Beijing's concurrence to the trans-Himalayan pipeline project ahead of Chinese President Hu Jintao's visit to Islamabad next month shows that the mega project will also figure in the talks the distinguished guest will hold in Islamabad. Further, Pakistan expects to secure Chinese investment for a large refinery complex to be constructed at Gwadar from where the trans-Himalayan pipeline will originate.
The proposed pipeline, a highly capital-intensive project requiring top-level engineering expertise, apparently forms a part of Beijing's larger policy thrust to forge closer economic and strategic ties with Pakistan about which President Musharraf had talked to the Chinese leaders during his February visit to Beijing. According to media reports, private and state-owned Chinese oil companies are currently engaged in talks with Pakistani officials on the proposed oil refinery at Gwadar port from where the proposed pipeline will proceed.
According to the plan, the refinery-cum-petrochemical complex will initially have an annual refining capacity of 10 million tonnes (200,000 barrels a day) that will be later increased to 21 million tonnes. Some of the incentives the government wants to extend to the Chinese investors include provision of free land for the refinery, blanket permission for unlimited duty-free import of crude for processing, sales tax exemption for the refined oil exports, and infrastructure support. Pakistani officials expect to get Beijing's approval for the project by the end of this year.
China's interest in the trans-Himalayan pipeline project proposed by Pakistan mainly stems from its spiralling energy needs. Under the pressure of its rapid GDP growth trajectory, China's energy requirements are mounting at an annual rate of 3.2 percent (compared to 1.1 percent for the US) and are expected to double by the year 2025. Meanwhile, a major source of concern for Beijing is that more than 80 percent of its crude oil imports transit through the Strait of Malacca and more than 90 percent of all imports are carried by foreign owned tankers.
This element of insecurity has prompted the Chinese government to finance many energy projects. In 1993 China became a net importer of oil. In 2005 it imported some 1.3 million barrels of oil a day, and it is said that the figure will climb as high as eight million barrels per day by the year 2020. In order to meet its future energy requirements, China has dedicated enormous financial resources to domestic and foreign energy projects. It plans over the next five years (2006-2011) to invest about $14 billion in exploration and development of several offshore oil and gas fields. Billions more will be allocated for developing reserves in western China, and it plans to construct 16,000 kilometers of oil and gas pipelines by the year 2020.
According to an estimate, China plans to obtain 50 million tons of oil and 50 billion cubic meters of natural gas from abroad by the year 2010 by giving priority to exploring oil markets in the Middle East, Africa, Russia, South America and Central Asia. In less than four years Beijing has established energy presence in 20 different countries, and since 1997 its state-owned energy companies have signed 47 contracts with 70 foreign oil companies in 18 different countries.
We have quoted this data to show how lucrative a closer partnership with China, particularly in the energy sector, will be for Pakistan's economy at a time when our mounting energy deficit is threatening to stunt our growth rate.
Pakistan plans to offer a raft of incentives to Chinese investors to make the energy projects a success. It should also arrange the fullest possible security cover to the Chinese and other personnel who will be working on the projects. The government should simultaneously initiate political talks with dissidents to ensure a peaceful ambience in the entire tribal belt, so that these mega projects can be implemented expeditiously.
Pipeline blasts in Balochistan have understandably raised security concerns. The government should solve this problem at the earliest. In a peaceful environment President Hu Jintao's forthcoming visit will undoubtedly further strengthen the Pak-China friendship that has already stood the test of time.