Afghanistan’s Coming Energy Boom

Via The Diplomat, an upbeat update on Afghanistan’s energy sector:

Last month Afghanistan’s Minister of Mines, Wahidullah Shahrani, told the Wall Street Journal that he expects the country to start exporting oil as early as this year. Mr. Shahrani explained that oil wells in the Amu-Darya Basin in northern Afghanistan, while currently producing no oil, will have an output level of 25,000 barrels of oil a day by the end of this year. He also said that this is expected to rise to 40,000 bpd in 2014.

All of this oil will be exported initially, as Afghanistan’s first oil refinery is not expected to come on line for at least two to three years.

The oil wells in question are operated by state-owned China National Petroleum Corp. (CNPC), China’s largest integrated oil and gas company, who is working alongside an Afghan partner.

Afghanistan is awash in natural resources. A U.S. Defense Department-funded and U.S. Geological Survey-led mapping of Afghanistan’s resource landscape found the country was sitting on top of an estimated US$ 1 trillion in various minerals and natural resources.

The WSJ report said the Afghan mining minister added that starting in May the country will be auctioning off additional blocks of oil, iron ore, gold and copper bloc to international investors. A Chinese consortium is also developing a copper mine in Aynak, Logar province in eastern Afghanistan, about 40 km from Kabul.

None of these investments are likely to come easy for Beijing, however. Indeed, for decades the world has known that Afghanistan has enormous resources located on its territory. Two issues have prevented them from being tapped, however: a lack of security and a lack of transportation infrastructure.

The first issue shouldn’t be a huge challenge for the Amu-Darya Basin oil well project in the initial years, as the Pashtun-led insurgency is mostly concentrated in the southern and eastern areas of Afghanistan. The copper mine in Aynak may face more challenges on this front, however.

Furthermore, the challenge of transporting oil from Amu-Darya to export markets could prove more daunting. Mr. Shahrani told the WSJ that his country was currently in the final stages of negotiations with one of its northern neighbors for an agreement to allow CNPC transport the oil by truck through the neighboring country’s territory.

“The wells are ready for production,” the WSJ quoted Mr. Shahrani as saying. “If we complete negotiations with our northern neighbor in the next two to three weeks, then production of the crude will begin with an initial 5,000 barrels” a day.

He did not specify which of Afghanistan’s three northern neighbors— Turkmenistan, Uzbekistan or Tajikistan— was participating in the discussions, nor did he say whether the oil would be exported to China or other markets.

Afghanistan’s transportation woes could be improving, however. Last month President Hamid Karzai signed a memorandum of understanding with his counterparts in Turkmenistan and Tajikistan, for a proposed 220-250 mile railway linking their three countries together, as well as to other areas of Eurasia. Indeed, some are speculating that the railway will later be greatly expanded to link it up with other countries in the region, including China.

Initially, however, the rail line would link the Afghan town of Akina-Andhoi, which is about 650 kilometers (400 miles) northwest of the capital city of Kabul, to Atamyrat in Turkmenistan and Pyandzh in Tajikistan.

The rail line is expected to cost between US$1.5 billion and US$2 billion to build. During the signing ceremony last month Tajik President Imomali Rakhmon said: “It would be great if the Asian Development Bank, the Islamic Development Bank and Japan could take part in financing” the construction.

Tajikistan has said it will finance its own section of the rail line, as well as provide engineers to help build the Afghan portion of the project.

If the countries do find capital they expect to start the project as early as July of this year, and hope to complete it by 2015.

This entry was posted on Thursday, April 4th, 2013 at 10:06 am and is filed under Afghanistan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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