‘Karakoram’ is a Turkish word meaning ‘black gravel’, probably for the blackish rubble that covers the glaciers in the range. But the explorers who coined the term might never have thought that one day black crude oil will gush across beneath the craggy mountains linking the world’s oil depots to the world’s most populous and the fastest growing economies.China and Pakistan have agreed in principle to build a trans-Karakoram oil pipeline along the Karakoram Highway to connect the Middle East with the north-western China through Gwadar.The pipeline once in place can set the stage for another rewarding oil bridge from the landlocked Central Asia to the world market. On the pattern of the trans-Alaska pipeline, it would be possible to build an oil grid starting from Turkmenistan or Kazakhstan travelling through Tajikistan and the uninhabited Wakhan corridor and the peaceful Ashkoman valley of the Northern Areas to converge with the trans-Karakoram pipeline at around Gilgit for onward transportation to Gwadar. No, this is certainly not a pipedream! In fact, such cross regional oil pipelines already exist, and are doing decent business in the aforementioned countries.

A 960-km-long pipeline connecting Kazakhstan with China has began pumping oil in December 2005. The $700-million project was completed by the China National Petroleum Corp and KazMunaiGaz Company of Kazakhstan in a record period of just one year. It holds an initial annual capacity of 10 million tons and full capacity of 20 million tons.If that fails to fire your imagination, check out the 1,176-km-long Baku-Tbilisi-Ceyhan (BTC) pipeline which has started transporting oil from the Caspian Sea in Azerbaijan to the south eastern Mediterranean port of Ceyhan in Turkey through Georgia. For the first time, oil was pumped from Baku on May 10 of this year which arrived at Ceyhan’s export terminal on May 28. The pipeline having up to a million barrel a day injection capacity has been a collaborative effort and was built by a consortium led by British Petroleum.

The trans-Karakoram oil-gas pipeline has brighter prospects because of the relatively secure environment along the proposed route. The Northern Areas as we know is a unique pivot which brings China, Tajikistan, Afghanistan, Pakistan and India within the radius of 250 kilometres of each other. It will enable Caspian oil to reach the world oil market, particularly the rapidly growing economies in Asia, bypassing conflict-prone and politically problematic countries like Afghanistan, Iran, Russia, Armenia, Chechnya and even Georgia.The proposed route also bypasses the comparatively troubled spots within Pakistan like the Tribal Areas and the restive Balochistan province. Chinese willing, there is an option to pull the line straight from Gilgit up to Karachi through Punjab instead of Gwadar. As for recent history of violence in Gilgit, the issues there are of a very local nature mainly stemming from administrative inadequacies which can be addressed once the economic stakes are appropriately acknowledged.

The Caspian region in Central Asia houses phenomenal energy reserves. Here, the proven natural gas reserves are estimated at more than 236 trillion cubic feet, and estimated oil reserves range up to 243 billion barrels. But since almost all the oil infrastructures in the region were developed during the Soviet era, they are designed and directed to the advantage of Moscow, in which Russia maintained a tight control over oil exports from its former Soviet colonies to the outside world.The BTC pipeline was the first serious effort to wean Central Asia away from the Russian clutches. According to an assessment by US Department of Energy, Azerbaijan and Kazakhstan alone sit on more than 130 billion barrel oil, three times more than the United State’s own reserves.

Being a country where four per cent of the world’s population consumes about one-fourth of global energy output, it is but natural for the US to keep a good calculation of the world’s oil wells. Besides, given the fast rate of resource depletion, and the chronic political uncertainties the Middle East continues to suffer, it is only prudent for the world to look for oil in remote places like the Caspian.In the 1990s the Unocal-led consortium had brought Pakistan and a number of Central Asian republics around to an idea of building a 1,040-mile-long oil pipeline from the Caspian region to an export terminal at Karachi through Afghanistan. The pipeline would have a capacity of one million barrels of oil per day.Later on Unocal and a Turkish firm also came up with a plan to construct a gas pipeline linking Turkmenistan’s rich gas fields with markets in Pakistan and India. The proposed 790-mile pipeline would have travelled through Afghanistan to Multan, and also onward to an Indian pipeline.

However, continued instability and chaos in Afghanistan made it difficult for the financers to go ahead with the projects. Though the situation in Afghanistan remains murky, the recent progress made by China and Pakistan concerning up-gradation of the 1300-km Karakoram Highway with a parallel initiative of an oil pipeline, a fibre optic line and with a proposal to lay railway tracks is poised to transform the dynamics of oil business in the region in many ways.Needless to say, there will be potential political and environmental spillovers which will deserve dedicated discussions later on.At the moment both China and South Asia are experiencing a sharp rise in the demand for energy, which is likely to be doubled by the coming decade. Political turmoil in the Middle East and Afghanistan makes it all the more urgent for these countries to seek alternate and reliable energy routes.

The trans-Karakoram oil pipeline may not solve their energy problems for good but it will certainly give these countries enough time to do something for the future.Currently China’s 80 per cent oil imports passes through the narrow and piracy-prone Malacca straits. The trans-Karakorum pipeline will allow it to import oil in a more secure and sustainable mode. For Pakistan, and the rest of the world it opens more exciting opportunities to unlock the true business potential of the landlocked Caspian oil.In this process Pakistan also hopes to secure Chinese investment in a large refinery complex. The route over the Him-alayas 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 per cent 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, said."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." The two countries aim to lift two-way trade to $8 billion by 2008, and are discussing a free trade agreement. Bilateral trade rose to $4.25 billion in 2005 from $3.06 billion in 2004.

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 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.