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Afghanistan signs oil extraction deal with Chinese company

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Kabul: The Taliban interim government in Afghanistan has signed an oil extraction agreement with China’s Xinjiang Central Asia Petroleum and Gas Co (CAPEIC), the country’s first major foreign deal since the political resettlement in August 2021.

Under the contract, the CAPEIC will invest $150 million in one year and $540 million in the next three years for oil extraction in Afghanistan’s Amu Darya Basin, Taliban spokesperson Zabihullah Mujahid said.

“In this contract, the Islamic Emirate will be a 20 percent partner, and this share will increase to 75 percent,” he said in a Twitter post on Thursday.

Mr Mujahid added that they will extract oil from an area covering 4,500 square kilometers (1,737 square miles) in Sar-e Pul, Jawzjan, and Faryab provinces, with the daily extraction rate increasing from 1,000 to 2,000 tons gradually.

The contract has a 25-year term and will automatically be terminated if CAPEIC fails to meet its material obligations within a year, he added.

The Amu Darya is the largest gas-bearing basin in Central Asia and the world’s third-largest gas-rich basin after the Western Siberian Basin and the Persian Gulf Basin, according to a 2019 study by PetroChina.

It is located mainly in Turkmenistan and Uzbekistan, as well as in parts of northern Afghanistan and northeastern Iran.

Afghanistan is estimated to be sitting on untapped resources of more than $1 trillion, which has attracted the interest of some foreign investors, although decades of turmoil have prevented any significant exploitation.

Although both parties hinted that there will be significant future investment by China in Afghanistan, few details have emerged.

The China allowed the interim government to keep Afghanistan’s embassy in Beijing and offered humanitarian aid to Afghanistan despite having no formal recognition of the administration.

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