Pakistan is all set to initiate an oil pipeline project spanning from Gwadar to China primarily to export crude oil. The task of construction and development has been assigned to Frontier Works Organization. The ultimate beneficiary of this project is going to be China as it will allow them to reap the benefits of diversification in their imports.

Since the pipeline will start from Gwadar and penetrate into Western China thus providing China to shorten the route and speed up the delivery of crude oil import. This idea was floated by Prime Minister Nawaz Sharif in his latest visit to China.

Slight delay in Gwadar project yet new refineries to trigger output

In the midst of political tug of war, there were a few projects which were hanging by the thread and Khalifa Refinery project was one of them. Although the good news is that Pak Arab Oil Refinery (Parco) is planning to revamp this project. Initially this project was to be launched during the previous government but was kept at the back foot by UAE government. The cost of this project was USD 6 billion. It has been quoted by the experts that once completed, it is going to create surplus output.

Parco will construct a refinery in Baluchistan with estimated processing capacity of 250,000 barrels of crude oil per day. United Arab Emirates (UAE) currently owns 40% stakes in Parco while the government of Pakistan owns 60%. Some other investments in oil refineries are also underway as China Huanqiu Contracting and Engineering Corporation is also planning to construct a refinery in Gwadar.

Other refineries are overhauling their processes, as Byco being the largest refinery in Pakistan, has enhanced its capacity to 155,000 barrels per day (bpd) from 120,000 barrels per day (bpd). Before overhaul of Byco, Parco was the largest refinery in Pakistan. The second position was secured by National Refinery with 68,000 bpd, with Pakistan Refinery being third standing at 48,000 and at last Attock Refinery having a capacity of 45,000 bpd.

Oil pipeline could be connected to Iran

Iran being another beneficiary in the region has also showed keen interest in this project and there is also a likelihood that Gwadar-China pipeline could be extended and connected to Iran. This pipeline will supply crude oil to Gwadar eventually.

Originally, Iran had the intention to establish an oil refinery in Gwadar with the estimated capacity of 400,000 barrels per day during the previous government. However, the project did not materialize due to sanctions on Tehran and inability of the concerning parties to reach an agreement.

The location of Gwadar port is the reason for its success as it is close to Persian Gulf which is the prime route where 40% of world’s oil passes.

According to official figures, China is currently meeting 50% of its oil demand through imports from Middle Eastern Region. It is also anticipated that through Gwadar port China will save its cost and distance as the current route of Dubai-Shanghai-Urumqi covers 10,000 kilometers.

Gwadar Port to be operational soon

Currently Pakistan has a great opportunity to export crude oil through Dubai-Gwadar-Urumqi route which is so far the shortest possible route of spanning 3,600 kilometers. This oil pipeline could be efficient if it’s laid through the energy corridor from Karakorum highway and Khunjerab pass.

Many argue that this route is very difficult to develop due to many hindrances of freezing temperatures, peak heights, and difficult landscape. But its counter argument suggests that these issues can easily be resolved through technological advancements and techniques.

There are many examples in other countries where similar projects have been initiated and successfully developed under harsh environmental conditions. Prime examples are Atacama gas pipeline, Trans-Alaska pipeline and Trans-Asia gas pipeline. The proponents of Gwadar port are eyeing this to be a turning point for Pakistan’s history as it brings multiple benefits for the entire region.

image credit: APP