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China bid for Afghan oil exploration granted

China has won its bid for petroleum exploration and extraction in Afghanistan, granting the country access to potentially millions of barrels of oil. The Afghan cabinet has approved a deal to grant China National Petroleum Corporation (CNPC) the right to build oil blocks along the Amu Darya Basin, which is estimated to have about 87 million barrels of petroleum.

The agreement comes during China’s search for more oil resources to meet its rising domestic demand. The country’s very fast economic expansion is resulting in an upsurge in demand for petroleum and other fuel sources.

Afghanistan’s presidential office stated that it had ordered Wahidullah Shahrani, who is the mines minister, to sign a petroleum exploration contract with China National Petroleum Corporation. CNPC, which is state-owned will execute the oil exploration and extraction in the Amu Darya Basin with the Watan Group, its local partner.

Although there have been many discussions about the possibility of oil resources in the Afghani region, experts say that it is too early to estimate the profitability of such a venture. Tony Regan from Tri-Zen, which is a Singaporean consultancy group, said that they were taking a risk.

Mr Regan stated that CNPC would need to spend a large amount of money to analyse the basin before it could actually know more about the quantity of oil that might exist there. He added that it would take betwee 5 – 10 years before they could get a decent feel for what was available and start producing it commercially.

The deal is a major victory for China since it has been seeking to invest in oil-rich Afghanistan. Yet, analysts say that resources are not the only industry that China is wishing to invest in. Charles Chaw from China Knowledge Consulting called the deal a way of finding a place in the Afghan market.

The raging war in Afghanistan has greatly damaged the country’s infrastructure and economy. Experts say that when peace returns to the Central Asian country, there will be a great deal of rebuilding activity to trigger economic growth during the coming years, which is something that China is set to tap into.

Mr Chaw said that China was keen to seek out a much larger scale of investment, adding that it could involve infrastructure-building projects, including a high-speed rails system.

 

 

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