Wednesday, September 18, 2019
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Pipeline economics

Reports about China’s plan for an oil pipeline from Gwadar to Kashgar in Xinjiang, to overcome its “tyranny of geography” (meaning the choke points of the Straits of Malacca, Sunda and Lombok), does not appear economically feasible. The 1,800 km pipeline, according to some estimates, will cost $10 bn to build. When taken together with the cost of supplying a million barrels a day, it works out to around $8 a barrel. That is double the cost of shipping the oil, currently around $4 per barrel. The region which the pipeline will feed, Xinjiang, Qinghai and Tibet, are among the poorest and least populated. So the market is missing. It adds to the suspicion that China’s interest in Pakistan is entirely geo-political not geo-economic.