Global energy markets are usually analysed through prices and supply dynamics. In practice, however, geography often dictates outcomes. A significant portion of global crude still moves through the Strait of Hormuz, while China’s imports remain heavily dependent on the Strait of Malacca. These routes have served global trade efficiently for decades, but their vulnerability is increasingly evident.
Recent developments in the Middle East have once again brought this reality into focus. Beyond the immediate economic costs of conflict, there is a deeper structural concern: a large share of global energy trade remains concentrated through narrow and exposed maritime corridors. Even limited disruptions in these passages can quickly translate into higher freight costs, rising insurance premiums, and supply uncertainty.
The issue is not whether these risks exist — they are well understood. The more relevant question is whether practical alternatives can reduce them.
This is not an entirely new proposition. A Gwadar–Kashgar crude oil pipeline has previously been considered at the policy level, and one segment of the proposal received conceptual approval from the Ministry of Petroleum, including the signing of an initial agreement. What has changed since then is the geopolitical context. Extending this framework to include Oman as a feeder point strengthens the case by creating a route that can effectively bypass the Strait of Hormuz.
The Muscat–Gwadar–Kashgar represents a practical and timely step towards reducing vulnerability in the global energy system
Under this configuration, crude could be transported from Oman, located outside Hormuz, to Gwadar Port via an offshore pipeline across the Arabian Sea. From Gwadar, an overland pipeline extending to Kashgar, broadly aligned with the China-Pakistan Economic Corridor, could connect supplies directly to western China.
Such a corridor would not eliminate risk altogether, but it would diversify it in a meaningful way. For China, this provides a partial response to its long-standing concern over reliance on maritime routes. For Gulf producers, it offers an additional export channel amid persistent geopolitical uncertainty.
The financial case, while often debated, remains credible. The total project cost is estimated between $6.5 billion and $13bn, with the offshore segment requiring approximately $1.5–3bn and the onshore Gwadar–Kashgar section costing $5–10bn, largely due to terrain and high-altitude engineering challenges.
While conventional sea transport costs around $2–3 per barrel, pipelines of this nature are not designed to compete purely on cost. Their value lies in security, reliability, and reduced transit time. A tariff of around $8 per barrel is therefore justifiable, reflecting the premium placed on a secure and shortened route that bypasses two major global chokepoints.
At a projected throughput of 1.2 to 1.4 million barrels per day, the corridor can generate annual revenues of $3.5 to $4 billion. This translates into a payback period of approximately four to five years and an internal rate of return exceeding 20 per cent, placing the project within the range of commercially attractive large-scale infrastructure investments.
For Pakistan, the opportunity extends well beyond transit revenues. Gwadar has long been described as a strategic asset, but its potential remains underutilised. If developed alongside storage, refining, and logistics infrastructure, it can evolve into a regional energy and trade hub.
In addition to crude oil flows to China, Gwadar can serve as a redistribution and trading centre for petroleum products and other commodities destined for regional markets such as India, Indonesia, Malaysia, and Japan. Its geographic position offers a natural advantage for handling multi-directional trade flows, provided the necessary infrastructure and policy support are in place.
This would require investment in refining capacity, storage terminals, and an integrated logistics framework, areas where Pakistan currently faces structural gaps. Regulatory clarity will also be critical. Institutions such as the Oil and Gas Regulatory Authority, along with market participants like Pakistan State Oil, would need to play a more active and coordinated role to ensure that Gwadar develops into a value-adding hub rather than remaining a transit point.
The challenges are evident and should not be understated. Offshore construction, difficult terrain in the northern corridor, and security considerations will all require careful planning and sustained institutional coordination. However, these are challenges of execution rather than feasibility. Comparable infrastructure has been developed in similarly demanding environments.
In the end, projects of this nature are not driven by cost efficiency alone. They are shaped by long-term strategic considerations. As global energy flows become increasingly exposed to geopolitical shocks, diversification of routes becomes a form of insurance.
The Muscat–Gwadar–Kashgar corridor may not be a complete solution, but it represents a practical and timely step towards reducing vulnerability in the global energy system while positioning Pakistan at the centre of a new and evolving energy geography.
The writer is a public-private partnership expert.
Published in Dawn, The Business and Finance Weekly, April 13th, 2026