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INTERVIEW-Exxon yet to inspect Afghanistan's biggest oil project -minister

Source: Thomson Reuters Foundation - Sun, 30 Sep 2012 23:59 GMT
Author: Reuters
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(Repeats Sept. 30 story without changes to text)

By Rob Taylor and Hamid Shalizi

KABUL, Sept 30 (Reuters) - Exxon Mobil Corp, the world's biggest non-state oil company, has not yet accepted an offer to look over a new Afghan oil concession in the country's north, possibly indicating a fading appetite to invest in the conflict-wracked country.

As Afghanistan's government finalises new laws designed to attract more foreign mining investment, Mining Minister Wahidullah Shahrani told Reuters that Exxon had not turned up for a site tour which closes on Sunday, despite being shortlisted with eight other firms for the Afghan Tajik tender near Mazar-e-Sharif.

"Hopefully at some point they (Exxon) will visit the area. But that visit is not mandatory," Shahrani said in an interview late on Saturday in his Kabul office. A spokeswoman for U.S.-based Exxon said she could not immediately comment.

Exxon's July expression of interest in the Afghan Tajik basin, which holds an estimated 1.9 billion barrels of oil, lent credence to hopes that Kabul may be making progress in efforts to lessen its reliance on aid, through untapped resources worth as much as ${esc.dollar}1 trillion, despite an ongoing insurgency.

Shahrani said that with an October bid closure deadline looming, shortlisted companies had been invited to inspect the area and meet local community leaders, an offer which closes on Sept. 30, and which would usually be accepted.

"Some companies, they have already visited, some companies are about to visit the area," he said. "Those companies, most of them are well established in the region."

Chinese and Indian companies are already scrambling to lock in access to Afghanistan's mineral wealth, most estimates of which date back to U.S surveys carried out decades ago. The country has large deposits of gold, copper, iron ore and oil, as well as lithium and rare earths used in high-tech manufacturing.

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

MAJOR INTEREST

Exxon's interest fuelled hopes that U.S.-based majors may also compete, despite worries over security and endemic graft, adding urgency to a push for new laws designed to make resource investment more attractive as foreign combat troops withdraw.

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 re-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 which led miners to question why they were spending their money on expensive and risky exploration if they could not be assured of profiting.

"It created a lot of discomfort among the potential mining companies and global investors," Shahrani said.

"We have made the provision that whoever gets the licence for exploration through the tender, once they conduct the exploration, if they find a deposit to be commercially and economically viable, their exploration licence will be automatically converted to an exploitation or production licence."

Miners and Western diplomats have not managed to convince the government to include fixed royalty payments in the re-drafted law, though Shahrani admitted that some resources firms thought it lead to greater confidence in planning.

"In the new draft law, we have not mentioned that, and we will leave that to be determined in the bidding process," he said.

Instead, the overhaul would commit the government to more transparency by publishing contract details in local and international newspapers, as well as on its own website, to counter perceptions of graft in Afghanistan's notorious kleptocracy.

The draft laws, he said, should go to Karzai's cabinet in three to four weeks before a November vote in the fractious parliament, where lawmakers have in recent months been testing their muscle with Karzai, sacking key security ministers.

Some political analysts have also speculated that Shahrani's problems with the law's initial draft may have been linked to political rivalries over control of potential resource profits.

YEARS UNTIL PRODUCTION

Shahrani said he was optimistic opposition to the laws had faded in cabinet, and that parliament's influential economics and resource committees were also positive about the legislation, which was drafted with World Bank help.

"We have been interacting very closely with parliament's relative committees. I can see a significant degree of support on behalf of the members of those committees," he said.

Despite the risk of global commodity prices falling as a result of concerns about the strength of the Chinese economy and a global economic slowdown, Shahrani said he believed Afghanistan had not missed the peak of the resource boom.

Most projects in Afghanistan, he said, including bids for northeastern gold concessions in Badakhshan now being considered, would take years to reach production.

"If we do award the concessions tomorrow for iron ore and copper, usually it takes at least five to six years for these deposits to get developed," he said. "We hope that by then the demand for commodities will again increase." (Additional reporting by Jessica Donati in KABUL; Editing by Daniel Magnowski)

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