China’s CAPEIC Signs Oil Extraction Agreement with Taliban
- January 6, 2023
- Posted by: Quatro Strategies
- Category: Energy
China’s Xinjiang Central Asia Petroleum and Gas Co (CAPEIC) signed an agreement with Afghanistan’s Taliban administration to extract oil from the Amu Darya basin in the country’s north, Taliban’s mining minister said. The deal marks the first major public commodities agreement the Taliban administration has signed with a foreign company since taking power in 2021. It also highlights China’s economic interests in the region although the Islamic State militants have targeted its citizens in the country.
“The Amu Darya oil contract is an important project between China and Afghanistan,” China’s ambassador Wang said.
Although China has not officially recognized the Taliban administration, it has important ambitions in the country as it is at the center of Beijing’s Belt and Road Initiative.
According to Taliban officials, the Chinese company will invest $150 million a year in Afghanistan under the contract. Its investment would increase to $540 million in three years for the 25-year contract.
The Taliban-run administration will have a 20% partnership in the project, which can be increased to 75%.
China’s state-owned National Petroleum Corp (CNPC) signed a contract with Afghanistan’s previous, U.S.-backed government in 2012 to extract oil at the Amu Darya basin.
At the time, the basin’s reserves were estimated at up to 87 million barrels of crude.
The Taliban said another Chinese company, which was not identified, had not continued extraction after the fall of the previous government so the deal had been struck with CAPEIC.
The mining minister said a condition of the deal was 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 administration over the operation of a copper mine in eastern Logar province, another deal that was first signed under the previous government.
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