Lack of Refinery Accord Holds Up Landmark China-Afghan Oil Project

Afghanistan's landmark oil project has ground to a halt and most Chinese staff have left the site less than a year after production first started because there is still no transit agreement in place to refine the oil, an employee and a government official said on Sunday.

The venture between China National Petroleum Corporation (CNPC) International and its Afghan partner, Watan Oil and Gas, began producing oil in the Amu Darya basin in the north in October, providing a much needed confidence boost to investors eyeing the country's vast oil and mineral wealth.

But equipment at the site had been locked up and about 16 Chinese workers had left, an employee at the project said on condition of anonymity as he is not authorised to speak to the media.

The removal of staff was only a temporary measure to save money, according to Jalil Jumriany, policy director at the Ministry of Mines in Kabul. He said an agreement to refine the oil over the border in Uzbekistan was being negotiated.

"We are waiting for a transit agreement with the Uzbek government," he said.

Jumriany said a team would travel to meet the Uzbek government next week and was hopeful a deal could be reached.

CNPC said it had no knowledge of problems or delays affecting the project when asked early last week.

Landlocked Afghanistan lacks the capacity to refine the oil it can produce and until an adequate refinery is built, will remain reliant on trade agreements with its neighbours.

The joint project, the first international oil production agreement reached by the Afghan government for several decades, had been expected to earn the war-torn state billions of dollars over two decades.

(reuters.com, edited by Topco)