China wins major oil deal in Afghanistan

The deal comes as booming China is looking to expand its oil resources in wake of a growing domestic demand.

Last Updated: Dec 28, 2011, 00:00 AM IST

Beijing/Kabul: Energy-hungry China has struck a major oil deal in war-torn Afghanistan, gaining potential access to some 87 millions of barrels of oil in the strategically-located resource-rich country.

The Afghan cabinet has approved the deal to allow China National Petroleum Corporation (CNPC) to develop oil blocks in the Amu Darya Basin, allowing the state-run Chinese conglomerate to become the first foreign firm to produce oil in Afghanistan.

The Amu Darya Basin is estimated to hold around 87 million barrels of oil.

The deal comes as booming China is looking to expand its oil resources in wake of a growing domestic demand.

"The Afghan cabinet has ordered mines minister Wahidullah Shahrani to sign an oil exploration contract for Amu Darya with China National Petroleum Corporation," Afghanistan president`s office said in a statement.

Under the deal, CNPC, China`s largest integrated oil and gas company, is allowed to drill and build a refinery in the northern provinces of Sar-e Pul and Faryab. The contract calls for CNPC to form a joint venture with a local partner, the
Watan Group.

Afghanistan`s Mines Minister Wahidullah Shahrani is expected to sign the accord with the director of the Beijing-based CNPC tomorrow, ministry spokesman Jawad Umer said.

The Afghan government said the contract with CNPC will be the first with a foreign company to exploit oil reserves in the land-locked country.

The deal is a major win for China as it has been looking to invest in resource-rich Afghanistan, the BBC reported.

However, analysts said that resources is not the only sector that China is looking to invest in.

"The deal is a way of getting a foot inside the door,"
said Charles Chaw of China Knowledge Consulting.

Surveys done by the Soviets in the 1970s have shown that
Afghanistan has vast mineral deposits.

The ongoing war in Afghanistan has seen its infrastructure
and economy being damaged.

Analysts said that as peace returns to the country, it
will require a lot of rebuilding activity in order to trigger
economic growth in coming years, something that China is keen
to tap into.

"China is looking towards a much bigger scale of
investment," Chaw was quoted as saying by the BBC.

"This could involve projects in infrastructure, including
high-speed rail in times to come," he added.

In 2008, the China Metallurgical Construction Co. had
signed a contract to develop the Aynak copper mine in Logar
province by investing USD 3.5 billion.

PTI