Afghanistan and China sign multi-billion oil development deal

December 29th, 2011 - 8:35 pm ICT by BNO News  

KABUL, AFGHANISTAN (BNO NEWS) — The governments of Afghanistan and China agreed to an oil development deal on Wednesday which is expected to deliver up to $7 billion in profits for Afghanistan, local media reported on Thursday.

The agreement, which will be developed over the next 25 years, establishes that three oil fields along the Amu River in northern Sar-i-Pul and Faryab provinces of Afghanistan will be developed by the state-owned China National Petroleum Corporation (CNPC). Afghanistan will receive 70 percent of net profits.

Afghan Minister of Mines Waheedullah Shahrani told the Pajhwok Afghan News that the deposits were estimated to contain some 87 million barrels of oil. Shahrani noted that one barrel of oil is priced at $100, meaning Afghanistan would be earning approximately $7 billion in the next 25 years.

Operations are expected to begin late next year as CNPC will build Afghanistan’s first refinery over the next three years, after the exact size of the reserves is determined. The joint venture is being launched with the Watan Group on behalf of the Afghan side.

The agreement was signed in the Afghan capital of Kabul by Shahrani and CNPC President Lu Gong Xun, who characterized the agreement as a sign of growing Sino-Afghan cooperation.

According to the deal, CNPC will be paying 15 percent in royalties, as well as corporate taxes and rent for the land used for its operations. Furthermore, the Chinese firm will have to ensure its operations will not affect the environment.

CNPC will be investing around $400 million during the first stage of the project, which is also expected to generate thousands of jobs.

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