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Afghanistan's First Oil and Gas Licensing Round

quentin smeeth | 09.09.2009 16:10 | Energy Crisis | Other Press | Terror War | World

If evidence were ever needed as to the resilience of oil companies and their willingness to do business in some of world’s most hostile environments then surely it would be worth drawing on the story of Afghanistan.

By Martin Clark from

If evidence were ever needed as to the resilience of oil companies and their willingness to do business in some of world’s most hostile environments then surely it would be worth drawing on the story of Afghanistan.

The war-torn country is currently in the middle of its first licensing round but has reported brisk interest from international oil companies, both large and small.

The government in Kabul launched its bid round back in March in the hope of stimulating investment in an industry that might one day help the country back on its feet.

A few eyebrows were raised at the time but not among the industry itself, which will always embrace the opening of a new oil frontier and the chance to probe its potential.

And potential there is. Afghanistan already produces about 200 million cubic metres of gas per year, against up to 5 billion cubic metres during the Soviet era.

One of the differentiating points of the oil business, of course, is its ability to operate in such areas, supremely agile and efficient logistically, and very much adept in managing risk in all its various guises.

A bad memory for former Soviet troops and now a war zone to other foreign armies there are those that view Afghanistan with a fresh sense of opportunity.

Remarkably, despite the flood of bad news coming out of the southern Helmand province in recent times, the bid round has gone well since its launch, with Kabul on track to sign contracts with foreign partners by December.

So far, all key dates along the way have been met and most encouragingly, there has been considerable industry interest.

Among the better-known operators pre-qualified to bid for blocks are: Total Exploration & Production, Addax Petroleum – now a target for China’s Sinopec – and another Chinese player, Sinochem Petroleum Exploration & Production.

A further five less well-known names are also pre-qualified: Nations Petroleum, Oil & Gas Development Company Limited, Orient Petroleum International Inc., Redwood Petroleum Co. Ltd, and Turkiye Petrolleri A.O. Genel Mudurlugu (TPAO).

Final bid documents are due to go out in early August, to be returned by mid-September, with an announcement of the bidding results expected to follow in October.

There are three blocks on offer – Jangalikalan, Juma-Bashikurd and Kashkari – all located in the country’s comparatively safer northern regions and close to the border with gas-rich Turkmenistan.

Significantly, all of the blocks have some proven hydrocarbons potential, and some even have a modest history of production.

The Afghan Ministry of Mines, which is leading the round, is naturally talking up prospects, suggesting that substantial oil and gas deposits are on offer.

A Ministry statement said the Juma-Bashikurd block holds natural gas reserves estimated at 33 billion cubic metres (bcm), while the Jangalikalan block holds gas reserves of 19 bcm.

The oil attraction is the Kashkari block with 64 million barrels, which holds the Kaskhari, Angoat, and Aqdarya oilfields, as well as some gas potential.

The Ministry of Mines said it is “quite optimistic the potential figure will be much bigger” citing possible reserves at Kashkari of 144 million barrels.

Angoat is the only field that has been in sustained production, delivering small amounts of oil mainly for local heating purposes.

In the late 1990s, the Kashkari field was also reported to be producing – at levels reaching up to 13,000 barrels per day – though only for a short time.

The Mines Ministry said the oil and gas deposits are all in Cretaceous and Jurassic formations, which were discovered in the 1970s under a Soviet-led exploration campaign.

Indeed, this remains very much frontier territory where little modern-day exploration activity has been allowed to take place. Despite neighbouring Turkmenistan’s proven hydrocarbons potential, Afghanistan is still well off limits for most energy companies.

Mines Minister Mohammad Ibrahim Adel said recently that a US Geological Survey (USGS) report supported its figures for the three blocks and showed that Afghanistan might even hold far greater riches than previously thought.

Adel – who has led international road shows to London, Dubai, Singapore and Houston – said northern Afghanistan could hold 600-700 bcm of gas and 25 million tonnes of oil across four basins, based on the USGS data.

During the bid promotional tour, Adel also met representatives of Shell, BP, Petronas, ExxonMobil and ConocoPhillips, although these giants subsequently declined the offer to participate.

quentin smeeth