The Taliban-led administration in Afghanistan on Thursday signed its first international contract to extract oil from the northern Amu Darya basin as the group seeks to increase revenue.
The agreement with a subsidiary of China National Petroleum Corp (中國石油天然氣集團), was inked in Kabul in the presence of Chinese Ambassador to Afghanistan Wang Yu (王愚) and the Taliban’s Deputy Prime Minister for Economic Affairs Mullah Abdul Ghani Baradar.
The pact would “strengthen Afghanistan’s economy and increase its level of oil independence,” Baradar said at the signing.
Wang, whose country does not recognize the Taliban government, said that the 25-year contract would support Afghanistan’s push for self-sufficiency.
Xinjiang Central Asia Petroleum and Gas Co (疆中亞石油天然氣) would invest as much as US$150 million in the first year and US$540 million over the subsequent three years to explore five oil and gas blocks, said Shahabuddin Delawar, the Taliban’s acting minister of mines and petroleum.
The blocks are in a 4,500km2 area in northern Afghanistan.
The militant group would earn 15 percent royalty fees from the 25-year contract.
Daily oil production would start at about 200 tonnes and gradually rise to about 1,000 tonnes. The five blocks are estimated to hold 87 million barrels of crude oil, a previous survey showed.
Xinjiang Central Asia Petroleum and Gas would also build Afghanistan’s first crude oil refinery, Delawar said.
If it failed to meet all the contract obligations within a year, the contract would be terminated, he said.
China National Petroleum was awarded the same projects in 2011 by the previous government, but the deal was scrapped years later by then-Afghan president Ashraf Ghani due to delays and lack of progress in work.
The Taliban has regarded the restart of this project as significant as so far investments have been from private or individual entrepreneurs, said Raffaello Pantucci, a senior associate fellow at the Royal United Services Institute in the UK.
“This contract is clearly quite significant for the cash-strapped Taliban, because they’ve been desperate for this kind of investment,” Pantucci said. “Strategically, this isn’t going to be a game changing oil commitment for China, as it’s a relatively limited opportunity.”
The Taliban has harbored hopes that China would boost investments in the country’s rich resources, estimated to be worth US$1 trillion.
The group sees the investments as a way to fix an economy that has nearly collapsed after international aid, accounting for 40 percent of the nation’s GDP, was halted following the chaotic withdrawal of US troops in 2021.
However, attacks by the Islamic State group in Afghanistan, such as the one that targeted Chinese businesspeople and executives in a hotel last month, have made China wary about investing.
Then there is also the presence of the East Turkistan Islamic Movement, a Xinjiang-based separatist group, that has kept Beijing cautious.
Before China National Petroleum came into the picture, Metallurgical Corp of China Ltd (中國冶金科工) won almost a US$3 billion bid in 2008 to mine one of Afghanistan’s largest copper deposits in Logar Province, but it never made headway due to a series of delays mostly to do with security concerns.
The Taliban says that it is renegotiating the contract.
The Taliban has repeatedly asked international companies to invest in Afghanistan’s natural resources, even though it has drawn widespread international condemnation for its rules barring women from education and jobs.
China has consistently said it would never interfere in the country’s affairs.
Although no nation has officially recognized the Taliban government, China, Russia and Pakistan have maintained close political and economic ties.
Afghanistan consumes about 1.3 million tonnes of fuel annually, imported mostly from Uzbekistan, Turkmenistan and Iran.
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