VZCZCXRO1935
RR RUEHLH RUEHPW
DE RUEHIL #1420/01 0940824
ZNR UUUUU ZZH
R 030824Z APR 08
FM AMEMBASSY ISLAMABAD
TO RUEHC/SECSTATE WASHDC 6286
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHRC/USDA FAS WASHDC 4173
RUEHNE/AMEMBASSY NEW DELHI 3058
RUEHLO/AMEMBASSY LONDON 7605
RUEHML/AMEMBASSY MANILA 2962
RUEHGP/AMEMBASSY SINGAPORE 1808
RUEHKP/AMCONSUL KARACHI 9442
RUEHLH/AMCONSUL LAHORE 5202
RUEHPW/AMCONSUL PESHAWAR 3918
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC

UNCLAS SECTION 01 OF 02 ISLAMABAD 001420 
 
SIPDIS 
 
 
SENSITIVE 
 
SIPDIS 
 
E.O.  12958:  N/A 
TAGS: EFIN ECON EINV PREL PK
SUBJECT: THE PORT OF GWADAR: MEGA PORT DREAM REQUIRES ENERGY TO BE 
REALITY. INVESTORS NEEDED. 
 
REFS: A) Islamabad 0655; B) Islamabad 0921; C) Islamabad 0810 
 
¶1. (SBU) SUMMARY. Without fanfare and in the midst of the 
political changeover, Pakistan's strategic new seaport in 
Balochistan became operational and opened the trade routes to 
Central Asia, Afghanistan and Iran.  Investors and energy are 
desperately needed to make the Pakistani dream of a mega-port into 
reality.  END SUMMARY. 
 
¶2. (U) This is the fourth in a series of cables on Pakistan's energy 
sector. 
 
¶3. (SBU) With the recent activity surrounding the formation of a new 
government, little attention was paid to the commencement of 
operations at Pakistan's newest port.   Gwadar, in Balochistan 
province, is Pakistan's third seaport and serves as the strategic 
gateway to increased trade with Central Asia, Afghanistan and Iran. 
While there has been no fanfare or official inauguration, Mr. Syed 
Muhammad Hussain Zaidi, Spokesperson of the Ministry of Ports and 
Shipping confirmed that "as far as the Government of Pakistan is 
concerned, the port is operational." 
 
¶4. (SBU) The biggest bulk vessel ever to berth at a Pakistani port, 
the "Pos Glory", carrying 72,700 metric tons of wheat docked 
off-shore on March 10 with cargo offloading completed on March 18. 
According to local media reports, the Ministry of Agriculture 
decided to route the vessel from Karachi to Gwadar due to port 
overcrowding at Port Qasim.  More than 200 trucks were then utilized 
to transport the wheat throughout Pakistan to help alleviate the 
national shortage.  Two additional cargo vessels are expected in 
April.  Zaidi noted that the pace of port activities will depend on 
the port's Singaporean operator. 
 
------------------------- 
Operations and Capacity 
------------------------- 
 
¶5. (SBU) In February 2007, Pakistan signed an agreement with the 
globally known Port of Singapore Authority (PSA) and the 
Concession-Holder Company (CHC), a subsidiary of PSA International 
for handing over Gwadar port operating rights.  Under the agreement, 
the Gwadar Port Authority (GPA) will receive revenues from PSA over 
a period of 40 years. PSA International is owned by the Singaporean 
government's investment-holding company Temasek. 
 
¶6. (SBU) The CHC will establish three separate operating companies 
to manage the port area and cargo operation, the marine functions 
and to operate a free trade zone.  These companies will enjoy a 20 
year concession on taxes at the federal, provincial and local 
levels.   Under the agreement, the CHC will pay a fixed 9 percent 
share of its revenues to the GPA.  Pakistan will get 15 percent of 
the revenue from the free trade zone, where warehouses and other 
facilities will be constructed by the PSA. Pakistan has declared 
Gwadar a special economic zone and all imports coming through this 
zone will be exempted from customs duty and sales tax along with 
concessions on income tax.  Pakistan has reportedly decided to give 
a seven-year tax exemption to industrial and commercial 
establishments in the Gwadar Special Economic Zone. 
 
7.(SBU) At a cost of USD 248 million, the recently completed phase 
one development at Gawadar has resulted in three multipurpose berths 
602 meters long, with a 4.5 kilometer long approach channel dredged 
to 11.5 to 12.5 meters, a turning basin with a diameter of 450 
meters and one 100 meter service berth.  The port can handle bulk 
carriers of up to 30,000 dead weight tons (DWT) and container 
vessels of 25,000 DWT.  The current cargo-handling capacity of 
Gwadar port is 50 million tons with plans to increase capacity to 
300 million tons in 20 years. 
 
¶8. (SBU) Government of Pakistan (GOP) plans for Phase II of the 
Gwadar port lack investors for the estimated USD 524 million 
project, but allow for construction to occur on either a build to 
operate basis or with transfer of operations after completion. Phase 
II plans call for  construction of nine additional berths including 
 
ISLAMABAD 00001420  002 OF 002 
 
 
two container berths, one bulk cargo terminal, one grain terminal 
with capacity to handle vessels up to 100,000 DWT, one roll on/roll 
off terminal, two oil piers for vessels up to 200,000 DWT and future 
expansion of two container berths. 
 
 --------------------------- 
Energy and Investors Needed 
--------------------------- 
 
¶9. (SBU) Pakistan has grand dreams of making the Gwadar port a 
regional city hub and mega port in the same vein as Dubai, Hong Kong 
or Singapore.  Plans for development of hotels, restaurants, and 
other projects in the area have been developed but all are lacking 
two elements - Energy and Investors.  To meet the demands of its 
future commercial and industrial needs, Gwadar will need an infusion 
of electricity.  When the port becomes fully operational, the power 
demand will certainly increase and current estimates put demand from 
the present 4 MW to 14 MW in 2010 increasing to 74 MW in 2030 and 
370 MW in 2050. 
 
¶10. (SBU) Since December 2002, Pakistan has been importing 35 MW 
electricity from Iran through the Mand interconnection on 132 KV 
transmission line (2 MW on 20 KV through Tuftan and 2 MW on 20 KV 
from Mshkehl) for Pakistan's costal areas of Mekran where estimated 
demand is 17.5 MW.  In February 2007 Pakistan and Iran signed a 
power purchase agreement for the supply of an additional 100 MW to 
Pakistan.  The Iranian state run power company, Tavanir will supply 
100 MW to Gwadar through a 170 km long 220 KV double circuit 
transmission line between 200 KV Polan sub-station at the Iranian 
side of the border and the 220 KV Gwadar sub-station.  Under the 
agreement a 100 km long line will be constructed in Pakistan and the 
remaining 70 KV line will be constructed in Iran. 
 
¶11. (SBU) The power supply to Gwadar port will start in January 2009 
at a cost of USD 86 million, of which USD 26 million will be funded 
by Tavanir. The electricity tariff is set at 6.25 cents per kilowatt 
hour.  This tariff, including Iran's transmission line capital cost, 
is less than Pakistan's average electricity tariff from domestic 
sources.  Pakistan has also requested that Tehran supply 1000 MW 
more electricity upon completion of the 220 KV line to meet future 
power requirements. 
 
¶12. (SBU) As part of the GOP's long term power strategy, a 132 KV 
grid station is under construction in Gwadar and two similar grid 
stations are in the planning stages.  At present a small power 
station at Gwadar is operational which is meeting Gwadar's current 
demand of 4 MW. 
 
¶13. (SBU) COMMENT.  The potential for investment in the energy 
sector in Gwadar is enormous and American companies should avail 
themselves of potential opportunities.  If Pakistan has plans to 
make Gwadar a mega port city then dependency on Iran for energy 
supply will not be sufficient and other power sources will have to 
be identified.  There is tremendous potential to use the Mekran 
coast in off-shore exploration of oil and gas in the Arabian Sea and 
Pakistan Petroleum Limited is looking at exploration opportunities 
with an initial investment of USD 35 million.  They have 
unsuccessfully dug one offshore well and are looking for joint 
venture opportunities to dig at least three or four more wells. 
 
¶14. (SBU) COMMENT CONTINUED. Wind maps have already been prepared, 
and future wind generation is another viable option and investment 
opportunity.  Additionally, Gawadar port and its adjoining area will 
need desalination plants for making sea water suitable for 
electricity production and drinking.  Solar thermal power plant 
could provide reliable energy and clean water.  With the opening of 
the Gwadar port, options and opportunities for investment are 
abundant and investors will be welcomed. END COMMENT. 
 
BODDE