Gwadar seaport holds key in China's energy search

Syed Fazl-e-Haider says the Gwadar seaport will play a key role in its joint projects with Pakistan

PUBLISHED : Tuesday, 12 February, 2013, 12:00am
UPDATED : Tuesday, 12 February, 2013, 2:45am

China is expected to take operational control of the strategically located Gwadar port on Pakistan's southwestern coast this month. The state-run Chinese Overseas Port Holdings has bought the shares of Singapore's PSA International, the concession holder and operator of the port, under a deal approved by the Pakistan government.

China had contributed US$220 million to the construction of the seaport.

PSA was initially contracted to manage and develop the port for 40 years but decided to quit it last year after Pakistan failed to transfer 236 hectares of land in the Pakistan navy's hands for development. The port has so far remained a commercial failure, as it still lacks road and rail connectivity to the rest of the country.

Now China has become the builder and operator of an Arabian Sea port, near the Strait of Hormuz. By virtue of its strategic location, the port can become a major outlet for trade between China, Central Asia and the Gulf region.

Furthermore, energy-hungry China can achieve its strategic objectives associated with energy security through its presence in Gwadar. The port is China's favourable choice for oil trade: oil imports from Iran, the Gulf states and Africa can be transported overland to northwestern China through the port.

Previously planned projects, such as the development of a Pakistan-China energy corridor, may also materialise. China has already proposed to develop a petrochemical city with an oil refinery in Gwadar. In 2007, the Chinese company Great United Petroleum Holdings carried out a feasibility study of the US$13 billion petrochemical city.

The establishment of a dry port at Sost, near the Pakistan-China border, the oil refinery in Gwadar, the proposed rail and road projects, and the expansion of the Karakoram Highway - these are all moves over the past decade towards building an energy corridor.

Gwadar has the potential to play a major role in serving as a corridor for energy, cargo and services between Central Asia, the Gulf and other surrounding regions. Western China can benefit from the port through the Sost dry port, which will also boost economic activity along the proposed highway linking Gwadar with the Karakoram Highway in the north.

The movement of oil and trade between Pakistan and China will obviously gain momentum when Gwadar is linked with the highway.

The Chinese have already built the railway to Tibet and its extension to Pakistan will lead to a faster movement of cargo between the two countries.

However, despite the progress, China will face a daunting security challenge due to increasing lawlessness in the insurgency-hit Baluchistan province.

Syed Fazl-e-Haider is a development analyst in Pakistan