Kabul (TDI): The Taliban-led Afghan government has officially canceled a major oil extraction contract with a Chinese firm, citing repeated breaches of the agreement.
The deal was signed between the Afghan Ministry of Mines and Petroleum and the China-based Central Asia Petroleum and Gas Co, Ltd. (CAPEIC) in January 2023, was terminated this week after the company failed to meet investment deadlines and also violated multiple clauses.
The 25-year agreement, which was previously celebrated as the largest foreign investment since the Taliban’s return to power, focused on oil exploration in the Amu Darya basin, covering the provinces of Sar-e-Pul, Jowzjan, and Faryab.
The Chinese company had committed to investing $540 million over the first three years and planned to extract up to 1,000 tons of oil daily. As part of the agreement, Afghanistan was to receive 20% of the extracted oil, with a gradual increase to 75% with time, and around 3,000 local jobs were promised to the Afghani’s.
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However, Afghan officials said that the CAPEIC failed to deliver. The Key problems in all this included delayed investment, incomplete seismic surveys, failure to pay royalties and bonuses, and neglect of agreed infrastructure projects such as roads, power lines, and water supply facilities.
As a result, the Afghan Ministry of Mines and Petroleum, under current minister Hidayatullah Badri, moved to terminate the contract.
“A deal is not just ink on paper. If a company can’t stick to its commitments, it cannot continue to work on our soil,” said a ministry spokesperson. “We are now looking into reopening the project for bidding or prioritizing Afghan investors.”
The company involved was a subsidiary of China National Petroleum Corporation (CNPC), operating locally under the name Af-China Petroleum & Gas Company. It was seen as a flagship project of China’s Belt and Road Initiative (BRI) in Afghanistan.
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The decision raised speculation about possible strains in Afghanistan-China relations, but Taliban officials have clarified that the cancellation is strictly business-related. A Taliban professor, Muhammad Yousuf, explained, “This is a decision based on company performance, not politics. The Chinese government itself would agree that commitments must be honored.”
In public reactions, some Kabul residents welcomed the cancellation, calling the project a one-sided benefit for the Chinese firm. “It was like throwing our resources into a dragon’s mouth,” said one resident.
Our Take is that the cancellation of the Af-China oil deal shows Afghanistan’s renewed efforts to protect its economic interests as well as demand transparency from foreign investors.
While it may affect short-term foreign investment sentiment, the move could strengthen Afghanistan’s bargaining power in it’s future deals. More importantly, it signals that even in tough conditions, the country looks forward to accountability and is not willing to be exploited in the name of development.
Student | Writer | Analyst
