In a rare move, the Ministry of Mines and Petroleum has announced the cancellation of a 25-year oil extraction contract in the Amu Darya basin with the Chinese company Afchin.

According to the ministry’s spokesperson, the reasons for the contract termination include failure to make specified investments as outlined in the agreement, shortcomings in drilling and exploration of designated wells, lack of required guarantees, failure to employ Afghan nationals, and negligence in fulfilling social, environmental, and capacity-building responsibilities.

Homayoun Afghan, spokesperson for the Ministry of Mines and Petroleum, said: “A joint inter-ministerial committee was formed, and during their investigation, they found that the contracting company repeatedly ignored the issue of contract execution and failed to implement it. Based on a recommendation from the Economic Deputy Office and by the order of the Prime Minister’s Office, the oil contract for the Amu Darya basin with Afchin was terminated.”

Economic experts, noting Afghanistan’s pressing need for oil resources, emphasized the importance of greater scrutiny in the process of awarding mining projects. They believe that awarding such projects to companies with local partners could prevent similar issues in the future.

Mohammad Nabi Afghan, an economic analyst, said: “We need oil badly and it must be extracted by any means. If they take everything and don’t operate, it benefits neither us nor them. The government should, in future contracts, avoid including clauses that lead to such outcomes, and not let projects drag on as this one did.”

Abdul Ghafar Nezami, another economic expert, stated: “There are many contracts in Afghanistan signed years or even decades ago, where the rights of both sides have not been protected, and often, there’s no proper coordination between the contracting companies and the Afghan government.”

This contract was signed on June 5, 2023, under which the Chinese company had committed to investing $150 million in the first year and $540 million over three years in total.

The decision comes amid renewed efforts by the Islamic Emirate, following its return to power, to utilize domestic natural resources for economic development.