Petro news – Afghanistan is full of oil

Petro news – Afghanistan is Full of Oil

One of our recent articles about the discovery of huge oil reserves in Tajikistan have led readers to the logical question – if there is oil in Tajikistan, shouldn’t’ there also be oil in Afghanistan? Indeed, Afghanistan has major hydrocarbon reserves and international oil giants are already scrambling for the right to develop Afghan deposits. However, mining operations in the troubled country carry specific risks, which we discuss below.

Got oil? We’re coming over.

According to recent reports by the U.S. Geological Survey, Afghanistan has a substantial mineral base, containing cobalt, iron, copper, gold and even lithium. But the oil fields of northern Afghanistan are its most attractive feature: the Afghan-Tajik Basin is reported to contain some 1.9 billion barrels of oil.

Of course, this black gold cannot remain without an owner for too long. Since the Afghans are unable to extract it on their own, foreign oil companies have to do the “dirty work”. A tender is currently under way to award oil exploration licenses, but with results due only in December participants keep their offers under wraps. However, we do know the tender list includes ExxonMobile (U.S.), Dragon Oil (Saudi Arabia), Kuwait Energy (Kuwait), ONGC Videsh (India), Petra Energia (Brazil), Pakistan Petroleum (Pakistan) PTT (Thailand), and TPAO (Turkey).

The list above includes only the lucky few who passed the initial tender commission, with over 20 other international oil companies having dropped out at the early stage. As you can see, interest in Afgan oil is, indeed, substantial.

But…. where is the ubiquitous China, you ask?

Haste makes waste

The China National Petroleum Corporation (CNPC) already won a tender to develop oil fields in the Amu Darya river basin last year. And it is presicely China’s interst that, according to some sources, forced the other players to pay more attention to Afghan oil. The market knows that profiting after the Chinese have taken root will not be easy, so the scramble to join the game is understandable. Even US Congressman Rohrabacher, known for his provocative statements, said on this subject: “The Chinese do everything for their gain only, using for their own benefit even the war waged by the United States” (source: InoSMI).

However, the Chinese haste to be first kid in the sandbox may have played a cruel joke on them. The problem is that the license acquired by the CNPC  in northern Afghanistan falls squarely onto the territory of the so-called Dostumistan, a region controlled by Abdul Rashid Dostum. Permit us a few words to paint a proper picture of this character.

Dostum is well known to Soviet Afgan veterans. Half-Uzbek and half Tajik by birth, after completing his education in the USSR Abdul-Rashid returned to Afghanistan to commence his military and political career. During the Afghan War in 1979-1989 he was the commander of the 53rd Division of the Afgan government troops, and he backed the Najibullah government until 1992. After its collapse Dostum was the de facto ruler of a vast northern region with its capital in Mazar-i-Sharif, which was named “Dostumistan.” Over the years he has repeatedly changed his political views, feeling the country for his life a number of times, but each time he returned and regained power. At the moment, Dostum is chief of General Staff of Afghanistan and the unofficial ruler of the same Dostumistan.

The problem with all of this is that the Chinese have made a rather grievous error in failing to take Dostum’s interests in the region into account when they took up mining his land. In order to win the tender the Chinese had for form a joint venture with one of Karzai’s company, who promised to solve any problems that may arise, and complete protection. But in Afghanistan, Karzai’s authority extends only to the territory controlled by Karzai. Therefore, upon seeing the first Chinese engineers on their territory, Dostum’s militia have demanded hefty baksheesh for the right to continue drilling operations. Given that even in the best of circumstances the Chinese will see first debit in only about five years, CNPC appears to have landed itself in a bit of hot water.

However, for major international oil corporations such problems are nothing new. A similar situation prevails in the African continent, and certainly the oil production in Afghanistan is no more difficult than, say, on the Arctic shelf. This largely explains the high interest in profiting from exploration of Afghan mineral resources. In light of the foregoing, the news of the oil fields in Tajikistan is not so fantastic.

Eugene Super