Pakistan port opens new
possibilities By Syed
Fazl-e-Haider
QUETTA, Pakistan - President
General Pervez Musharraf on Tuesday formally
opened Gwadar Port in Pakistan's Balochistan
province, the South Asian country's third port.
The Arabian Sea port will be completed at
a cost of Rs16 billion (US$264 million), with
financial and technical assistance of China, which
has so far provided 80% of the $248 million
initial development costs.
The operation
and management of the port was handed over to the
Port
of Singapore Authority (PSA) under an agreement
signed between the Gwadar Port Authority (GPA) and
the Concession Holding Co (CHC) - a subsidiary of
the PSA. The CHC is committed to invest $550
million over the next five years.
The
agreement, which regulates the rights and
obligations of both parties, has a duration of 40
years, with the GPA receiving revenue from the
PSA. The investment attracted and revenue
generated by Gwadar Port have been estimated at
between $23.6 billion and $42.2 billion.
Gwadar is on the southwest coast of
Pakistan, close to the Strait of Hormuz that links
the Persian Gulf and the Gulf of Oman. Its
location marks the confluence of three
increasingly important regions - the oil-rich
Middle East, heavily populated South Asia, and
resource-rich Central Asia. The seaport will serve
as an economic and trade transit point for
Pakistan and Afghanistan, as well as Central Asian
and Middle Eastern countries.
It is
expected that the port will not only promote trade
with Persian Gulf states, but will also facilitate
the transshipment of containerized cargo, unlock
the development potential of the hinterland, and
emerge as a regional hub for major trade and
commercial activities. It is also expected that
Gwadar, 70 kilometers east of the Iranian border
and in close proximity to Gulf shipping lanes,
will handle transshipment traffic for the Gulf and
ports on the Arabian Peninsula.
Some
analysts see an operational Gwadar port as China's
first foothold in the oil-rich Middle East, as
well as providing road and rail links to the
economic powerhouse. Beijing wants Gwadar to be
the gateway port for its western region, as its
eastern seaboard is 3,500km from Kashgar, the main
city in the far west of China's Xinjiang Uyghur
Autonomous Region, whereas the distance from
Kashgar to Gwadar is only 1,500km. This makes it
feasible and cost-effective for China's interior
regions to carry out trade through this port. That
is why China expressed interest in helping
Pakistan to develop Gwadar into a full-fledged
deepwater commercial port, capable of handling
cargo ships of up to 50,000 tons or more.
Energy-hungry China is eyeing Central
Asia's oil and gas reserves and is increasingly
looking to Pakistan for oil and gas supplies.
Beijing plans to run at least five oil and gas
pipelines to Gwadar from the Central Asian
republics and wants to turn the facility into a
transit terminal for Iranian and African crude-oil
imports.
Gwadar is expected to play a key
role in China's energy security, as its strategic
location gives it greater scope as a free oil port
in the region, and it will be the endpoint of all
gas pipelines from Central Asian states, Iran and
Qatar. Pakistan and China have also held talks on
the construction of the strategic pipeline from
Gwadar to China's borders, enabling it to import
oil from Saudi Arabia.
The port has a
depth of 14.5 meters and an approach channel of
5km. Three multipurpose berths of 210 meters in
width have also been built. The port can currently
handle bulk carriers of up to 50,000 deadweight
tons through its three berths.
The
dredging of Gwadar Port's 4.5km approach channel
was completed in February.
The CHC has
established four separate operating companies -
PSA Gwadar Ltd, PSA Gwadar Terminals Ltd, Gwadar
Marine Services Ltd and Gwadar Free Zone Co Ltd.
Beijing wants to build a refinery and
petrochemical complex with an initial 10 million
tons per year capacity, later expanding to 21
million tons. Under a memorandum of understanding
signed between Pakistan and the China, the Great
United Petroleum Holding Co (GUPC) began carrying
out a feasibility study and preparation work for
the petrochemical city project last December.
The GUPC, China's largest private
petroleum group, was established in June 2005 and
is a conglomerate of nearly 50 private petroleum
enterprises. China's petroleum industry has been
monopolized by large state-owned enterprises such
as the China National Petroleum Corp (CPNC), China
Petrochemical Corp (Sinopec) and China National
Offshore Oil Corp. However, the establishment of
the GUPC, through the unification of private
enterprises, has helped to break up China's state
petroleum monopoly.
The petrochemical
city, a two-phase project, is part of the proposed
oil mega-city in Gwadar. In the first phase, the
petrochemical city will be set up. In the second
phase, the biggest refinery and petrochemical
logistics and storage complexes will be set up.
Pakistan has allocated 5,060 hectares of
land in Gwadar for the project, which will be
leased at nominal rates to parties interested in
establishing the refineries or investing in oil
logistics and storage facilities.
In the
first three years, the refinery will be able to
refine 10.5 million tons of oil annually. In the
first phase, its capacity is expected to be
increased to refine up to 21 million tons of crude
oil within seven to nine years. In the second
phase, the capacity of the refineries will be
increased to refine 63 million tons of crude oil
within 15 years.
The Chinese Petroleum
Chamber has also shown keen interest in the $12.5
billion investment plan for constructing the
petrochemical city and shifting energy-related
industry to the Gwadar Port Energy Zone (GPEZ).
The two countries will set up a
joint-venture consortium to finalize the
preferential policy and tax incentives package for
the establishment of the GPEZ. It has also been
estimated that the GPEZ will be able to attract
investment of about $13 billion. The proposed zone
will comprise an oil refinery,
liquefied-natural-gas terminals and petrochemical
plants.
Islamabad is finalizing incentive
packages to induce the Chinese petroleum-services
industry to relocate to the GPEZ. The incentives
may include free land for refinery construction,
unlimited duty-free import of crude for
processing, and sales-tax exemption for
refined-product exports.
A Pak-China
Energy and Trade Cooperation Promotion Association
has been proposed to be established for steering
these plans. The association would be broad-based
and include members from the oil-and-gas and power
sectors. Pak-China Joint Investment Co has been
proposed to finance the projects.
According to official sources, both
countries will announce the establishment of the
Pak-China Joint Investment Co during the visit of
Pakistani Prime Minister Shaukat Aziz to China
next month.
Critics in Pakistan oppose the
idea of China being heavily involved in the
development of Gwadar Port. They believe that
Gwadar should have a neutral image and that
Islamabad must declare it an open port. They also
believe that continued emphasis on Gwadar's
strategic position may be at the expense of some
of the economic benefits it can provide.
Musharraf also announced on Tuesday that
the country's fourth port will be built at
Sonmiani in Balochistan.
Syed
Fazl-e-Haider, sfazlehaider05@yahoo.com,
is a Quetta-based development analyst in
Pakistan. He is the author of six books,
including The Economic Development of
Balochistan, published in May 2004.
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