Afghanistan signs oil extraction deal with Chinese company

The contract is the first major foreign investment deal since the Taliban seized power in Kabul in 2021.

Afghanistan’s Taliban-led administration has signed a contract with a Chinese company to extract oil from the Amu Darya basin and develop an oil reserve in the country’s northern Sar-e Pul province.

The contract was signed on Thursday by acting Minister of Mines and Petroleum Sheikh Shahabuddin Delawar and an official of Xinjiang Central Asia Petroleum and Gas Co (CAPEIC) in a ceremony held in capital Kabul.

It was the first major public commodities extraction deal the Taliban administration has signed with a foreign company since taking power in 2021.

Acting Deputy Prime Minister Mullah Abdul Ghani Baradar and Chinese ambassador to Afghanistan Wang Yu also witnessed the signing ceremony, state-run Bakhtar News Agency reported.

Afghan Deputy PM Mullah Abdul Ghani Baradar at a news conference in Kabul [Ali Khara/Reuters]

“Recently, several projects were approved by the Economic Commission, and with their undertaking, fundamental steps will be taken for the prosperity of the country and public welfare,” the agency quoted Baradar as saying.

“We request that the company continue the procedure in accordance with international standards and in the best interests of the people of Sar-e Pul,” he added.

Speaking on the occasion, Delawar said under the deal the Chinese company will be extracting oil from an area covering 4,500 square kilometres (1,737 square miles) collectively in northern Sar-e Pul, Jawzjan, and Faryab provinces.

“Over 3,000 local people will get jobs in this project,” he said.

The Chinese envoy called the deal important for the economic growth of the war-torn country and a positive step towards close relations between Kabul and Beijing.

“The Amu Darya oil contract is an important project between China and Afghanistan,” Wang Yu said.

CAPEIC will invest $150m a year in Afghanistan under the contract, the spokesperson for the Taliban-run administration, Zabihullah Mujahid, said on Twitter.

Its investment would increase to $540m in three years for the 25-year contract, he said.

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

The state-owned company China National Petroleum Corp (CNPC) signed a contract with Afghanistan’s previous, United States-backed government in 2012 to extract oil at the Amu Darya basin in the northern provinces of Faryab and Sar-e Pul.

At the time, up to 87 million barrels of crude were estimated to be in Amu Darya. Delawar said a condition of the deal was that the oil be processed in Afghanistan.

Baradar told Thursday’s news conference that another Chinese company, which he did not identify, discontinued extraction after the fall of the previous government so the deal had been struck with CAPEIC.

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

A Chinese state-owned company is also in talks with the Taliban-led administration over the operation of a copper mine in eastern Logar province, another deal that was first signed under the previous government.

China has not formally recognised the Taliban administration but it has significant interests in a country at the centre of a region important for its Belt and Road infrastructure initiative.

The oil contract also underscores neighbouring China’s economic involvement in the region even though the ISIL (ISIS) group has targeted its citizens in Afghanistan.

The announcement came a day after the Taliban administration said its forces had killed eight ISIL members in raids, including some who were behind an attack last month on a hotel catering to Chinese businessmen in the capital, Kabul.