where the federal government issues policy guidelines to Ogra, unless these are found to be inconsistent with the provisions of the Act or the rules, they shall be binding on Ogra. Further, section 7 and 21 of the Ogra Ordinance, 2002 empowers the federal government to issue policy guidelines and Ogra is required to approve the tariff subject to such policy guidelines by the federal government.
Chairperson Ogra revealed that they have also received a licence application for laying an oil pipeline on the same route by Frontier Oil Company (FOC) which is a subsidiary of Frontier Works Organisation (FWO). A comparison of both projects was presented and it was stated that the applications would be processed and approved as per policy and on merit, and if they are found to be competitive and economical.
Chairperson Ogra further stated that the tariff will have to be determined by Ogra being the authority in the matter and it will be determined after the issuance of construction licence. Ogra has also suggested ISGS to approach Government of Pakistan (GoP) to underwrite the differential tariff (if any) between the Ogra determined tariff and the one determined through open bidding.
Managing Director, ISGS stated that as ISGS had the policy approval from the government, its licence application should take precedence and be considered/ approved by the Authority. Further, the tariff obtained through the open bidding process under BOOT model after applying a discount factor of 10 per cent being denominated in Pak Rupee with no escalation over the period of 15 years is lower than the trucking tariff; and after 15 years the pipeline will be transferred to ISGS at Rs 1.
Presently, Ogra is processing the case as per rules and mandate. Several meetings have been held by ISGS team with Ogra and some of the information has been provided.
The sources said, it has been decided at a high level meeting that Finance Division will underwrite the differential in tariff ( if any) between the Ogra determined tariff and the tariff obtained through open bidding by ISGS.
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