ISLAMABAD: Pakistan is working on a plan to lay an oil pipeline from Gwadar to China for the export of crude and has given the task to state construction firm Frontier Works Organisation, say officials who are aware of the development.
The pipeline will run from Gwadar Port to western China and will allow Beijing to diversify and speed up import of crude oil. Prime Minister Nawaz Sharif had floated the idea of constructing the oil pipeline during a visit to China.
China irked by delay in Gwadar project
According to the officials, Pakistan would have surplus oil in the future as Pak-Arab Refinery Limited (Parco) has decided to revive the $6-billion Khalifa Refinery project that was shelved by the United Arab Emirates (UAE) during the previous government of Pakistan Peoples Party (PPP).
Parco will set up the refinery in Balochistan that will have the capacity to process 250,000 barrels of crude oil per day. In Parco, the UAE holds 40% shares whereas the government of Pakistan has a 60% stake. China Huanqiu Contracting and Engineering Corporation has also expressed interest in setting up an oil refinery in Pakistan, preferably at Gwadar.
The refining capacity of Byco, Pakistan’s largest refinery, has jumped to 155,000 barrels per day (bpd) after completion of work on its second unit of 120,000 bpd.
Previously, Parco was the biggest refinery with production capacity of 90,000 bpd, followed by National Refinery with 68,000 bpd, Pakistan Refinery with 48,000 bpd and Attock Refinery with 45,000 bpd.
Chinese offer to finance whole $2b LNG project
The planned oil pipeline from Gwadar to China could be extended and connected with Iran that has already offered to build a pipeline for the supply of crude oil to Gwadar, the officials say.
Iran had also expressed the intention to set up an oil refinery of 400,000-barrel-per-day capacity at Gwadar Port during the previous PPP government. However, the project could not be pushed ahead because of international sanctions on Tehran and failure to reach an agreement on the proposed incentives.
The project can be implemented in future after the Chinese take operational control of Gwadar Port. Gwadar is quite close to the Persian Gulf from where nearly 40% of the world’s oil passes.
According to the officials, China meets 50% of its oil demand through imports from the Middle East. Oil supplies come via Dubai-Shanghai-Urumqi route covering over 10,000 kilometres.
Gwadar port to be operational by 2017: Chinese official
The crude oil processed and refined in Pakistan can be exported through the shortest possible Dubai-Gwadar-Urumqi route - a distance of about 3,600 km. This can be achieved by laying an oil pipeline through the energy corridor up to western China via Karakoram Highway and Khunjerab Pass.
Hurdles in the way like the high altitude, freezing temperatures and a difficult terrain can be overcome with the help of advance technology.
Many countries have successfully completed similar pipeline projects under extreme conditions and at high altitudes such as the Atacama gas pipeline, Trans-Alaska pipeline and Trans-Asia gas pipeline.
Published in The Express Tribune, July 13th, 2016.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.