As Exxon Mobil Weighs Oil Bid, Afghans Move Closer To A Foreign Investment Goal

Via The New York Times, a report on the latest battle of global and regional bulls over Afghanistan’s potential oil and gas riches. The country’s Ministry of Mines recently announced eight finalists to bid for an estimated 1 billion barrels of oil equivalent in northern Afghanistan.  ExxonMobil has been pitted against companies from bitter regional rivals Pakistan and India — Pakistan Petroleum and India’s ONGC. Turkey’s TPAO is also a powerful regional contestant.   Other finalists are Dubai-based Dragon Oil, Kuwait Energy, Petra Energia of Brazil and Thailand’s PTT.  Bids are to be submitted in October, and a winner chosen by the beginning of next year.  As the article notes:

Afghan officials and their American backers made a small step this week toward securing the big-name Western foreign investment they have long sought for Afghanistan: Exxon Mobil is weighing a bid on a modest oilconcession in the country’s north, Afghan officials and the company said Thursday.

Afghan and American officials eagerly cast Exxon Mobil’s expression of interest in the concession — six blocks of land being auctioned by the government — as a sign of confidence in Afghanistan, even though there was no guarantee that the company would actually bid.

Yet simply by showing interest, Exxon Mobil could bolster the American position here, American officials said. The move could also help muffle criticism in Washington, especially among Republicans, that China is reaping the gains of a war fought and paid for largely by the United States. Companies owned by the Chinese government previously won a smaller oil and gas concession in an Afghan government tender that was aided by a Pentagon task force focused on securing investment in Afghanistan, as well as the rights to a sizable copper deposit.

But the Obama administration’s immediate concern is weaning Afghanistan off foreign aid. According to estimates from the World Bank and the United States, Afghanistan will need at least $7.4 billion a year to run its government and its army for years after the NATO combat mission ends in 2014.

How long America and its allies will pay Afghanistan’s bills is an open question. In recent interviews, American officials said they envisioned that oil, which can be extracted relatively quickly, would provide some cash and give time for the mining of Afghanistan’s potentially rich deposits of iron ore and copper — along with precious metals, other minerals and gemstones — to start yielding revenue.

Together, the drilling and the mining could help the Kabul government begin to pay its own way, they said.

American officials as recently as last month expressed doubts that any big American companies would venture into Afghanistan. But Afghan officials said they hoped that Exxon Mobil’s signal of interest in Afghanistan’s nascent oil industry would pique the interest of other big American and European companies and allay their concerns about setting up shop in a war zone that ranks among the world’s 10 poorest and least-developed countries.

Until now, most foreign companies seeking to drill or mine in Afghanistan were state-owned Asian companies and far lesser known Western outfits, many of them on the margins of their industries. In the current tender, for instance, Exxon Mobil is the only fully private company in a field of eight finalists that includes state-owned enterprises from countries like India, Brazil, Turkey and Pakistan.

Exxon Mobil’s interest in what is known as the Afghan Tajik Tender “sends a pretty strong signal that Afghanistan is the place to invest as far as the mining and hydrocarbons sector is concerned,” said Tamim Asey, a spokesman for Afghanistan’s Ministry of Mines.

Experts agreed with Mr. Asey’s bullish assessment — to a point. Yes, they said, Exxon Mobil’s interest has the potential to reorder the Afghan mining industry, mainly by pushing marginal players out of the bidding for big projects.

But the tender is still in its preliminary stages. Exxon Mobil, which is exploring the tender through its Esso Exploration division, might not bid, they cautioned.

An American oil industry executive familiar with Exxon Mobil’s thinking echoed those concerns. The company’s decision to file an expression of interest, which was needed to become a finalist, was a “formality that allows it to see the government’s data on the blocks,” the executive said.

“After it studies the data, it will decide if it is interested,” said the executive, who asked not to be identified to avoid offending Afghan officials.

Studies conducted by the United States Geological Survey, and earlier ones done during the Soviet occupation of Afghanistan in the 1980s, have indicated that the Afghan Tajik blocks hold hundreds of millions of barrels of oil, and possibly upward of a billion.

Even if Exxon Mobil does not end up bidding for the blocks, its willingness to consider moving into Afghanistan is a rare boost for the Pentagon operation dedicated to helping Afghanistan attract investment.

The operation, known as the Task Force for Business and Stability Operations, prepared a report in 2010 that said Afghanistan had nearly a trillion dollars’ worth of untapped oil and mineral wealth.

Critics scoffed at the report, and before Exxon Mobil’s interest in the oil tender, the only marquee American or European corporate name linked to Afghanistan was JPMorgan Chase. Last year, it set up a deal for American and European investors to put about $40 million into an Afghan company that owns rights to a gold mine.

But the biggest prizes awarded so far — a copper mine and an iron ore mine — went to a company owned by the Chinese government and to a consortium led by a state-owned Indian company.

The only other oil concession awarded by the Afghan government was secured last year by a joint venture between the Chinese National Petroleum Corporation and the Watan Group, an Afghan company owned by relatives of President Hamid Karzai.

The Watan Group deal in recent weeks has attracted harsh criticism from Mr. Karzai’s political opponents and from Representative Dana Rohrabacher, Republican of California, who has long been a vociferous critic of the Afghan leader. Mr. Rohrabacher, in a letter sent last month to the State Department and the Pentagon, demanded that the deal be investigated and questioned the role played by the Pentagon’s business development task force.

Afghan and American officials have defended the tender, saying it was conducted fairly.

This entry was posted on Thursday, July 5th, 2012 at 3:29 pm 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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