Islamic Republic of Afghanistan - Enhanced Integrated Framework ...

The Afghanistan Compact Benchmark calls foran enabling regulatory environment for profitableextraction of Afghanistan's mineral andnatural resources to be created and for the investmentenvironment and infrastructure to beenhanced so as to attract significant domesticand foreign direct investment by end 2010.Current SituationWhile geological studies of Afghanistan havebeen conducted over the last 50 years, 90 percentof the territory of Afghanistan has notbeen systematically studied despite highlypromising findings. A geological map of Afghanistanhas been prepared and over 400mineral deposits have been identified includingcopper, coal and a number of small andmedium deposits including gold, silver, platinum,zinc, nickel, emerald, lapis, ruby, kuznite,tourmaline, fluorite, chromite, salt, radioactiveelements and numerous deposits suitable forconstruction materials.The availability of oil and gas fields in Afghanistanhas been well known for almost 50years. Russian equipment was used to explorethe first fields. Subsequently, gas fields inYateem Taq, Khwaja Gogerdak, Khwaja Bolan,Zigdeli and Bayan of Ghor province as well asoutskirts of Sheberghan district of Jowzjanprovince have been identified. Afghan andRussian experts identified a total of 500 structuresof which 67 were extended with exploratoryapproaches. Known gas reserves have acapacity of 180 billion cubic meters and an exploitationcapacity of 120 billion cubic meters.Sar-e-pul oil reserves have been identified(44.5) million tons with the extractable reservesof 14.5 million metric tons. During the past fewyears, five oil and gas fields have been identified.More work has been carried out in thevicinity of Amu Darya, and Afghan-Tajik basins.The first major investment has recently beenannounced for developing the Aynak copperdeposits in central Logar province, an almost$3 billion investment. The selection of thecompany was made after an extensive evaluationof tenders from nine major internationalmining companies. There will be importantindirect benefits from this investment. Thecompany will establish a power station with400 mega watt capacity at a cost of over $400million and will construct a town for the workersof the company. The company will alsoestablish a railway route from Hairatan port innorthern Afghanistan to Torkham in easternAfghanistan. Ongoing and planned activitiesinclude the: (i) fertilizer and power plants atBalkh with capacity of 110,000 tons of urea eachyear, and 48 mega watt power per hour;(ii) Ghori cement factory with capacity of100,000 tons per year; (iii) Jabal Seraj cementfactory with maximum capacity of 30,000 tonsper year; and (iv) Herat cement factory andGhori 2 with capacity reaching 200,000 annually.In July 2005 a Minerals Law was approved bythe Government. In December 2005, a HydrocarbonsLaw was also approved. Regulationsare being drafted which may be finalized during2008.Some of the most immediate needs of the sectorare being addressed as part of a $30 millionproject supporting sustainable development ofnatural resources. The main purpose of thisproject is to assist the Ministry of Mines to improveits capacity to effectively transform thesector so that it is primarily operated by theprivate sector and contributes to sustainableeconomic growth through tax revenues, employment,rural development and economicspin-offs. The major institutional strengtheningobjective of the project will be to assistMoM to make the transition from a producer ofminerals and other commodities to a policymaking institution that will facilitate the operationof private firms within the industry. It willalso strengthen financial and budgetary proceduresin the ministry, assist with the internalgeological survey work being done, assist inidentifying unlicensed mining operations, andattempt to enforce improved and safer workmining work practices.The landlocked nature of Afghanistan and thecurrent lack of rail links represent a barrier tothe movement of large bulk commodities. Securitydifficulties limit mining in some areas,principally in the south. Roads, energy andwater are all lacking. The danger of unexplodedordnance makes mining difficult. Thereis a shortage of trained labor. Most of the stateownedmining enterprises are not operating ona commercial basis. The North Coal Enterprisehas been privatized and is operating successfullywhile Mineral Exploitation Enterprise andAfghan Gas are about to be privatized.106Afghanistan National Development Strategy (ANDS)