The Afghan Oil Conundrum: Exploring The Country's Energy Potential

Afghanistan is estimated to have around 1.6 billion barrels of crude oil reserves. In 2016, the country consumed 35,000 barrels of oil per day, ranking 117th in the world for oil consumption. Afghanistan's Taliban-led government has recently begun extracting oil from wells in the north of the country and has signed deals with Chinese companies to further develop its oil reserves. The country's untapped natural resources, including oil, are estimated to be worth up to $3 trillion.

Afghanistan's oil extraction deal with China

Afghanistan's Taliban-led administration has signed a contract with a Chinese company, Xinjiang Central Asia Petroleum and Gas Co (CAPEIC), to extract oil from the Amu Darya basin and develop an oil reserve in the country's northern Sar-e Pul province. The deal was signed by Afghanistan's acting Minister of Minerals and Petroleum, Sheikh Shahabuddin Delawar, and a CAPEIC representative during a ceremony in Kabul.

The contract is the Taliban administration's first major foreign investment deal since seizing power in Kabul in 2021. It also underscores China's economic involvement in the region, despite the Islamic State militant group targeting its citizens in Afghanistan.

According to the contract, CAPEIC will invest $150 million per year in Afghanistan, increasing to $540 million in three years for the 25-year contract. The Taliban-run administration will initially have a 20% partnership in the project, which can be increased to 75%.

The Chinese ambassador to Afghanistan, Wang Yu, called the deal important for the economic growth of the war-torn country and a positive step towards closer relations between Kabul and Beijing. He also emphasised that the project would create job opportunities for around 3,000 Afghans.

Afghanistan is estimated to have untapped resources worth more than $1 trillion, which has attracted the interest of foreign investors. However, decades of turmoil have prevented significant exploitation of these resources.

The deal with CAPEIC is not China's first involvement in Afghanistan's oil industry. In 2012, the state-owned China National Petroleum Corp (CNPC) signed a contract with Afghanistan's previous, US-backed government to extract oil from the Amu Darya basin. However, the deal was scrapped by former president Ashraf Ghani due to delays and a lack of progress.

In addition to oil, Afghanistan is rich in natural resources such as copper, gold, natural gas, uranium, and rare earth minerals. The country's mining sector has the potential to contribute significantly to its economy if security and stability can be established.

Oil consumption in Afghanistan

Afghanistan is estimated to be harbouring around 1.6 billion barrels of crude oil, according to a 2019 Afghan report. The country has an estimated daily consumption of 35,000 barrels of oil as of 2016, ranking 117th in the world for oil consumption. This equates to 0.04 gallons of oil per capita every day, or 15 gallons per capita per year.

Afghanistan's oil consumption has fluctuated over the years, with an average value of 18.59 thousand barrels per day from 1980 to 2014. In 2010, the country's oil consumption was estimated to be 4,800 barrels per day.

In 2023, the Taliban-led government of Afghanistan began extracting oil from wells in the country's north, specifically in the Qashqari oilfield in the Sar-e-Pul province. The Qashqari basin has 10 wells, and 200 tons of oil is being extracted from nine of them, with officials aiming to increase the extraction capacity to more than 1,000 tons.

In 2023, Afghanistan also signed a 25-year contract with a Chinese company, Xinjiang Central Asia Petroleum and Gas Co (CAPEIC), to extract oil from the Amu Darya basin and develop an oil reserve in the northern Sar-e Pul province. The deal is the first major foreign investment in Afghanistan since the Taliban took power in 2021.

Afghanistan's natural resources

Afghanistan is estimated to have over $1 trillion in untapped natural resources, including copper, gold, oil, natural gas, uranium, bauxite, coal, iron ore, rare earth minerals, lithium, chromium, lead, zinc, gemstones, talc, sulphur, travertine, gypsum, and marble. The country has historically been a major source of lapis lazuli, a deep blue semi-precious stone mined in the northern Badakhshan province. Other gemstones such as rubies and emeralds are also found in Afghanistan.

In 2023, Afghanistan's Taliban-led government began extracting oil from wells in the north of the country, specifically in the Qashqari oilfield in Sar-e-Pul province. The Qashqari basin has 10 wells, and officials aim to increase the extraction capacity to more than 1,000 tons.

Afghanistan's acting Minister of Minerals and Petroleum, Sheikh Shahabuddin Delawar, signed a contract with Xinjiang Central Asia Petroleum and Gas Co (CAPEIC), a Chinese company, to extract oil from the Amu Darya basin and develop an oil reserve in the northern Sar-e Pul province. This was the first significant foreign investment deal since the Taliban took control of Afghanistan in 2021.

The deal with CAPEIC is expected to generate over 3,000 local jobs and bring in $150 million in the first year, increasing to $540 million in investments over three years for the 25-year contract. The Taliban-run administration will have a 20% partnership in the project, with the potential to increase to 75%.

In addition to oil, Afghanistan has an estimated 30 million tonnes of copper resources, with another 28.5 million tonnes in undiscovered porphyry deposits, bringing the total close to 60 million tonnes. The country also has over 2.2 billion tonnes of iron ore, the raw material for steelmaking, worth over $350 billion at current market prices.

US foreign policy and Afghanistan's oil

Afghanistan is estimated to harbour around 1.6 billion barrels of crude oil, with most of the undiscovered crude in the Afghan-Tajik Basin. In 2016, the country consumed 35,000 barrels per day, ranking 117th in the world for oil consumption. Afghanistan does not import or export oil.

US foreign policy has long been interested in Afghanistan's oil. In 1998, Dick Cheney, then CEO of US oil-services company Halliburton, commented: "I cannot think of a time when we have had a region emerge as suddenly to become as strategically significant as the Caspian." He was referring to the approximately 50 billion barrels of oil and natural gas in the region, which the US expected to import a large portion of by 2050.

The US interest in Afghanistan's oil has been largely focused on the construction of a pipeline from Turkmenistan to Pakistan, which would provide a direct and cost-efficient route for oil and natural gas to flow into US-controlled terminals in the Caspian Sea. In 1998, Unocal signed a deal with the Taliban to build an 890-mile natural gas pipeline, but the plan was disrupted by civil war.

The US has also been involved in negotiations with the Taliban to build a pipeline across Afghanistan, with the support of former US Secretary of State Henry Kissinger. These negotiations included flying Taliban leaders to Washington and Houston for lavish barbecues and accommodation in five-star hotels. The US policy towards the Taliban regime was largely determined by the interests of Unocal, with the US insulating the Taliban leaders by declaring that Osama bin Laden's terrorists were "not supported by any state".

The struggle for control of Afghanistan's oil deposits has been referred to as "the Great Game", highlighting the strategic importance of the region for US foreign policy and the global oil industry.

Oil extraction in Sar-e-Pul province

Oil extraction in the Sar-e-Pul province of Afghanistan is a significant economic activity and has been carried out by various groups over the years. The province is located in the north of the country and has a population of about 632,000 people, with the major ethnic group being Uzbeks, followed by Hazaras and Pashtuns.

In 2012, the Afghan government, in collaboration with China National Petroleum Corporation (CNPC), began oil production in the Amu Darya basin, which covers the northern provinces of Sar-e-Pul and Faryab. This project was expected to generate billions of dollars in revenue over two decades. The deal included drilling and refinery activities, marking the first international oil production agreement for the Afghan government in several decades.

In 2023, the Taliban-led government commenced oil extraction in Sar-e-Pul, specifically in the Qashqari oil field, with the support of a Chinese company. The Qashqari basin has ten wells, and the goal was to extract 200 tons of oil from nine wells. Officials aimed to increase the extraction capacity to more than 1,000 tons. The revenue generated from these mines was intended to be used for the country's development and creating employment opportunities for locals.

The Taliban-led administration also signed a 25-year contract with Xinjiang Central Asia Petroleum and Gas Co. (CAPEIC), a Chinese company, to extract oil from the Amu Darya basin and develop an oil reserve in Sar-e-Pul. The contract included an investment of $150 million in the first year, increasing to $540 million over three years. This deal marked the first significant foreign investment in Afghanistan since the Taliban took control in 2021.

Prior to the Taliban's return to power, terrorist groups such as the Taliban and Daesh had also utilized crude oil extraction in Sar-e-Pul as a financial resource to fund their activities. They controlled oil wells like Angoot, Qashqari, and Tapa Zar, selling the extracted oil to local people.

Frequently asked questions