Sino-Afghan oil deal signed
CNPC and Afghanistan have signed a long-term exploration deal that could return more than seven billion dollars.
China National Petroleum Corp signed the contract with Afghan joint venture Watan group to develop three oil blocks in the northeastern Amu Darya basin in Afghanistan. The deal marks the first international oil production agreement in the war-torn state for several decades. The project is expected to start producing by late 2014 and will have an initial investment of around $400 million to cover exploration, drilling and a new refinery.
The fields, which are estimated to contain some 87 million barrels of oil, will be worth “at least $7 billion” over the next 23 years, according to the Afghan mining minister. Under the terms of the 25 year agreement, CNPC will pay a 15% royalty on oil, 20% on corporate tax and surrender 70% of its profit directly to the Afghan government while also paying rent on land used for its operations.
Afghanistan will not only use the revenue to pay bills and develop vital infrastructure, but also hopes the project will reduce its dependency on Iranian and Central Asian oil imports.
The troubled nation is also rich in mineral deposits, valued at as much as $3 trillion. However, mining projects in Afghanistan have been typically considered too dangerous by Western firms which claim insurgents, high production and transport costs and sovereign risk make it an inhospitable investment environment.
