OREANDA-NEWS. June 06, 2013. China has successfully taken over the operational control of Gwadar Port on Thursday. With its financial and technical assistance China built this port on Pakistan’s southwest coast. The contract of operation of Gwadar Port has been given to China Overseas Ports Holding Company Limited.

The Chinese would help link coastal highway with the port besides would start trans-shipment, sources in the Port and Shipping said.

After pull out by Port of Singapore Authority (PSA) of a 40-year port management and development contract signed in 2007, China will operate the port, which is strategically located close to the Pakistan-Iran border and the Strait of Hormuz in south-western Balochistan province.

The business community is terming the deal a great success as it will offer an energy and trade corridor that will connect China to the Arabian Sea and Strait of Hormuz, a gateway for a third of the world’s traded oil, overland through an expanded Karakoram Highway.

They said it would cut thousands of kilometres (kms) off the distance, which oil and gas imports from Africa and the Middle East have to travel to reach China.

China paid about 75 percent of the initial USD250 million used to build the port but in 2007 PSA International won a 40-year operating lease.

The Singaporean firm decided to quit the Gwadar project after Pakistan’s government failed to transfer land needed to develop a free zone, as was promised under a 40-year concession deal signed in February 2007.

The port has the potential to serve as a secure outlet as well as storage and trans-shipment hub for the Middle East and Central Asia oil and gas supplies through a well-defined corridor passing through Pakistan.

China has contributed about USD198 million of the initial investment for the port project.
It was expected that Chinese companies and exporters would handle their own cargo and this would make Gwadar Port one of the busiest in the region.

China will likely re-launch the Gwadar oil refinery project, which was halted in 2009 because of security concerns in the province. The refinery will have a total capacity of 19 million tonnes of oil per year.

The proposed refinery and the oil pipeline is actually a part of a planned Pakistan-China energy corridor.

Chinese engineers have already completed a feasibility study for a railroad and oil pipeline, which would enable Gwadar Port to handle most of the oil tankers headed to China.
The operational control of the port will enable China’s access to the Indian Ocean, which is strategically important for China as it expands its influence across the region.

To ensure the security of shipments along existing routes, a Chinese naval presence at Gwadar could also patrol the Indian Ocean sea-lanes.

Gwadar Port will be connected with China’s western province of Xinjiang through rail and road links. China’s eastern seaboard ports are 3,500 kms away from the city of Kashgar in western China whereas the distance from Kashgar to Gwadar Port is only 1,500 kms. On January 30, 2013 the Federal Cabinet Committee had approved the transfer of Gwadar Port to China.