Gwadar — A new port in the offing

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A $1.16 billion project

By AMANULLAH BASHAR
July 09 - 15 , 2001

Pakistan has two significant ports — both are located at Karachi. At present, all the petroleum cargoes are handled at these two ports. The import of cargo has to be very carefully planned, due to inadequate port capacity and other limitations. It is a fact that ports like other essential items of physical infrastructure are often difficult to justify in economic terms, especially when planning for the ports expansion/development.

An analysis of port operation would indicate that a marginal overloading may not justify an expansion in economic terms but definitely will cause congestion since the benefits are derived from reduction in costs to the ships using the ports and streamlining of cargo handling. Congestion in the ports is the most obvious shortcoming in the ports including Pakistan where it arises out of draft limitation on vessels, inadequate berth capacity and inadequate/ shortage of unloading infrastructure and storage in the port area.

The underlying reason for port conditions in Pakistan was reluctance of policy makers to attribute priority to the development of ports in Pakistan.

It is the high time that we should eliminate all bottlenecks and concentrate on developing a new, independent and dedicated port for ships and lesser demurrage costs along with easier availability of berths.

Credit goes to the present government for finding the answer to these shortcomings in the form of 'Gwadar Port', which according to reports has become a focal point especially of the port and shipping business around the world.

The development of a 3rd port in Pakistan seems to be inevitably important in view of mandatory expansion in the sea transport activity particularly in the oil sector and growth in import and exports in the days to come.

Currently, the total capacity of Keamari port and Port Qasim is 23.5 million metric tons per year. However it is estimated that import/export volume will be much more in next five years. With full utilization of port capacity, there is a clear indication that capacity will become difficult to handle the ever-increasing volumes in future, which pinpoints towards an enormous challenge.

Another challenge is to ensure that the existing infrastructure is used in a manner that ensures maximum effectiveness and economy of scale through the following measures: i. Night navigation both at Keamari port and Port Qasim. Since the existing capacity to handle import/export cargo especially in oil sector, the development of Gwadar port is the viable option for crude and petroleum products besides general merchandise.

It is important to note that the viability of a mode of transport is function of quantity or volumes and distance to be transported. The greater the distance and quantity, the lower the average costs due to economy of scale.

The proposed seaport at Gwadar responds positively to these questions.

The Iran gas pipeline project for export of natural gas through Pakistan is a ready project and most probably is finalized during the visit of President Gen. Pervez Musharraf to India on July 14. Pakistan has already given its willingness to provide corridor for the pipeline to India.

The Iran gas pipeline project costing about $3.2 billion in fact is supposed to pave the way for another massive project that the oil pipeline from Iran to Pakistan. In this regard, the most suitable location for terminal of the oil pipelines. Active players in petroleum sector feel that Gwadar will be the ideal location for the pending joint venture project i.e. Iran-Pakistan Refinery instead of Gaddani in the current plan.

This scenario places the forthcoming port of Gwadar as the place for future business.

China has agreed to extend loan on soft-term for phase-1 of Gwadar deep-sea port, estimated to cost around $250 million. The total cost of the project is estimated at $1.16 billion.

A team of experts, led by the Chinese communications minister evaluated a number of projects but selected Gwadar deep-sea port. The government however was clearly told that completing the Gwadar port as a friendship project was not possible in the given circumstances but China was ready to extend loan on soft term plus technical know-how.

The Chinese team also discussed the project with Finance Minister Shaukat Aziz. The officials, however, are not yet clear whether the loan would be coming from the Chinese government or from a private bank. A team of Pakistani officials after receiving terms of the loans will visit China to finalize the deal.

When the Chinese Prime Minister visited Pakistan in March this year, Pakistan attempted to persuade the Chinese leadership to help it built the Gwadar deep-sea port and then use it for exporting its industrial output from Western China to the world markets.

The Chinese officials at the very outset had indicated to the Pakistani leadership that it might not be possible for it to fund the entire Gwadar port project worth $1.16 billion, as the project was not financially viable at this point of time, it however agreed to give serious thought to the project due to its geo-strategic importance.