Markets

China Wins First Oil Drilling Rights for Afghanistan

China has become the first foreign nation to win the rights to search for oil in war-torn Afghanistan.

Afghanistan's Ministry of Mines gave the Chinese state-owned National Petroleum Corporation (CNPC) the go-ahead to work on oil reserves in the north-eastern provinces of Sari Pul and Faryab.

The Amu Darya River basin reportedly boasts about 87 million barrels equivalent of oil reserves.

Northern Afghanistan may hold more than 1.6 billion barrels of crude, 16 trillion cubic feet of natural gas and 500 million barrels of natural gas liquids, according to the ministry.

The three "blocks" to be developed by CNPC may contain 80 million barrels of crude, Jawad Omar, spokesman for the Afghan mines ministry, said.

"This is the first big contract for exploration and extraction of oil in Afghanistan," a statement from the office of President Hamid Karzai in Kabul said.

Under the deal, CNPC is required to form a joint venture with a local partner, the Watan Group. Seventy percent of profits from the operation must be paid to the Afghanistan government.

"The 25-year oil project will create thousands of jobs," Wahidullah Shahrani, Afghan Minister of Mines, said. "Eventual investments in the Amu Darya basin are expected to be in the hundreds of millions of dollars and will spur improvements in roads and other infrastructure."

The provinces of Sari Pul and Faryab are hundreds of miles from the centres of fighting in the east and southeast and are considered relatively safe, the Washington Post reported.

The Afghan government, eager to rebuild its nation as well as attract investment, claims it holds an estimated US$3 trillion in natural resources. The deposits, which could yield copper and iron ore, oil and gas, niobium, cobalt, gold, molybdenum, silver and lithium, could lift the country's coffers by some $3.5 billion a year.

CNPC agreed to pay a 15 percent royalty on oil from the blocks and a corporate tax rate of 30 per cent.

In 2007, China won the extraction rights into the Aynak mine south of Kabul. According to Soviet-era data and a newer study by the United States Geological Survey, the mine could yield over 11 million tonnes of copper. It is by far the largest foreign investment in Afghanistan at $3.5 billion.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Commodities

Latest Markets Videos