Afghanistan, CNPC International Reach Agreement For Amu Darya Oil Tender

26 DECEMBER 2011

Kabul _ Today the Council of Ministers of the Islamic Republic of Afghanistan has approved an Exploration and Production Sharing Contract  between the Ministry of Mines and CNPC International of China for three oil blocks in the Amu Darya Basin of northern Afghanistan.

Under terms of the agreement, CNPCI and its Afghan partner, Watan Oil and Gas, have pledged to begin production within one year.  Their joint company, CNPCI Watan Oil and Gas Afghanistan Ltd., will work in partnership with an internationally recognized third party to perform well testing and wireline logging services.

The contract was awarded to CNPCIW after an open and transparent bidding process conducted under international best-practice standards. CNPC International was the highest bidder of the four companies that competed for the project, and won the contract after an extensive technical and economic review by a multi-Ministry Contracts Evaluation Team. The bids were also reviewed by Afghanistan’s Inter-Ministerial Commission before submission to the Council of Ministers.

“This is a great step forward for Afghanistan,” said H.E. Minister Wahidullah Shahrani, Afghanistan’s Minster of Mines. “Following an open and transparent bidding process, the government has awarded the contract to the company who offered the most favorable terms to the government. I look forward to the execution of a contract that will lead to rapid development of our nation’s resources and create thousands of jobs.”

In its bid, CNPCIW pledged to pay a 15% royalty and start producing oil in 2012. The fields are expected to contain a total of more than 80 million barrels of crude oil reserves, which will be produced over a 25-year period, and another potential 80 million barrels of estimated undiscovered resources.

The contractor is required to post a financial guarantee of $10 million US to pledge its commitment to an exploration program. Eventual investments in the Amu Darya Basin are expected to be in the hundreds of millions of dollars, and will spur improvements in roads and other infrastructure.   The Amu Darya Basin tender is the first of several expected tenders for Afghanistan’s oil and natural gas resources. Northern Afghanistan is believed to contain more than 1.6 billion barrels of crude oil, 16 trillion cubic feet of natural gas, and 500 million barrels of natural gas liquids. Further information can be obtained at the Ministry of Mines website, www.mom.gov.af.