Afghanistan drills oil for first time in north

Afghanistan, believed to be sitting on top of billions of dollars worth of minerals and energy sources, has extracted oil for the first time and plans to pump a modest 800 barrels a day, officials said on Thursday.

Afghanistan’s Mines Ministry plans to open bidding soon for contracts to refine the oil from the rugged Sar-i-Pul province in the north.

“The infrastructure existed there a long time ago. We overhauled them and this is the first time we are extracting oil,” said Jawad Omar, a spokesman for the ministry.

Various estimates of Afghanistan’s hidden wealth have been made in recent years — some as high as $3 trillion — but the challenge of exploiting those resources in a country at war and with little infrastructure has been too daunting for most investors.

Earlier this month, the Mines Ministry announced the find of an oilfield in the north with an estimated 1.8 billion barrels of oil north of Sar-i-Pul. Plans also remain on track for the tender of a 1.6 billion barrel Afghan-Tajik oil block in early 2011.

The north is Afghanistan’s key basin for oil and gas.

Afghanistan hopes its untapped mineral deposits could help reduce its reliance on Western cash to bankroll its impoverished and aid-reliant economy, and for its soldiers to maintain security when foreign troops begin to withdraw.

Most of Afghanistan’s oil needs are met by vast convoys trucked across the borders from Central Asia and Pakistan.

Omar said “a foreign institution” had helped with the Sar-i-Pul extraction but would not give any more information.

Sayed Anwar Rahmati, the governor of Sar-i-Pul, told Reuters the project had had Americans help but gave no further details.

Both the U.S. Embassy and USAID said they were not aware of who was involved in the project.

Afghanistan and foreign forces numbering almost 150,000 troops consume 2.5-3.0 million tonnes of oil annually, Omar said.

DECADES OF UNREST

The ministry this week started to re-inject gas from three gas wells which have a capacity of more than 200 million cubic meters of gas and are a key source for a fertilizer plant in Balkh province to the north of Sar-i-Pul, Omar said.

Foreign institutions have also pledged to invest $400 million in coming years to replace gas pipelines linking Balkh and the adjacent province of Jawzjan province, he said.

Afghanistan exported gas to the former Soviet Union during the Soviet occupation of the 1980s.

Ravaged by three decades of foreign interventions and civil war, Afghanistan is now faced by a growing Taliban insurgency and relies on foreign forces for control of many parts of the vast Central Asian country.

The U.S. Defense Department estimated earlier this year that Afghanistan’s mineral resources could top $1 trillion, but experts say the fragile security situation could delay seeing the benefits of this wealth for years.

Afghanistan will retender by year-end a deposit of iron of 1.8 billion tonnes it had scrapped earlier this year due to the global recession and changes in world markets.

The untapped mineral resources include iron ore, copper, lithium, oil gas and gems which Afghanistan hopes to develop in coming years despite rising insecurity. Violence is at its worst since the Taliban were ousted in late 2001.

China’s top integrated copper producer, Jiangxi Copper Co and China Metallurgical Group Corp, in 2007 became the first major investor in Afghanistan