Every reporter Yu Chunlai sent from Beijing

China National Petroleum Corporation (hereinafter referred to as PetroChina) has no suspense in entering the field of oil exploration in Afghanistan.

On December 26, the Afghan Presidential Office issued an announcement that A Cabinet has approved an agreement with CNPC to develop the oil block in the Amu Darya Basin. This is the first international oil contract signed by the Afghan government for decades. It is also the first oil exploration contract awarded by Chinese oil companies in Afghanistan. The announcement shows that the region’s oil reserves are 87 million barrels.

PetroChina confirmed the above news when it accepted the “Daily Economic News” confirmation. Analysts believe that although Afghanistan’s oil and gas resources are not abundant, in order to expand its oil and gas reserves and achieve the “Overseas Daqing” strategic goal, CNPC has to turn its attention to markets such as Afghanistan that are not favored by Western oil companies. However, the investment risk will also exceed the controllable range of PetroChina.

Costly

The contract includes the development of oil fields in the northern provinces of Sar-ePul and Faryab, and the construction of a refinery that will cost US$300 million. According to the contract, PetroChina will pay the Afghan government a 15% mining tax, a 20% corporate income tax, and up to 70% of project profits.

It is understood that the above contract investment will be at least 200 to 300 million U.S. dollars in the first two years. Although this 87 million barrels of oil reserves is only equivalent to about six thousandths of the oil and gas reserves in China's Bohai Sea, it is of great significance.

In response, Zhou Xiujie, a researcher in the energy industry of China Investment Advisors, believes that PetroChina will increase oil and gas reserves, help the strategic layout of the market, lay a foundation for its follow-up oil and gas cooperation with the Afghan government, and Afghanistan intends to bid for the other two oil fields.

In addition, since Afghanistan borders on the northwestern part of China, crude oil produced by it can be directly transported to China through oil and gas pipelines. PetroChina’s choice of Afghanistan can also significantly save on transportation costs.

Zhou Xiujie said that the reason why the Afghan government chose PetroChina was mainly to consider the strength of CNPC's funds and its willingness to accept higher quotations, which Western oil companies can hardly do. In this bid, PetroChina was three times higher than its competitors in terms of offer price and promises.

Since Afghanistan’s war led to Arab hostility towards Western companies, Zhou Xiujie said that the image of China, which was taken out of China, was relatively good and the resistance of PetroChina to Afghanistan was relatively small.

Strategic thinking is greater than operating

In fact, Afghanistan's oil and gas resources are not abundant and it is not an ideal resource market. Zhou Xiujie said that its oil and gas resources cannot even enter the world's top 30, and only 6 oil and gas fields have been discovered. Due to the turmoil in Afghanistan, there is currently no accurate data on the distribution of Afghanistan’s oil and gas resources.

According to statistics from the United States Geological Survey, the undiscovered oil and gas resources in Afghanistan are 15.7 trillion cubic feet of natural gas, 1.6 billion barrels of oil, and 562 million barrels of natural gas condensate.

Sinopec’s exploration experts also believe that it is difficult for Afghanistan’s oil and gas resources to be exploited, because it is not a large oil field group, but is mostly a small basin oil field, combined with new oil fields and no pipelines.

“The urgency for Chinese oil companies to find resources overseas is much higher than that of Western companies. While there are few good resources, they can only go to high-risk areas such as Iraq and Afghanistan where Western companies do not want to go; in addition to the advantages of labor costs, the ratio of Chinese companies Western companies have stronger competitiveness,” said Lin Boqiang, director of the China Energy Economic Research Center at Xiamen University. “This has a certain significance for the construction of PetroChina's five major oil and gas cooperation areas.”

PetroChina has already proposed that five oil and gas cooperation zones with different scales in Central Asia, Africa, South America, the Middle East, and the Asia-Pacific region will be basically completed at the end of the “Twelfth Five-Year Plan”. Overseas oil and gas business will realize the oil and gas equivalents of the Group’s “half of the country” and the equity production will be 50 million tons. The "Overseas Daqing" strategic goal.

Zhou Xiujin said that the layout of Afghanistan is obviously to serve its Central Asian oil and gas area, of course, will not be the focus of CNPC's layout in Central Asia, but it will make CNPC's layout in Central Asia more comprehensive and complete.

It is reported that in the first half of this year, CNPC’s overseas oil and gas production per day increased by 30,000 tons over the same period of last year, and overseas new oil and natural gas recoverable reserves respectively completed 53.8% and 57.6% of the annual plan.

Risk beyond control

Zhou Xiujie believes that the political situation in Afghanistan is unstable and that long-term wars have led to extremely weak infrastructure. These are the main risks that PetroChina will face when it enters the Afghan market. These risks are basically systemic risks and are beyond the control of PetroChina. For CNPC, it should comprehensively assess the risks and benefits of the Afghan project and control the scale of investment.

Song Zhichen, a researcher in the energy industry at China Investment Advisors, believes that once an incident occurs, it is very likely that the Chinese oil company will find no investment in this area.

To avoid these risks, Shao Yuqun, deputy director of the South Asia Research Center of the Shanghai Institute of International Studies, believes that it is very important to have effective and in-depth cooperation with the Albanian government while maintaining good relations with the relevant political forces in the area and respecting the local customs.

Song Zhichen suggested that insured projects with higher risks should reduce losses as much as possible. The second is to actively seek the government's diplomatic protection, combine the company's own business activities with the government's diplomatic strategy, and use the government's diplomatic means to provide guarantees for its business operations.