Afghanistan’s Taliban sign oil extraction deal with Chinese company

Unit of China National Petroleum Corporation to drill in Amu Darya basin

Afghanistan's acting minister of mines and petroleum Shahabuddin Dilawar, sitting left, its acting first deputy prime minister Abdul Ghani Baradar, second left, and China's ambassador to Afghanistan Wang Yu at the signing in Kabul. AFP
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Afghanistan's Taliban government has signed its first international contract to drill for oil in the Amu Darya basin in the country's north.

The 25-year agreement was signed with China's Xinjiang Central Asia Petroleum and Gas Company, a unit of the state-owned China National Petroleum Corporation (CNPC), according to a tweet on Thursday by Taliban spokesman Zabihullah Mujahid.

“Today, the oil extraction contract of the Amu Sea basin was signed with the Chinese company. According to this contract, oil will be extracted from an area of 4,500 square kilometres, which is located in three northern provinces (Sarpol, Jawzjan and Faryab). The amount of daily extraction will increase from 1,000 [tonnes] to 2,0000 tonnes,” Mr Mujahid said.

The deal is the first major energy extraction agreement with a foreign company since the Taliban took control of Afghanistan in 2021.

“The Amu Darya oil contract is an important project between China and Afghanistan,” the BBC reported, quoting China's ambassador to Afghanistan, Wang Yu, in whose presence the contract was signed.

Taliban’s deputy prime minister for economic affairs, Abdul Ghani Baradar, who was also present at the signing, said the pact will “strengthen Afghanistan’s economy and increase its level of oil independence”, according to a Reuters report.

Afghanistan is estimated to be sitting on natural resources — including natural gas, copper and rare earths — worth more than $1 trillion. However, much of those reserves remain untapped due to decades of turmoil in the country.

The Chinese company will invest $150 million a year in Afghanistan under the contract and the investment would increase to $540 million in three years, Mr Mujahid said in his tweet.

The Taliban-run administration will have a 20 per cent partnership in the project, which can be increased to 75 per cent, he added.

The Taliban will also earn 15 per cent royalty fees from the 25-year contract, he said.

“All the oil products of the Amu Darya basin will be processed in Afghanistan … with this action, Afghanistan will soon become self-sufficient in terms of oil,” Mr Mujahid said.

The project is expected to provide employment opportunities to 3,000 Afghans.

The company's parent, CNPC, was awarded the same projects in 2011 by the previous US-backed government, but the deal was scrapped years later by former president Ashraf Ghani due to delays and lack of progress in work, Reuters reported.

The Taliban have regarded the restart of this project as significant as so far investments have been coming from private or individual entrepreneurs, Raffaello Pantucci, a senior associate fellow at the Royal United Services Institute in the UK, was quoted as saying by Reuters.

A Chinese state-owned company is also reported to be in talks for the operation of a copper mine in the east of the country, according to the BBC report.

Updated: January 07, 2023, 1:42 PM