Pakistan and China are set to engage in crucial talks this week on laying an oil pipeline from Gwadar Port to western China – an attempt that will allow Beijing to diversify and speed up import of crude oil.
A Chinese team is expected to reach Islamabad on August 22 to hold talks on energy issues including the oil pipeline, sources say. China had expressed interest in investing in Gwadar after Pakistan handed over control of the port to Beijing.
The negotiations will be the follow-up to Prime Minister Nawaz Sharif’s visit to Beijing in early July, when he floated the idea of constructing an oil pipeline from Gwadar Port to western China for the transport of oil.
“Now, the two sides will discuss modalities of the project and undertaking a feasibility study to assess technical and financial viability of the pipeline,” an official said.
Later, officials said, the oil pipeline could be extended and connected with Iran which has already offered to lay a pipeline from its territory to Gwadar for supply of crude oil.
Iran had also announced its intention to set up an oil refinery with oil production capacity of 400,000 barrels per day at Gwadar Port during the tenure of previous government.
“This proposal may be feasible after the Chinese take operational control of Gwadar Port,” the official said, adding Gwadar was quite close to the Persian Gulf from where nearly 40% of the world’s oil supply 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.
“Crude oil processed and refined at the Gawdar oil refinery can be exported and transported to Urumqi through the shortest possible route – Dubai-Gwadar-Urumqi covering about 3,600 kilometers – by laying an oil pipeline through the envisaged energy corridor up to western China via Karakoram Highway and Khunjrab bypass,” the official said.
Hurdles in the way like high altitude, freezing temperatures and a difficult terrain can be overcome with the help of technological advancements. Many countries have successfully completed similar pipeline projects under extreme conditions and at high altitude such as Atacama gas pipeline, Trans-Alaska pipeline and Trans-Asia gas pipeline.
Coastal Oil Refinery
China will also discuss the feasibility of setting up an oil refinery at Gwadar in talks with Pakistani authorities. Islamabad has already pressed for reviving the stalled Coastal Oil Refinery project, which had been shelved by China in 2009-10 after the control of Gwadar Port was given to Singapore Port Authority. Global recession proved another stumbling block in the way of resuming work on the project.
Coastal Oil Refinery, which was designed to process up to 60,000 barrels of crude oil a day, was part of China’s plan to invest $12 billion in multiple projects in Pakistan.
Published in The Express Tribune, August 20th, 2013.