Gwadar Port benefits to China limited

By Li Xuanmin Source:Global Times Published: 2016/11/23 23:18:39

The CPEC terminal will provide development opportunities for Pakistan

The COSCO Wellington cargo vessel is seen during the opening of a trade project in Gwadar Port, west of Karachi on November 13. Photo: CFP

The COSCO Wellington cargo vessel is seen during the opening of a trade project in Gwadar Port, west of Karachi on November 13. Photo: CFP


The benefits of Pakistani Gwadar Port to the Chinese economy may be limited, as the port's capacity cannot satisfy China's oil import demand and a proposed pipeline from Gwadar to western China would be both economically and geographically infeasible and would raise crude transport costs by as much as 16 times, experts said.

However, the port is a bonanza for Pakistan, experts said, noting that it will bring a string of opportunities for the country, including revitalizing its lackluster economy and attracting more foreign capital.

Following the first trade cargo ships that departed from Gwadar on November 13, the National Business Daily (NBD) suggested China would benefit a lot from the port because of its strategic location.

The port "is located on the Arabian Sea and occupies a strategic location," Bloomberg reported, giving China access to the Persian Gulf region and the Middle East.

This will allow China to transport oil and gas from the Gulf countries through a much shorter route instead of the existing arrangement through the Malacca Straits, the NBD said.

However, based on the port's size and current cargo throughput, benefits to China may be limited, experts noted.

Gwadar's inner port is currently dredged to 11.5 meters, a depth that is eclipsed by "major international ports, like the Shanghai Port, which generally have a water depth of 14 to 15 meters and are compatible with heavy loaded ships that carry hundreds of thousands of tons of goods," Wu Minghua, a Shanghai-based independent shipping industry analyst, told the Global Times on Wednesday, noting that the vessels docked in the Gwadar Port are only able to carry cargo weighing less than 100,000 tons.

With an expected handling capacity of 1 million tons in 2017, it is better to describe the port as "medium-sized," Wu noted. Traffic at large ports generally averages 600 million tons per year.

Additionally, the port would not be able to handle China's demand for petroleum imports. In 2015, the country's total crude oil imports stood at 335.5 million tons, according to China's General Administration of Customs, 310 times the handling capacity of Gwadar Port.

Against this backdrop, "Gwadar will not become China's main trade hub with Persian Gulf countries, not to mention serve as an alternative route to the Malacca Straits," Wu said.

Oil pipeline

In addition to the port, China also plans to build pipelines from Gwadar to Kashi, Northwest China's Xinjiang Uyghur Autonomous Region, for the export of crude, the Nation reported.

The proposed construction hasn't started yet, and "will not likely take place" due to the high cost and complicated geographic conditions, Mei Xinyu, a research fellow at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, told the Global Times on Wednesday.

Such pipelines would need to climb the Karakorum mountain range with an altitude of 5,000 to 6,000 meters, where temperature fall as low as -30 C and earthquakes also happen frequently, Mei said, noting "the pipelines need extra heating and insulating equipment as well as high-power pumping stations."

But those expenses will drive up the cost. Mei estimates that the cost of delivering oil through the Gwadar-Kashi pipeline is about 16.6 times more than shipping from Saudi Arabia to a port in Ningbo, East China's Zhejiang Province.

"For the same amount of investment, it's more economically viable to build very large crude carriers than oil pipelines," Mei said.

Benefits to Pakistan

As the south terminal of the China-Pakistan Economic Corridor, a $46 billion mega cooperation project between the two countries, the Gwadar Port is likely to bring significant development opportunities for Pakistan by feeding its energy-starved economy and becoming, what the former Pakistani Prime Minister Shaukat Aziz called, a "game changer" for the country, experts said. 

"The port is a boon for the country, helping it to embark on a Shenzhen-liked development model," Mei said.

Balochistan Province where the port is located, is one of the most isolated and underprivileged regions in the country. As soon as the port goes into use, it will open a new route to Northeast Asian countries like Japan, South Korea and Russia, and gradually evolve to become an international transit point, Wu said.

The Chinese government has also pledged to build support infrastructure for the port, including roads and highways, a move which experts forecast will open up the country more, attract foreign investment, increase tax revenues and offer job opportunities in the long term.

Posted in: ECONOMY

blog comments powered by Disqus