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In-depth Business Intelligence
Books on Afghanistan
REPUBLICAN REFERENCE
Area (sq.km)
647,500
Population
26,813,057
Capital
Kabul
Currency
afghani (AFA)
President
Hamid Karzai
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Update No: 052 - (24/03/06)
Oil in Afghanistan?
In March a stir was caused by the announcement of the Ministry of Mining and
Industry that a survey indicated greater than expected oil and gas reserves in
Afghanistan. While gas and small quantities of oil were already being extracted
from Afghanistan's soil in the past, the new survey by the US Geological Survey
estimates potential reserves at up to 1.5 billion barrels of oil, that is up to
18 times previous estimates, and 15.6 trillion cubic feet of natural gas, or
three times as much as it had previously been estimated. These reserves are
however unproven and are located in the northern part of the country, north of
the Hindukush mountains. Exporting them, therefore, would not be easy or cheap
even if they were confirmed. Afghanistan might find itself once again in the
same predicament as in the 1970s, when it was forced to sell natural gas to the
Soviet Union at lower than market prices due to the unavailability of
alternative export routes. The transit costs of exporting through the northern
route would be high and the prices which Afghanistan could obtain probably low,
judging from current Russian policies towards gas-rich former Soviet Union
countries such as Turkmenistan. The political risks of investing in Afghanistan,
together with the existence of more attractive opportunities elsewhere, might
put off any possibility of large-scale investment anytime soon. The most likely
option for Afghanistan is the re-activation of the gas fields around Shiberghan
and oil fields in Sar-i Pul province, which were sealed in the late 1980s when
the Soviets left the country. Afghanistan already has a law, approved last year,
which allows foreign companies to invest in the oil and gas sector. So far
little has been done with regard to the existing infrastructure. There are a
total of one active oil and two gas fields, out of 15 which had been opened up
to 1984. In March it was announced that an American company had completed a
topping plant for the processing of crude at Angot oil field. The company,
Oxiana Energy, is awaiting authorisation for reactivating other oil fields in
the same area. The two gas wells in Sheberghan are extracting gas for local
consumption and there are plans to reactivate the pipeline which used to pump
gas to the city of Mazar-i Sharif.
Investment climate improves, but not quite enough yet
At the end of February the World Bank released a report on the Afghan
private sector, which highlights how the investment climate is improving yet not
enough to attract actual investors. While investment for an amount of US$1.3
billion has been pledged by private investors to the Afghan Investment Support
Agency, a government-sponsored initiative, only a small fraction of it has
actually been invested and even that in the building sector, which is driven by
an externally-funded reconstruction effort.
Karzai challenges Musharraf
In an unusual display of determination, President Karzai raised the issue of
border infiltrations by anti-government guerrillas during his visit to Pakistan
in March. Musharraf was not amused and in turn accused the Afghan government of
not being able to control its own border and allowing extremists to enter
Pakistan. The polemic continued within Afghanistan, where various groups and
factions started accusing each other of having links to Pakistan. In particular,
Defence Minister Wardak was the target of some of these accusations. The car
bomb campaign in southern Afghanistan in January created a wave of
anti-Pakistani resentment among the Pashtuns who live along the border with
Pakistan and now some political groups in Kabul, opposed to Pakistani influence,
are trying to exploit this.
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