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Pakistan sees Chinese interest in Himalaya pipeline

Written by: Staff

BEIJING, Oct 23 (Reuters) China is interested in Pakistan's proposal for a trans-Himalayan pipeline to carry Middle Eastern crude to western China, a Pakistan embassy official said today.

The proposed pipe would link Pakistan's deepwater port of Gwadar, which is close to the Iranian border and is partly financed by Beijing, with China's remote western regions.

Pakistan also hopes to secure Chinese investment in a large refinery complex.

The route over the Himalayas would be an expensive and challenging engineering feat, and once the oil reached China it would likely have to be shipped thousands of kilometres further east to coastal areas, where most energy demand is centred.

But it would allow security-conscious Beijing to reduce the portion of its oil shipped through the narrow, piracy-prone Malacca straits -- which now carry up to 80 percent of the country's oil imports.

''At the moment it is just an idea that we have brought forward, but the Chinese side have said they are interested,'' Naeem Khan, commercial and economic counsellor at the Pakistani Embassy in Beijing, told Reuters.

''It would be part of a larger trade corridor. We have already agreed to upgrade the Karakoram highway (between the two nations) and the pipeline would go in tandem with that.'' President Hu Jintao is expected to travel to Pakistan in November, Khan and Chinese businessmen said, reciprocating a February visit by Pakistani leader Pervez Musharaff, who pressed for closer economic and strategic ties.

The two countries aim to lift two-way trade to 8 billion dollar by 2008, and are discussing a free trade agreement. Bilateral trade rose to 4.25 billion dollar in 2005 from 3.06 billion dollar in 2004.

REFINING COMPLEX Private and state-owned Chinese oil companies are also in talks with Pakistan about construction of a refinery at the same port where the pipeline would originate -- which Islamabad would like to turn into a regional energy hub.

Officials want to build a refinery and petrochemical complex with an initial 10 million tonnes per year (200,000 barrels per day) capacity, later expanding to 21 million tonnes, Khan said.

The government is considering a raft of incentives from free land for refinery construction, to allowing unlimited duty-free import of crude for processing, sales tax exemption for refined product exports and infrastructure support.

The product from the refinery would be expected to include at least 60 per cent middle distillates -- kerosene and diesel.

''We have to make it a profitable venture to attract investors, '' Khan said, adding that officials hoped to get Beijing's approval for the project by the end of the year.

Reuters MQA DB1819

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