The Afghan Ministry of Mines and Petroleum under the Taliban regime announced on Tuesday (June 17) the cancellation of the contract for the Amu Darya oil field signed in 2023 with the Chinese state-owned enterprise Xinjiang Central Asia Oil and Gas Limited (referred to as Central Asia Oil). The contract was set for a duration of 25 years.
The ministry’s spokesperson, Homayoun Afghan, stated that the termination of the contract came after a formal investigation by a joint committee, which found that Central Asia Oil had repeatedly disregarded contractual implementation issues and failed to fulfill its obligations.
The reasons cited for Afghanistan’s termination of the contract included the Chinese company’s failure to progress investment amounts as stipulated in the agreement, deficiencies in the drilling and exploration of designated oil wells, lack of necessary guarantees, failure to employ Afghan nationals, and negligence in fulfilling social, environmental, and infrastructure development responsibilities.
Homayoun Afghan, the spokesperson for the Afghan Ministry of Mines and Petroleum, said on Tuesday (17th): “Based on the recommendations from the Deputy Prime Minister for Economic Affairs and orders from the Prime Minister’s Office, we have terminated the contract signed with Central Asia Oil for the Amu River Basin oil fields.”
The Taliban authorities have not provided further details on the violations by the Chinese company. However, the ministry has invited international consulting firms to review the nullified legal and financial contracts and is accepting formal applications from other companies.
In 2023, the Taliban authorities signed a contract with Central Asia Oil to extract oil in the Amu River Basin in northern Afghanistan. This was the first major public commodity extraction agreement signed between the Afghan government and a foreign company since the Taliban regained control in 2021. According to the contract, Central Asia Oil committed to investing $150 million in the first year and a total of $540 million over three years.
The main terms required Central Asia Oil to build a refinery in Afghanistan and prohibited the export of crude oil. Taliban spokesperson Zabihullah Mujahid previously confirmed that the agreement included a clause stating that if obligations were not fulfilled within a year, the contract would be automatically canceled.
Local media reports indicate that Afghanistan urgently needs to exploit its oil resources but also emphasize the need for stronger scrutiny in the process of granting mining projects. They believe that awarding such projects to Afghan partner companies can prevent similar issues in the future.
Economic analyst Mohammad Nabi Afghan stated: “We are in great need of oil and must exploit it without any reservations. If they take everything without operating, it is not beneficial for us or them. The government should avoid including clauses in future contracts that lead to such outcomes and not let the project drag on like this one.”