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Business & Economics
Major oil deal signed with ChinaBy Abdul Qadeer Siddiqui Dec 28, 2011 - 17:32
KABUL (PAN): Afghanistan and China on Wednesday signed their first-ever oil and gas deal that would earn the landlocked country $7 billion over the next two decades and a half, officials said.
Under the major oil exploration agreement, the state-owned China National Petroleum Corporation (CNPC) will develop three oil fields along the Amu River in northern Sar-i-Pul and Faryab provinces.
Minister of Mines Waheedullah Shahrani and CNPC President Lu Gong Xun signed the accord, giving Afghanistan 70 percent of net profits, in Kabul.
Speaking to journalists after the signing ceremony, Shahrani said the deposits were estimated to contain 87 million barrels of oil. "With one barrel priced at $100, Afghanistan will earn approximately $7 billion in the next 25 years."
Extraction along the Amu River would begin late next year, the minister indicated, expecting huge profits from the project. "This will bring enormous benefits to the government…it will be an important step toward (fuel) self-sufficiency."
Under the contract, the Chinese oil giant would build Afghanistan's first refinery over the next three years, after the size of the reserves was determined, said Lu Gong Xun, who characterised the agreement as a sign of growing Sino-Afghan cooperation.
Additionally, CNPC will pay 15 percent in royalties, as well as corporate taxes and rent for the land used for its operations. The joint venture is being launched with an Afghan company known as Watan Group.
The 25-year deal binds the Chinese firm to ensure the environment is not polluted due to its operations, according to the minister, who said special army and police units would be created to provide security for the project.
In the initial phase, the CNPC will invest $400 million in the project, which is expected to generate thousands of jobs for Afghans. Lu Gong Xun said the investment would increase with time.
Of a dozen Chinese, Pakistani, Canadian, French and American companies which participated in the bidding process, four were shortlisted. A government-appointed commission declared the Chinese company the winner.
Chairing a Cabinet meeting on Monday, President Hamid Karzai directed Shahrani to finalise the deal with the government-controlled Chinese firm on exploring oil and gas reserves in the Qashqari, Bazaar Kami and Zamrudsai areas of Sar-i-Pul.