Gwadar Port Master Plan Arthur D. Little (M) Sdn Bhd - Implications for Energy Sector Development Office Suite, 19-13-2 Level 13, UOA Centre 19 Jalan Pinang 50450 Kuala Lumpur 25-26 April 2006 Malaysia Outline

„ Gwadar port master plan

„ Gwadar port current situation

„ Port development potential

„ Industrial development potential

„ Traffic forecasts

„ Port zoning plan

„ Development program 2006-2021

„ Investment opportunities

1 The Gwadar case – Master plan project

In collaboration with our engineering partners, we have just completed the draft master-plan for the further development of Gwadar port

Gwadar port – current situation

„ One multi-purpose terminal, 600 m berthing space „ 5 multipurpose cranes, various yard equipment, 2 tugboats, 2 pilot boats, power, water „ Some building construction & dredging still on-going

2 Introduction The (draft) master plan document is structured in five main sections and thirteen chapters, plus various annexes including drawings

Sections / Chapters of the Master Plan

1 2 3 4 5 Gwadar's Traffic Forecasts Physical Implementation Current Situation Development & Development Development Management Potential Strategies Plans

„Chapter 1: „Chapter 4: „Chapter 6: „Chapter 9: „Chapter 11: Introduction Assessment of Gwadar industrial Port land Operating Gwadar port development requirements and models, funding „Chapter 2: development scenarios zoning plan (50 program & Gwadar’s macro potential years) financial analysis environment „Chapter 7: „Chapter 5: Port / cargo traffic „Chapter 10: „Chapter 12: „Chapter 3: Assessment of forecasts 15 years physical Institutional and Gwadar current Gwadar industrial development organizational developments development „Chapter 8: program development potential Port & industrial development „Chapter 13: strategies and Marketing recommendations program

Annexes contain details of various analyses and various lay-out drawings and concept drawings

3 Gwadar current developments – Development plans Gwadar city

The city development Master Plan will help to transform Gwadar city into an economic focal point for Balochistan.

Gwadar Master Plan 3 International 2 Special industrial zone airport

Export 4 1 Residential processing area zone

5 Fishing jetty

Gurab housing 6 scheme

Oil refinery & 7 storage

5 Main access 8 Fishing jetty roads 10 Tourism

Railway 9 1 Residential terminal area

Efficient completion of all key projects will be critical to reinforce GoP’s commitment and facilitate Gwadar port development

4 Gwadar port development – Sources of port traffic

Sources of traffic lie primarily in local industrial development and national ExIm, with transhipment becoming more important in the longer term Summary Gwadar potential Implications

Transit trade with CARs has 1 Transit trade Focus efforts on other port little potential. Cargo from traffic contributors for now Xinjang may have potential

Good potential for Gwadar, but Relying on transhipment to 2 Transhipment only in longer term, when ExIm realize port ambitions is not volumes become large advisable

National ExIm offers sizable 3 National ExIm Stay competitive to capture and potential for Gwadar, due to support national ExIm traffic growing national demand

Pro-actively develop Gwadar’s Local industrial Key lever to accelerate and 4 local industrial economy to development sustain rapid port development help drive port development

5 Gwadar port development – Role models for integrated development

There are many relevant examples of recent and successful integrated port- industrial developments

Role models • Port development since 1986 • Built on heavy industries: oil refining, petrochemicals, fertilizer, steel mill, Gwangyang LNG • Soon after combined with special industrial estates for foreign investors

• Fully integrated port and industrial planning Rotterdam • Port develops industrial areas and pro-actively drives industrial investment • Very wide industrial base, but chemicals & petrochemicals dominate

• Integrated industrial port currently under construction, TA from Rotterdam Sohar, Oman • Industrial investments secured: oil and gas supply, refinery, steel mill, fertilizer, poly-propylene, methanol, possibly aluminum and poly-ethylene

• Rapid and visionary development Shenzhen, Dubai • Built on SEZ and FZ concepts: exceptional incentives & facilities & investment promotion • Very successful in rapidly attracting wide range of investments

6 Gwadar development potential – Gwadar comparative advantages

Specific industries will leverage Gwadar’s specific set of comparative advantages

Competitive advantages Industrial development opportunities

„ Greenfield, low land cost „ Land intensive industrial complexes e.g. steel mill

„ Low labour cost „ Labour intensive sectors e.g. textiles

„ Proximity to oil & gas resources „ Oil & gas related processing and downstream industries e.g. petrochemicals

„ Proximity to fast growing Gulf states „ Export industries that meet Gulf states’ import needs e.g. automotive, consumer goods

„ Proximity to major shipping lanes „ Ship related industries e.g. ship repair

„ Some agricultural resources, incl coastline „ Food processing, fish-processing

„ Some mineral resources „ Minerals processing e.g. building materials, cement

„ Short access channel, deep draft, short „ Industries that require large ExIm quantities and turnaround times corresponding ship sizes e.g. oil refining

„ Tax-free status for new investments + incentives + port proximity „ Export-oriented manufacturing

7 Industrial development potential – Priority industries Eleven priority industries that can leverage on Gwadar’s competitiveness and contribute more strongly to its development have been identified

High Iron, steel & Clothing fabricated metals Cement based products Food Processing „ Steel making Marine services „ Cement Oil Textiles Refining „ Building materials Non metallic Minerals (building Petrochemicals „ Marine services materials) Fertilizers „ Shipyard Automotive „ Automotive „ Food processing „ Textiles & clothing

Competitive Alignment „ Oil refining „ Petrochemicals Priority Industries „ Fertilizer Other „ LNG industries

Low Economic Attractiveness High

Source: UNIDO, UN International Trade Centre, Pakistan Statistics Division, Arthur D. Little Analysis

8 Industrial development potential – Main conclusions

The early establishment of pre-selected feasible industrial trigger projects will be critical to ensure a rapid development of Gwadar

Summary Gwadar industrial development potential

„ Major industry sectors that show a high potential for development in Gwadar are: - Petrochemicals – oil refining, petrochemicals, chemicals, LNG, gas-based industries - Heavy industries – large-scale manufacturing: steel, cement, fertiliser etc., energy- intensive industries - Manufacturing – textiles and garments, automotive, consumer goods, food-processing, assembly; export-oriented „ The following key projects show good commercial potential. Efforts should be directed towards attracting these industries quickly, as these can act as major triggers for further industrial development: - First oil refinery - LNG terminal (initially for imports) - First cement plant - First fertiliser plant (urea, ammonia, based on gas or coal) - First dockyard or shipyard - Steel mill - First car assembly plant

9 Port & cargo traffic forecasts – Approach For the bottom up approaches, a range of values was obtained by determining the port traffic under the five different industrial development scenarios.

Industrial development scenarios

Industrial development A Short term forecasts scenarios „ Bottom Up: Model port traffic from I all major cargo contributors Industrial powerhouse covering national ExIm, Gwadar industrial development, city II growth, transhipment and transit Heavy industries trade dominated Range of III Petrochemicals values dominated obtained B Long term forecasts. 50 years IV Manufacturing „ Bottom up: Model based on long dominated term growth rates and built up from results of the short term V bottom up forecast Base case

10 Gwadar in 2055 – National traffic forecast

In 2055, Gwadar is forecasted to capture about one third of the national port traffic market, translating into a throughput volume of about 350 mln tons

Preliminary National traffic demand forecast

Port traffic (mln tons) 1100 Best case: 1125 1000 1st Port Worst case: 950 900 2nd Port 800 Gwadar 700 4th Port 600 500 400 300 200 100 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Source: Pakistan Board of Statistics, Karachi Port, Port Qasim, Arthur D. Little analysis

11 Port & cargo traffic forecasts – Short term forecasts

The model uses an overall port traffic growth rate of 7.5% at 2021, which decreases to 4.5% by 2055; this is slightly higher than national port growth. rates

2A Long term growth forecasts

Annual Growth (%) „ Liquid bulk grows at 3% 12% Overall at Year 16 and Containers decreases to 2.5% by 2055 Dry bulk 10% General cargo „ General cargo grows at Liquid bulk 5% at Year 16 and decreases to 4.8% by 8% 2055 „ Dry bulk grows at 11% 6% at Year 16 and decreases to 5% by 2055 4% „ Containers grow at 11% at Year 16 and decreases to 5.5% by 2% 2055 „ Overall growth is 7.5% at Year 16 and 0% decreases to 4.5% by 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 2055 Source: Arthur D. Little analysis

12 Port & cargo traffic forecasts

Gwadar’s port traffic is forecast to be between 42 – 65 mio tons in 15 years and 321 - 345 mio tons in 50 years.

Port traffic forecast Chapter Summary

„ The short term forecast for Cargo Traffic (mio tons) Gwadar Port traffic is 42 – 65 mio 400 50 yrs: 2055 tons, with containers and liquid bulk as the main contributors 350 345 mio „ Using an aggregate of two 300 321 mio approaches, the long term forecast for Gwadar Port is 321 – 250 345 mio tons „ Forecasts indicate approximately 200 4,800 ship calls by 2020 and approximately 24,000 ship calls by 150 2055 15 yrs: 2020 „ The construction program uses 100 the outputs of the 15 year forecast 65 mio for developing design capacity (90 50 mio tons in 2020) 42 mio „ The zoning plan uses the outputs 0 of the 50 year forecast for developing design capacity Dry Bulk General Cargo Liquid Build Containers (approx. 500 mln tons in 2055)

Source: Arthur D. Little analysis

13 Port & cargo traffic forecasts

In the short term, local industry development is expected to provide the largest port traffic contribution.

Short term forecast: by contributors Preliminary

Cargo Traffic (mio tons) 70 65 mio Gwadar industry development 60 National ExIm Transhipment 50 42 mio Transit trade 40 Gwadar city growth 30

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0 Year 123456789101112131415

Source: Pakistan Board of Investments, Statistics, Intracen, Karachi Port/ Port Qasim, Arthur D. Little analysis

14 Port & cargo traffic forecasts

Liquid bulk and containers will be the main contributors by 2020, reflecting the importance and potential of petrochemical activities.

Short term forecast: by cargo type Preliminary

Cargo Traffic (mio tons) 70 65 mio Liquid bulk 60 Containers 50 General cargo 42 mio 40 Dry bulk

30

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0 Year 123456789101112131415

Source: Pakistan Board of Investments, Statistics, Intracen, Karachi Port/ Port Qasim, Arthur D. Little analysis

15 Port land requirements & zoning plan (50 years) – Final zoning plan The Gwadar port zoning plan was formulated to optimally allocate land areas for the various cargo handling activities & related industrial development based on a 50 yrs time frame

Gwadar port zoning plan (50 years) Comments

„ The zoning plan caters up to 50 km of quay side and up to 10,000 ha of industrial land by 2055

„ There will be dedicated terminals for all cargo types; general, dry (clean & dirty), liquid, SPMs, LNG, containers, ro-ro, navy, etc.

„ Certain terminals will be for multi- purpose usage

„ Port-adjacent industrial land is for cargo back-up and storage, shipyard activities, LNG, oil refineries, steel mills, fertilizer plants, etc. to the extent that these need to be situated next to port facilities

Existing facilities Immediate (Phase I) extension (Phase II)

16 Port land requirements & zoning plan (50 years) – Final zoning plan The zoning plan was developed based on the analysis of the port-land requirements under all possible industrial development scenarios of Gwadar

Gwadar port zoning plan (50 years) Comments

1„ Multi-use area 1 (119 ha) – Designated to support phase 3 Industrial area 1 1 & 2 operations of multipurpose terminal

4 Industrial area 2 2„ Multi-use area 2 (1159 ha) – Reserved for back-end operations of future dedicated container & general cargo terminals

3„ Industrial area 1 (2620 ha) – Port related industrial land 2 Multi-use area 2 for clean dry bulk, chemicals, oils and fats and related industries – Potential location for EPZ

4„ Industrial area 2 (5000 ha) 1 Multi-use area 1 – Port related industrial land for heavy industries

17 15 year Physical development Program – Program Overview

The new terminals planned for the first 15 years will be able to cater for the forecasted traffic for that time period

First stage development plan (2005-2020) – Overview

Early developments

18 15 year Physical development Program – Program Overview

The terminals planned for the first 15 years will be able to cater for the forecasted traffic for that time period

First Stage Development Plan (2005-2020) – Main facilities

„ Multipurpose terminal expansion to the east „ Navy base at end of hammerhead „ Conversion of the existing fishing wharf to provide bunkering and other ship services „ Container terminal (northwest in East Bay) „ Free zone development adjacent to container terminal „ Liquid bulk terminal (for edible oils, chemicals etc) (northern end of East Bay) „ Clean dry bulk terminal (northern end of East Bay) „ LNG terminal (east of East Bay) „ Petroleum/ Petrochemical Terminal (east of East Bay) „ Dirty bulk terminal (east of East Bay) „ Four additional access channels „ Breakwaters where needed

19 Overall structure of relationships with operators – Landlord model

In line with the Government’s policy, Gwadar’s port development shall follow the landlord model

Key functions of GPA under landlord model

„ As a regulatory authority, the key functions of GPA are: Š Port development planning and implementation Š Ensuring funding for development and maintenance of port infrastructure Š Selection and contracting of operators Š Performance management and control (of all relevant port actors) Š Management and control of tariffs and rates Š Port safety and security control (actual operations can be outsourced) Š Vessel traffic control, navigational safety, anchorage management Š Port infrastructure maintenance (breakwaters and channels) Š General promotion of Gwadar Port and corporate communications

„ To ensure balanced development, as the regulatory authority, GPA should maintain an arm- length relationship with the various port actors, operators and sub-contractors

20 Private sector participation

There will be many private sector investment opportunities in Gwadar in the near and immediate term

Terminals and other port facilities Large-scale industrial opportunities

„ Multipurpose terminal and related „ Oil refineries „ Container terminal and related facilities „ Petrochemicals, incl gas-based „ Clean dry bulk terminal „ Fertilizer „ Dirty bulk terminals (coals, minerals) „ Coal-based industries „ Crude oil terminals / SPM’s „ Steel making and related „ Other liquid bulk terminals „ Cement production (petrochemicals, chemicals, edible oils) „ Car assembly „ LNG terminals „ Dockyard / shipyard „ Free zone facilities „ Other heavy industries „ Storage / warehousing (bulk) „ Industrial estate facilities (various types) Most of these port projects are expected to „ Other commercial developments be BOT projects

21 Port & industrial development strategies –SEZ 8

The SEZ concept will not replace the EPZ and FZ concepts, but instead reinforce their development. Objectives differ by concept

Coexistence of SEZ, EPZ and FZ

SEZ

„ Covers the whole Gwadar city , port and industrial areas „ Incentives benefit both individuals and companies, locals and foreigners „ SEZ status and incentives will expire after 20 years (recommended time frame)

EPZ FZ „Incentives provided in terms of taxes „Smaller than the EPZ, but located and duties exemptions will survive the within the port fenced area end of life of the SEZ „Tax and duties exemptions are „Incentives more elaborate permanent „Operates as a bonded environment „Provides investment opportunities to enabling certain goods to be establish value add, re-assembly, manufactured for exports without being packaging and re-packaging and time subjected to standard tax and duties sensitive activities within the port area

22 Integrated port & industrial development

Thank You

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