* Eight companies, including Exxon Mobil, express interest
* Six blocks offered in Afghan-Tajik region in latest round
* Mining expected to be key revenue earner for Afghanistan
By Amie Ferris-Rotman and Ramya Venugopal
KABUL/SINGAPORE, July 16 More top-tier energy
companies are likely to join the race to explore for oil and gas
in Afghanistan after the world's biggest publicly traded firm,
Exxon Mobil, changed perceptions of what the country may
hold by showing interest in drilling.
Energy majors are exploring new frontiers in pursuit of
fresh reserves as they exhaust existing fields and Afghanistan,
after decades of conflict, remains little explored.
While the U.S. government estimates the country holds a
fraction of the reserves of surrounding giant Middle East
producers, its potential is enough to attract Exxon Mobil and
that factor, by itself, is likely to lure more.
Kabul, which has long depended on international donations to
finance its economy, now hopes revenue from raw materials will
help the country stand alone, especially as an impending pullout
of most foreign troops by the end of 2014 is creating donor
"Exxon would not go into an area unless the areas are very
promising. They are not looking for potatoes," said Chakib
Khelil, former Algerian oil minister, now an energy consultant
The search for fresh assets by big companies such as Exxon,
which produce a lot could mean "going to the Arctic, going deep
off-shore and going into new areas like Afghanistan," he added.
Eight firms including Exxon this month expressed interest in
an oil and gas auction of six blocks in the Afghan-Tajik basin,
after a tender was won by China National Petroleum Co (CNPC)
late last year.
Afghanistan has about 1.9 billion barrels of undiscovered
technically recoverable crude reserves, the United States
Geological Survey (USGS) said in 2011, although it didn't say
how much of it was economically recoverable.
That compares to Equatorial Guinea, which has proven
reserves of 1.7 billion barrels and produces about 250,000
barrels of crude a day, according to BP's latest annual
With oil hovering around $100 a barrel, an output of 250,000
bpd would earn Afghanistan about $9.1 billion a year. That would
be roughly half the country's gross domestic product of $20
billion in 2011, according to the World Bank.
The country also has an estimated 59 trillion cubic feet of
natural gas reserves, about half that of the proven reserves in
neighbouring Iraq, according to BP.
The Tajik basin, for which Kabul invited bids earlier this
month, has about 946 million barrels of crude and 7 trillion
cubic feet of natural gas reserves, the survey found.
The Amu Darya basin, which CNPC, China's biggest oil and gas
producer, is exploring after it won the tender last year, has
962 million barrels of crude and 52 trillion cubic feet of
natural gas, according to USGS.
However, drilling in Afghanistan is fraught with risks, most
notably those related to security, and sovereign risk is a
Violence in Afghanistan was at its worst this year since the
Taliban regime was toppled 10 years ago, United Nations said.
Besides violence, companies operating in the country also
have to deal with the still prevalent infighting between groups,
which could disrupt their operations.
For instance, CNPC's Amu Darya project has met with severe
interference from militia loyal to former warlord and army chief
of staff General Abdul Rashid Dostum, the government says.
Dostum's supporters have been allegedly demanding a share of
the proceeds, a claim the general's National Front party denied.
Still, for the oil companies, which operate in some of the
world's most conflict-ridden areas, including Iraq, Nigeria and
Sudan, this is just an occupational hazard.
"Security is an issue but it's not an issue that will bar
them from being involved in the country," said Khalil, citing
cases such as Iraq, where companies continue to operate and
provide their own protection, with the help of the government.
"But you need to have a good return to justify the risk."
The country, among the world's poorest, will need around $6
billion to $7 billion of aid a year to grow its economy, on top
of a $4.1 billion bill for security forces to maintain peace
after foreign combat troops leave, the head of Afghanistan's
central bank said last month.
Mining reserves "is not a magic solution. And we're going to
have to see this develop over the longer term. Many of these are
very large projects... so it will take time before you see those
benefits," said a U.S. embassy official in Kabul.
Still, exploration in the country will be an uphill task as
the geology has not been closely studied or well understood,
said Alan Troner, head of the Houston-based Asia-Pacific Energy
And Kabul has still to put its own house in order before it
becomes a destination for more energy companies.
"Looking at the lack of transparency, widespread corruption
and no security, I am not optimistic that other powerful
companies in the world would invest in Afghanistan," said Yama
Torabi, executive director of Integrity Watch Afghanistan, a
civil organisation promoting transparency.