Afghan oil, and gold, and iron

I noted today that the Afghan government is beginning to pin some hopes on oilfield development as a way of helping generate some desperately needed cash. It was just last August that a field containing up to 1.8 billion barrels of oil was reported. There has been exploration and hopes of significant production in Afghanistan since 1937 but there has been little significant production as yet. Prior to the Soviet invasion in 1979 it had been estimated that the country had 100 million barrels of oil and a refinery was planned, but cancelled by the resulting conflict. The Angot field had been identified, and some 14 wells drilled into it, without much production. In those years much of the Afghan energy production was in natural gas, that was shipped to the Soviet gas grid, via Uzbekistan. The conflict and guerrilla activity in the region lowered production, and when the Soviets left many of the wells were capped.

An attempt to start the oil production process over at the beginning of this year was not successful, with only a single, rejected, bid being received. A Norwegian evaluation of the situation in June suggested that it was too early for a decision.

Balancing the notable achievements that have come in place through Norwegian facilitation and support for the Government of Afghanistan with the range of risks identified in this report, and not least the two central conflict issues identified in the literature review, Norad is advised to consider the following: Await further engagement on policy matters relating to implementation of the Hydrocarbons Law and a new (if materializing) Hydrocarbons bidding round until there is further clarity as to how the Government of Afghanistan aims to develop and utilize these resources and to what extent major external donors support such policies”.

But by August, when the new discovery was made, a rig had been fielded in the Angot field in the Sar-i-Pol (Sar-e-Pul) region in the North to begin a production stream. It is that field that is now being brought on line, looking to production from both new wells and some of the existing older ones that will be refurbished. Production will only be on the order of 800 bbl/day but for a country where the United States spends $250 million a year providing diesel for the Afghan forces, any start is welcome. The oil will be extracted by the Afghan government and then sold at $80 a barrel, and is being marketed to an Afghan group, Ghazanfar Group. The company is one of the largest private companies in the country, and made $475 million in gross earnings from its petroleum business in 2008 (up from $2 million when it got into that business in 1998).

And just as the “black gold” of the country is starting to be developed, so also is the real yellow stuff. Plans were also announced for a gold mine to be opened.

About 10 investors - most of them from the United States and Britain - are investing an estimated $50 million in the gold project in Dushi district of Baghlan province, about 84 miles (135 kilometers) northwest of Kabul, Wahidullah Shahrani, Afghanistan's minister of mines, told the Associated Press. The only other gold mine in Afghanistan is in neighboring Takhar province.

There has been considerable talk of the mineral wealth that is part of the Afghan geology. These developments, and preliminary discussions on the mining of the largest iron ore deposit in Asia, that at Hajigak, reputed to have 1.8 billion tons of a 62% purity, are an indication that there can be progress in moving the country into a more prosperous future.

It is interesting to note, however, that in the case of the iron, as is the case with some of the oil in Iraq, it is China and India that are looking to develop the industries, and thereafter likely to consume the product. It Iraq they are already hard at work. The Chinese are willing to go into countries such as Iraq, and Afghanistan, as well as Sudan, which now sends more than 60% of its oil output to China. They face the difficulties of operating in countries under wartime conditions, and yet the benefits that can accrue will assure them of needed supplies in the years ahead.

The new fields that are being developed in Afghanistan lie in the north of country and the oil transitions to gas as the reservoirs approach the Turkmenistan border and the much richer gas deposits that lies north of the Amu Darya River. The new developments are also to the East of the planned route for the gas and oil pipelines that have been discussed, for many years, as a way of bringing needed energy to India and Pakistan.

Planned Afghan pipeline ( derived from one in The Canadian )

And while the pipeline may remain more a paper exercise, the production of the fuels has begun. But it should not be forgotten that the Chinese have already initiated one pipeline with Turkmenistan and that pipeline is a whole lot closer to these fields, over less disputed ground, than it would be sending the production South.

Pakistan load shedding, IPI, TAPI and what chance of change

While for many in the West the thought of fuel shortages is a “sometime” future thing, and there is enough energy supply around that there is little short term concern about, for example, having enough heat this winter. That, sadly, is not the case for many parts of the world, but in writing about them I have some caution in case I seem to be harping on the conditions in some countries, relative to the plight of others. The “Energy Shortage” website does not update information every day (looking at it on Dec 8th it was last updated on Nov 23rd) but the woes that it documents around the world consistently bear the same country names. And of these Pakistan is all too frequently at the top of the list. In the headline that day was the news that Karachi Electric Supply Company had confessed that it was load shedding customers for three hours every day. It had previously threatened to cut off power to local police stations if their power bill was not paid.

Yes this is that Karachi, Pakistan’s commercial center and also where

“Terrorists are fleeing to areas that are as far away as possible from the conflict and populated enough to hide,” Syed Mazhar Mashwani, Karachi’s senior superintendent of investigations, said in an interview. “In Karachi, they find places to shelter and it will take a couple of months to clean them out after the operation ends.”

It is apparently possibly soon to see fighting again. Yet they are having consistent problems with power supply!


Part of the problem has arisen with the need to maintain the power stations that supply the area. Two stations are currently down for “preventative maintenance” but as they return to power, they will be followed in succession by others.

the KESC has planned closure of two more units for overhauling in January for at least two months. The annual overhauling of Units 2 and 5 of the Bin Qasim plant will begin in January and continue into mid-February.

In March, the annual overhauling of Units 3 and 6 will be initiated and by the end of March all the six generation units of the plant will be available and be giving more than 900MW electricity for the next summer, said the sources.

The stations are largely powered by natural gas, which has not, locally, come down in price. For some years Pakistan has been seeking additional supplies, since they continue to come up short, and next year the anticipated shortfall is projected to be around 2 billion cu ft (BCF)/day . The hope has been for a pipeline coming from either Turkmenistan or Iran, with India being included as the customer at the end of the line in both cases. The Iranian project, which is likely to cost around $7.4 billion has had a fitful life. It has not been popular with the previous Administration because of the support that it would give Iran. It is now however, moving forward, with the Indian government sounding more positive.

Possible supply pipelines for India and Pakistan (Source EIA)

Perhaps this has been due to some pressure from Iran since they have already started the project with Pakistan with more than 60 miles of the 1,725 mile project already completed in Iran. The pipe will use 44-inch diameter tubes through Iran and Pakistan, dropping down to 36-inch in India, with a terminus in New Dehli. The target delivery is some 5.25 BCF/day, with initial supplies starting at around 1 BCF/day to both India and Pakistan scheduled initially for delivery in 2011.

In terms of Indian need this is anticipated to meet about 16% of demand, but with the possible current world glut, there are both positive and negative aspects to the deal (ppt presentation) and there is some concern that Iran does not have enough available gas to meet both this commitment and one of about 2/3 this size to the Nabucco pipeline.

The other likely source of gas (for both Pakistan and Nabucco) is Turkmenistan. That pipeline (shortened to TAPI) has had a long and varied history.

The 48-inch diameter pipeline will extend 790 miles (1,271 kilometers) from the Afghanistan-Turkmenistan border, generally follow the Herat-to-Kandahar Road through Afghanistan, cross the Pakistan border in the vicinity of Quetta, and terminate at Multan, Pakistan where it will tie into an existing pipeline system. A potential 400-mile (644 kilometers) extension from Multan to New Delhi is also under consideration. . . . Dauletabad Field is one of the largest gas fields in the world. DeGolyer & MacNaughton, an internationally recognized petroleum engineering firm, has thoroughly evaluated the field’s reserves. These evaluations clearly show that the field’s resources are adequate for project needs, assuming production rates of roughly 1.5 BCF of gas per day (15 BCM of gas per year) for 30 years or more. The Government of Turkmenistan has guaranteed deliverability of 25 TCF (709 BCM) of natural gas exclusively for this project. . . The proposed pipeline will carry natural gas at a rate of up to 2 BCF per day (20 BCM per year/700 BCF per year).

This “alternative” has also found more favor with the American Administration, since it would cut out the Iranians.

But by itself it won’t supply all of Pakistan’s needs, and while news reports continue to tout progress it is proving hard to get that final commitment from Ashgabat (the Turkmen capital). And with the pipeline running through Afghanistan before it gets to Pakistan, and with the possible withdrawal of troops from the region now being discusses, long term security concerns may slow progress yet again. And reports out of Ashgabat suggest that the West is still viewed with suspicion.

Deliveries to Iran through a new internal pipeline within Turkmenistan are supposed to start soon (feeding from the South Yolaton field) but the concern over the conflict in Afghanistan is also seen as limiting investment interest.

As that story concludes “the game continues,” (A reference to the “Great Game, ” immortalized by Kipling, between Britain (then – the West in general now) and Russia for influence in the region – particularly historically Afghanistan.) Unfortunately as it continues to play the folk in Pakistan are going to continue to be short of natural gas, which means more load shedding in Karachi.

Coal, water and an Afghan problem of reality

It has been the first full day of the conference on innovations in coal production, and by the evening we delegates were ready for our evening meal. The papers today included the one from Vietnam that concluded that by 2020 the country would produce around 75 million tons of coal a year, but would still need to import another 120 million tons to meet the needs that are already predictable to meet future power needs.

It was another delegate that pointed out that by far the majority of folk were over 40, and so it was no surprise that in the evening, in a field above the village, we sat in an open wooden pavilion, and after bigos, beer, sausage, and other Polish food, sat around the fire and sang.

Around the fire

The photo does not do the group justice, since with a 3-man folk band playing trumpet, accordion and bass, the density of folk was soon about 3-times that shown, and even those of us with no Polish were singing along, as someone else said, “in French” (la, la la!)

But for a little while I, and the sole Afghan delegate, sat in a relatively quiet corner and chatted over (at least for me) a beer. And I came to an appreciation of one of the problems that I had not thought about for that country, and that I will, as a result share.

We went through the usual talk of Afghanistan being an unconquerable country (vide Alexander the Great, the British and the Russians to name but three). But then we talked about what could, realistically, be done to help the country.

I have just ( in Tuesday’s post) quoted figures on electricity availability in the country – at around 10 – 12% percent. “No”, he said sadly,”it’s about eight.”

One of the reasons that I write the Tech Talks on Sundays is that unless you understand some of the “behind the scenes” ways in which things work, you can’t understand why certain “logical” answers actually won’t.

So it is in Afghanistan. With so little available electric power (and this is not the place to explain why that is a critical rung in the ladder of progress) the thing that would cement the local affection for any “invader” would be the provision of power to the populace.

But there is a rather large snag – the operation of a significant sized power station requires a lot of water. (And the TT on that will explain why). But the one thing that Afghanistan does not have is copious amounts of water. It is not part of the world that sees the seasonal rains of the monsoon. Rather it relies on the melting of the snows that fell in the winter and the storage of water in underground tanks and cisterns. (See, among others, Kipling).

Such provision works well for individual homes, it can – under the right circumstances – store enough water for a 40-acre farm that will keep the family alive (different world - different agriculture) – but it can’t meet the needs of a 100 MW coal-fired power generating plant without a whole lot of changes.

(Oh, and a brief aside to Jerome – wind turbines are, in their place, a great alternative source of needed electricity, but in Afghanistan the winds bring the sands from the surrounding desert and in the abrasion of surfaces under wind, sand and rain attack is where I can raise a knowledgeable question of reality).

The coal in the country is found in the North and swings around the edge of the country on the East.

Coal deposits in Afghanistan (USGS)

Because of the growth of the Himalayan mountains the seams are now left in a steep (about 45 degree) incline that makes it more difficult to extract the coal. The immediately logical method of mining in such conditions is to use hydraulic monitors, as they do in New Zealand, but one gets back to the water availability problem.

Water is much more a right that is owned in Afghanistan than it is, in many other parts of the rest of the world. It is a topic that already is capable of stirring riots and anger – even in the United States, where water provision in California is now becoming a major problem.

But in the drier places of the world, such as Afghanistan (but also neighboring Pakistan) the lack of water comes at the same time as the maturing of a great increase in population ( from 24 milion in 2003 to 35.5 million in Afghanistan in 2015) and some attempt to bring industry to the country – both greatly increase water demand, while supply remains relatively flat.

It is a very difficult problem, there is coal for power, not really enough firewood for the future population demand for fuel, and there is not a lot of alternative choice. But other than burning the coal for domestic heating and cooking, how can they use it? How do they find the way to generate the electrical needs that the country has, and without which the future of the country is going to be as restricted as it might have been in the times of Alexander. The need for water is almost ubiquitous to the provision of so many forms of power, and so how do we circumvent it? Or can we?

More on Turkmenistan and gas sales

A couple of days ago I was writing of the promise inherent in a meeting between the Turkmen President, Gerbanguly Berdymukhamedov and President Medvedev of Russsia. Well the meeting has now taken place, and there was a story in the Moscow Times that the meeting had not gone well. However, before writing this post I went to dinner, and now it seems that story has quietly disappeared. Instead there is now a story in The Daily Star that reports that the meeting went well, and that the two leaders “clinked champagne glasses.”

As I mentioned in Friday’s post the meeting included the end of the Silk Way Race, which is now over. The dispute may not be, since, although stories talked of the dispute being resolved:

There were also signs that the sides had reached a breakthrough on the export row that would allow stalled talks to go forward. Berdymukhamedov said all technical problems relating to the blast had been fixed, and a top Kremlin aide said that Turkmenistan and Gazprom would hold a meeting within days to discuss “further cooperation in the gas sphere,” Russia’s Interfax news agency reported.

It appears that the agreement is only to continue talks, and not to resume gas shipments.


Now at the moment Turkmenistan is extracting gas and storing it, since the Russians aren’t accepting it into their pipelines, but that may be a bit of a dangerous game for Gazprom, given that the Chinese pipeline may be ready to receive shipments before the end of the year. At the continuation of discussions, but now in Kenderly, Kazakhstan, the Turkmen President mentioned all the commitments, but the one to Russia.

Berdimuhamedov noted his country would begin operating a gas pipeline to China by the end of 2009 with the capacity to pump some 1.6 trillion cubic feet of gas per year. Meanwhile, he emphasized the importance of the proposed Turkmenistan-Afghanistan-Pakistan-India (TAPI) while a rival project from Iran moves forward in the region.

On Nabucco, the natural gas project for Europe, Berdimuhamedov said his country was ready to make pledges in support of the $10.3 billion pipeline.

Now of these the Nabucco continues on life support since there is not yet enough gas committed to be supplied to justify construction, despite an agreed market for sales into Western Europe. There is already a crude oil pipeline in place, the Baku-Tbilisi- Ceyhan pipeline, and the West would like a similar natural gas equivalent, but it keeps running into obstacles. Azerbaijan has doubled its commitment to the line, with supplies proposed from the Shah Deniz field.

Production at Azerbaijan’s giant Shah Deniz natural gas field has risen to 24 million cubic meters (847 million cu ft) daily, Azerbaijani and Russian news sources reported May 4. In 2008, the daily output averaged 22 million cubic meters (777 million cu ft).

Field operator BP said that production increased despite ongoing drilling, the Regnum news agency reported. BP is preparing for a second production phase when annual output is expected to reach 12 billion cubic meters (423 billion cu ft) and, later, 20 billion cubic meters (706 billion cu ft).

Yet this is still not enough to make the pipeline work – it needs the gas from Turkmenistan.

The TAPI pipeline on the other hand would feed natural gas into downstream economies that are desperate for natural gas supplies. Afghanistan is the first of these, and energy shortages are rarely discussed as one of the problems of their economy, but with only 10 - 12% of the populace having access to electricity and with only limited natural gas resources (perhaps enough for a 100 megawatt power station), the country needs to import natural gas in large volumes. The question is, as always, from where? Turkmenistan is a logical place.

Proposed pipeline from Turkmenistan to India

But the route of the pipeline, while agreed, does not end up delivering gas without a pipeline being installed, and though the project has been nearly ready to start since 2003, with a projected construction time of 3-years, there has yet to be a significant physical start.

Pakistan, while getting help for construction of hydro-electrical projects is still desperate for help with natural gas and other energy fuels. But so far there is no pipeline to help.

Looking at it from Turkmenistan’s point of view the pipeline to China will soon open and revenues can come from thus new customer. The price will be at double the price China has been paying for its own gas.

Chinese wellhead prices at $3.5 to $4 per million British thermal units (mmBtu) are now comparable with US onshore gas prices and spot LNG cargoes, but still half of term LNG supplies signed last year for delivery beyond 2012, estimated at $8-$10.

While the cheapness of gas has made it a favoured choice for power plants compared to fuel oil, it has done little to encourage import deals or drilling during a near four-fold rise in demand in the last decade. By raising prices, Beijing will provide an incentive to increase supplies while gradually getting industries used to paying the market rate for raw materials, part of Beijing’s drive for a greener economy and prominent role in global climate talks.

. . . . . Turkmenistan gas will be priced at 2 yuan per cubic metre ($8 per kcf) at the border point in Khorgos, sharply above the average 0.79 yuan for local gas flowing in China’s flagship West-East pipeline, China’s leading financial magazine Caijing reported in March.

Chinese demand is anticipated to grow from a current 7.3 bcf/day to 18 bcf/day by 2020, with 2.9 bcf coming from the new pipeline by 2011.

While this may be an expensive price for China to pay, it will certainly relieve Turkmenistan of the old option that was to either provide natural gas to Russia, or starve, and will give it more income until other options (such as TAPI or selling natural gas to Iran) become a reality.