Pakistan working on Gwadar-China oil pipeline

Published: July 13, 2016
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Country will have oil in surplus after Khalifa refinery is set up. PHOTO: AFP

Country will have oil in surplus after Khalifa refinery is set up. PHOTO: AFP

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.

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Reader Comments (25)

  • quatro
    Jul 13, 2016 - 8:42AM

    LOL. It’s as though someone finally woke up and figured out that the only item of consequence that China trades with the Middle East is oil and somehow that got overlooked by CPEC. The cost of constructing a pipeline over the mountains to China will be very expensive and isn’t part of the $46 Billion CPEC budget. How much – who provides the money – how repaid? It’s also unclear what Pakistan’s oil refinery capacity have anything to do with oil pipeline – implies Pakistan is going to refine China oil which seems unlikely. Recommend

  • Jul 13, 2016 - 8:57AM

    Wow! This pipeline will be a work of art. The work on Khalifa Refinery is yet to start and the GOP will be hard pressed for funds.
    If USD 6 billion is the historical cost what is the cost after many years of shelving the project? So, borrow and push up the outstanding debt. What is the proposed date of construction and completion? SalamsRecommend

  • Rana
    Jul 13, 2016 - 9:41AM

    Lol.Pakistan couldn’t not buils IP pipeline for its own.Recommend

  • Random Passerby
    Jul 13, 2016 - 9:44AM

    @quatro Who told you that the $46 Billion figure is set in stone? Recommend

  • Reader
    Jul 13, 2016 - 11:14AM

    A good news. If Pakistan move smartly there can be billions of dollars in transit fee for biggest energy consuming nation.Recommend

  • Samir
    Jul 13, 2016 - 11:29AM

    Indian trolls will jump in to discredit the pipeline.. its so interesting to see negativity on positive things.. that you wonder if they are paid to troll.Recommend

  • Jul 13, 2016 - 11:39AM

    Our country need more economic activities as it will help to remove deprivations and Indian agents from Baluchistan. Recommend

  • Woz Ahmed
    Jul 13, 2016 - 12:00PM

    Can anybody advise if a pipeline can transport more than one type of fuel ? I ask because if the crude oil is refined in Pakistan , can more than one product be piped to China or is it sending crude oil easier then that broken down into its constituent parts in China ?

    Urumqi is already connected via pipeline with Russia, so I doubt the oil is required in Urumqui but on the east coast.

    A study by the Prague school, an international think tank, states that transporting oil from the Gulf to East coast of China will cost $10 a barrel whilst a tanker to Shanghai costs $1-2. This was in 2010 so I imagine costs and technology have moved on.

    Security wise , always worth paying a premium , but how large a premium is a question for Chinese state planners.Recommend

  • Haji Paji
    Jul 13, 2016 - 12:22PM

    @Rana:
    And you need auto correct asapRecommend

  • Rana
    Jul 13, 2016 - 1:24PM

    @Haji Paji: yep but you got it right ?Recommend

  • Noble Tufail
    Jul 13, 2016 - 3:59PM

    This friendship is lot more costly than I ever imagined !!Recommend

  • Naresh
    Jul 13, 2016 - 5:28PM

    @Woz Ahmed: Can anybody advise if a pipeline can transport more than one type of fuel ? I ask because if the crude oil is refined in Pakistan , can more than one product be piped to China or is it sending crude oil easier then that broken down into its constituent parts in China ?
    .
    No & Yes.
    .
    If there is only one Pipeline than it can have a throughput of only Crude or Refined Oil.
    If Refined Oil then for a short distance pipeline one can pump one product and then another. However if it is a Long Distance Pipeline then you have to have one line dedicated to a type of oil i.e. Crude Pipeline and then a refined Product Pipe Line. It would be very difficult to segregate two “products” over a distance of the Gwadar – Urumqui Pipeline which is an “Air Distance” of 3,000 Kilo Metres. Thus there may be Four Pipe Lines i.e. Crude, Petrol, Diesel and High Grade Kerosine used as Jet Fuel.Recommend

  • quatro
    Jul 13, 2016 - 7:14PM

    @Random Passerby: @quatro Who told you that the $46 Billion figure is set in stone?
    .
    The point I was trying to make was that the proposed pipeline will be expensive and that it’s not part of the original $46 Billion CPEC. Discussion of funding seems relevant. You should also note that 34 years ago the American’s spent $8 Billion dollars to complete a similar difficult Trans Alaska Pipeline. That pipeline was approximately 1/3 the length of the pipeline over the mountains to China … that implies that the cost of the China pipeline will be enormous. Recommend

  • Jul 13, 2016 - 7:58PM

    Why are we destroy9ing our lands beauty for China’s interests? these pioe libes pollution road and train infra will destroy the beauty of most beautiful region of Pakistan.Recommend

  • KANISHKA
    Jul 13, 2016 - 10:50PM

    Does Pakistan has the design expertise, qualified engineers and technicians, funds in billions of dollars and specialized material for piping, pumping stations and valves for laying down 3000 plus miles of pipeline in difficult and snowy terrain? I am not sure.

    The very purpose of CPEC (network of roads, pipes, railways) is to suck the whole sale raw materials (oil, gas, minerals and ores) from Africa and Asia including Baluchistan to run thousands of huge Chinese factories and in return, dump the markets of Africa and Pakistan with cheap manufactured good back.

    In short term it will look good but in the long term it will destroy the local industries as they cannot compete with Chinese economy of scale and communist minded labor force comprising of hundreds of million Chinese workers under strict rules.

    Good luck Pakistan in shooting own feet.Recommend

  • syed & syed
    Jul 13, 2016 - 11:31PM

    Who is the author of this news item. Pakistan did not take any step to start gas pipe line on a lame excuse of sanctions from Iran and the author is breaking the news that Iran will build a refinery and lay a pipe line for crude. Whom are you trying to fool.Recommend

  • woz ahmed
    Jul 13, 2016 - 11:47PM

    @KANISHKA:

    Pakistanis built the Gulf countries, the Arabs are largely Bedouins, tent dwellers, without us they would still be tent dwellers, Emirates took off because of PIA tutelage. So yes we have the skills.

    There are issues with our China relationship, for example our FTA and the fact that solar energy from Chinese plants are 4x what UAE pays and double what India pays for coal electricity under CPEC and Visa issues.

    But China loves us and our friendship grows ever higher and deeper.Recommend

  • Naresh
    Jul 13, 2016 - 11:52PM

    @Author : The project can be implemented in future after the Chinese take operational control of Gwadar Port.

    Gwadar was handed over to the Chinese in February 2013 :

    http://tribune.com.pk/story/509028/gwadar-port-handed-over-to-china/
    Gwadar Port handed over to China

    By AFP Published: February 18, 2013

    ISLAMABAD: China took control Monday of a strategic Pakistani port on the Arabian Sea, as part of a drive to secure energy and maritime routes that also gives it a potential naval base, sparking Indian concern.
    .
    The Pakistani cabinet approved the transfer of Gwadar, currently a commercial failure cut off from the national road network, from Singapore’s PSA International to the state-owned China company on January 30.

    CheersRecommend

  • curious2
    Jul 14, 2016 - 1:17AM

    Pakistan has outsourced every major pipeline to-date …. but somehow has no problem assigning the most challenging pipeline yet to a Pakistani company which has no experience in pipeline construction. That make sense to anyone?
    .
    I would speculate that the cost of this pipeline will exceed the entire CPEC budget by a significant amount – and given the complexity/risk China will have to manage the project from beginning to end. I suppose the lack of any news coverage in China about this investment is an oversight? Recommend

  • Virkaul
    Jul 14, 2016 - 1:35AM

    Zafar Bhutta Sb needs an orientation course in oil production and oil refinery.

    If China wants to import oil through a pipeline with hundreds of pumping stations enroute, where is a refinery expansion connected with it. All gwadar port retires is a number of floating roof crude oil tanks with a capacity so designed that the terminal never runs dry until new oil tanker arrives at port.

    Or is the author saying that China will have products process in Pakistan and despatch white products via pipe line? The a 12 MMTPA refinery is rather small for both China and
    Pakistan.

    I find this article more of theatrics than facts.Recommend

  • sabi
    Jul 14, 2016 - 1:42AM

    @KANISHKA:
    Before you build a pipeline you need to have preliminary feasibility report for starter, and that’s what the whole idea is and one doesn’t need lot of resources.
    This proposed pipeline and railway link is cpec part ll .Recommend

  • cautious
    Jul 14, 2016 - 3:13AM

    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
    .
    Anybody think that one of the most expensive and technologically challenging pipelines ever constructed is going to be done by an outfit which has no experience in pipeline construction? Nope – and that goes for performing a feasibility study as well (@sabi). Recommend

  • syed & syed
    Jul 14, 2016 - 3:59AM

    @curious2:Pipe line or no pipe line. My question is who are share holders of the Pakistani company. Will it be another gigantic leakRecommend

  • quatro
    Jul 14, 2016 - 4:31AM

    @Samir: Rather than labeling someone as “Indian Troll” how about providing something of substance which indicates what they say is wrong?Recommend

  • Bharat
    Jul 14, 2016 - 6:38AM

    Good Job Pokistan

    Be careful not to make a mess.
    China is the only all weather friend left, and for that ypu had to give a lot of land that dpes not belong to you in KashmirRecommend

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