Wednesday, June 7 2006 16:48 Hrs (IST) - World Time -

New Delhi: Moving beyond cooperation in the military and political arena, China and Pakistan are set to expand ties in energy sector with Beijing contemplating building a 21 million tonne refinery at Gwadar port.

Intelligence input suggests that Beijing is considering development of the Gwadar Port Energy Zone in the south-west Pakistani province of Baluchistan and feasibility of constructing an oil refinery of 21 million tonnes capacity.

Also on the cards is China undertaking oil and gas exploration projects in Pakistan, besides examining the economic viability of the energy corridor, industry sources said.

These plans are likely to be finalised during Pakistan President Pervez Musharraf's upcoming visit (june 13-17) to China to attend the fifth Shanghai Cooperation Organisation (SCO) summit talks in Shanghai.

Sources said Gwadar Port in Baluchistan would enable China diversify its crude oil import routes and extend its presence in the Indian Ocean. Hence, Beijing's contribution -technical assistance, 450 workers and 80 per cent of the funds for the construction of the port.

China, they said, would also review initial plans to shift excess capacity in the petroleum industry to Dubai because of the new option of Gwadar becoming available. The Gwadar Port Energy Zone's potential to attract an estimated foreign investment of 12-13 billion US$ is an incentive.

The China-Pak Energy Trade Cooperation Promotion Association under China's Ministry of Civil Affairs and China-Pak Joint Investment Company to finance these projects was being considered.

Eventually, the Gwadar port would be accessible for Chinese imports and exports through overland links that would stretch to and from Karakoram Highway in Pakistan's Northern Areas that border China's Muslim-majority Autonomous Region of Xinjiang.

Sources said Gwadar port would provide a stable and proximate point of access to the Gulf ports. Just 250 miles from the Straits of Hormuz, through which nearly 40 per cent of the world's oil supplies flow, the port is strategically located to serve as a key shipping point in the region.

The port would also provide the landlocked Central Asian republics, Afghanistan, and the Chinese Xinjian region with access to the Arabian Sea.

A road from Gwadar to Saindak, which is currently under construction and runs parallel to the Iran-Pakistan border, will be the shortest route between Central Asia and the Arabian Sea.