Chinese company ventures into Afghanistan in oil extraction deal

Kabul — Afghanistan’s Taliban-led administration is to sign a contract with a Chinese company to extract oil from the Amu Darya basin in the country’s north, the acting mining minister said on Thursday.

The contract will be signed with Xinjiang Central Asia Petroleum and Gas Co (CAPEIC), officials told a news conference in Kabul. It will be the first major public commodities extraction deal the Taliban administration has signed with a foreign company since taking power in 2021.

It underscores neighbouring China’s economic involvement in the region even though the Islamic State militant group has targeted its citizens in Afghanistan. “The Amu Darya oil contract is an important project between China and Afghanistan,” China’s ambassador, Wang Yu, told the news conference.

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

The Chinese company will invest $150m a year under the contract, the spokesperson for the Taliban-run administration, Zabihullah Mujahid, said on Twitter. This will grow to $540m in three years for the 25-year contract, he said.

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

The announcement came a day after the Taliban administration said its forces killed eight Islamic State members in raids, including some behind an attack in December on a hotel catering to Chinese businessmen in the capital, Kabul.

China’s state-owned company National Petroleum Corp (CNPC) signed a contract with Afghanistan’s previous, US-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.

Acting deputy prime minister Mullah Baradar told the news conference another Chinese company, which he did not identify, did not continue extraction after the fall of the previous government so the deal was struck with CAPEIC.

“We ask the company to continue the procedure according to international standards, also we ask them to provide for the interest of the people of Sar-e Pul,” he said. The mining minister said a condition of the deal is that the oil be processed in Afghanistan.

Afghanistan is estimated to be sitting on untapped resources of more than $1-trillion, which has attracted the interest of some foreign investors, though decades of turmoil has 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.

Reuters