China National Petroleum Corporation

Kabul publishes mining and energy contracts

Karzai government makes details of resources contracts public to convince investors and aid donors corruption is under control

PUBLISHED : Tuesday, 16 October, 2012, 12:00am
UPDATED : Thursday, 11 June, 2015, 4:57pm

The Afghan government has released details of scores of mining and energy contracts, including a major Chinese deal, in an effort to counter rampant corruption and bribery of officials that worries investors and donors.

As the government finalises laws designed to attract more foreign mining investment, officials on Sunday made public 210 previously awarded contracts, including one signed last year with China National Petroleum Corp to develop three oil and gas blocks in the Amu Darya basin.

"For the first time in the history of the country, we have been able to publish the details of the awarded contracts on the website of the Ministry of Mines," Mines Minister Wahidullah Shahrani said in Kabul.

Last month Shahrani said contracts would be published on the ministry's website and in newspapers, to safeguard delivery of US$16 billion in aid promised by foreign donors over four years and tied to stronger anti-graft measures.

Chinese and Indian companies are already scrambling to gain access to Afghanistan's estimated US$1 trillion worth of untapped mineral wealth. The country has large deposits of gold, copper, iron ore and oil, as well as lithium and rare earths used in hi-tech manufacturing.

Chinese firms are leading the race, with China Metallurgical Group (MCC) and Jiangxi Copper winning a 2007 deal to exploit the giant US$3 billion Aynak copper mine southeast of Kabul.

The Amu Darya contract, covering an estimated 80 million barrels of oil, shows CNPC will allocate the first 15 per cent of extracted hydrocarbons in any month to the government as royalties and pay income tax of 30 per cent. The company is also required to use Afghan labour and materials where possible, although CNPC could be free to import Chinese or other foreign workers given the lack of skilled labour in Afghanistan.

In making the contracts public, the government risks more public opposition to mining projects at a time when it is relying on resource income to replace diminishing development aid now accounting for 90 per cent of the national budget.

Shahrani's ministry will soon resubmit to President Hamid Karzai's cabinet mining laws that Afghan officials and Western donors hope will persuade foreign firms to invest in the country's resources, but which were rejected in July over concerns they were too generous to miners.

The new draft, backed by Western donors and the World Bank, would remove a 2009 clause separating exploration from an automatic licence to exploit finds, a law that led miners to question why they were spending their money on expensive and risky exploration if they could not be assured of profiting.

Shahrani acknowledged that many contracts awarded in the past had been technically or legally flawed, with some given to companies with no mining background or experience.

"We have opened a very important chapter to demonstrate the highest degree of transparency in managing our national resources," Shahrani said.

Both Chinese-operated sites at Amu Darya and Aynak have been delayed by attacks by Taliban insurgents aiming to destabilise government revenue and frighten off fresh investment ahead of a pullout by most Nato combat troops in 2014.