Pakistan's oil regulator faces strong objections to its revised tariff for the Faisalabad-Thallian-Tarujabba White Oil Pipeline, with an intervener warning that dollar-linked returns, ship-or-pay guarantees and IFEM recovery could shift commercial risks to consumers and leave the project as another 'super independent power producer (Istehkam-e-Pakistan Party (IPP))'. The Oil and Gas Regulatory Authority (Ogra) is scheduled to hold a public hearing Thursday on Frontier Oil Company-II's petition seeking an EPC-based tariff for the pipeline.

In submissions filed by Muhammad Arif Bilwani, the petitioner says Ogra's revised determination materially changes the original tariff framework by switching the tariff currency from Pakistani rupees to U.S. dollars, changing the capital structure from 70:30 to 55:45, and introducing minimum-volume, ship-or-pay and Inland Freight Equalization Margin (IFEM) recovery. The submission argues that Section 13 of the Ogra Ordinance does not allow a review to reconstruct the entire tariff case.

Changes in currency, debt-equity, foreign-exchange exposure, throughput guarantees and IFEM recovery require a specific legal basis, it says. The petitioner calls the absence of sensitivity analysis a 'fatal defect,' saying the tariff depends on 17 variables, including throughput, utilization, capital expenditure, operating costs, financing costs, weighted average cost of capital (WACC), exchange rates, inflation, interest rates, commissioning date, project life and returns.

The petitioner also questions the dollar-denominated tariff, arguing that investor preference for dollar returns cannot determine the methodology for domestic regulated infrastructure. Ship-or-pay should not automatically qualify for tariff recovery, the submission says, while warning that IFEM recovery of volume shortfalls could become open-ended insurance against projected revenue losses.