Afghanistan may have mouth-watering oil riches, but opium still rules this economy amid a lack of any real investment in getting oil and gas out of the ground.
In 2011, the United States Geological Survey released a report on Afghanistan arguing that the responsible exploitation of the country’s natural resources, including oil and natural gas, could help alleviate its economic addiction to opium sales.
At that time, opium production represented just under 50 percent of Afghanistan’s Gross Domestic Product. Since then, the nation has set new opium cultivation records.
With an estimated 59 trillion cubic feet of natural gas resources hidden in its ground, Afghanistan does not seem to get the financial attention it deserves as a potential game-changer in the Central Asian natural gas market.
American efforts to rebuild Afghanistan’s economy through the energy industry have created opportunities for Republican candidates to criticize the ability of the U.S. government—and of the Obama administration, in particular—to affect positive change in Iraq, Afghanistan and other areas in the Middle East.
Case in point: the scandalous story that broke last November about a $43 million compressed natural gas station built in Afghanistan by the Task Force for Business and Stability Operations (TFBSO).
A report by the Special Inspector General for Afghanistan Reconstruction (SIGAR) said the costs of the Sherberghan station appeared to exceed 140 times the amount of capital needed to build a comparable station in Pakistan.
However, as Glenn Kessler from The Washington Post pointed out in February in a MythBusters-style piece, the $43 million figure cited by SIGAR included “misallocated” overhead costs and other expenditures from non-related TFBSO projects. Related: Scientists Suggest Aliens Are Harnessing Energy From This Star
The inflated number made for catchy headlines, even though Sherberghan’s real cost stood under $10 million.
Regardless, corrective journalistic endeavors rarely generate the attention or coverage the original mishap is able to conjure, allowing Republican presidential nominee Donald Trump to capitalize off of bureaucratic fumbles.
However, the Department of Defense’s (DOD) motivations behind the construction of the gas station speak to how far behind Afghanistan has fallen in taking full advantage of its domestic energy supplies.
The station, located in northern Afghanistan, serves as a pilot project for the introduction and spread of the use of CNG as fuel for vehicles. The site included a compression station, a pipeline extension from the gas grid to supply the fuel, vehicle conversion kits to equip cars with the necessary facilities, and more.
Pakistan - Afghanistan’s further developed, yet still third-world neighbor - has managed to prop itself up as the largest user of CNG in the world. An estimated 70 percent of vehicles registered in the South Asian country run on the ‘’environmentally-friendly’’ fuel, and the nation hosts 3,000 stations to service the converted vehicles.
To add an additional CNG station in Pakistan would be a cookie-cutter operation, whereas developing Afghanistan’s first site requires developing human resources and know-how to make the process successful and replicable.
Though the DOD took the first steps in developing Afghanistan’s CNG infrastructure, the lack of meaningful energy investment will keep the country from returning its oil and natural gas output to the levels it enjoyed during the late 1960s, when it conducted big business with the Soviet Union.
The Afghani natural gas industry’s heyday came to an end when, after decades of working with Afghani leaders to build natural gas extraction capacity, the USSR invaded its former Central Asian ally as part of the Cold War.
Production declined in the decades of fighting that followed, with current natural gas output levels at just 450,000 cubic meters for the domestic market.
Even the newest industry developments in the region do not lend themselves to further Afghani energy goals. The $10 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) or Trans-Afghanistan pipeline, to be completed in 2019, will link natural gas from Turkmen waters in the Caspian Sea to Afghanistan, Pakistan and India, cheaply and economically.
Because the line creates a huge new market for Turkmen gas, Turkmenistan has pledged to pay 85 percent of the modern day Silk Road’s construction costs. Related: What Will You Do When The Lights Go Out? The Inevitable Failure Of The US Grid
Overall, the move blocks Russian and Iranian control of export pipelines to the region. Both nations have previously refused TAPI nations access to their pipeline network during political impasses.
Though the pipeline is outstanding as a political victory for the newly neighborly countries, the US$400 million in revenues Afghanistan stands to gain from natural gas customs fees and a new, cheap energy source could make the country complacent regarding domestic exploration and extraction efforts.
As Afghanistan distances itself from its Soviet history and modern Russia, and as new projects provide effortless revenue streams, will Afghani oil and natural gas ever make it to the world stage?
And as a side note, presidential candidates should refrain from using Afghanistan—however tantalizing—as a point of criticism, or he or she will become the next president to fail in Afghanistan.
No one is going to fix Afghanistan in this lifetime, and everyone’s been trying to bring Afghanistan into the fold since the time of Peter the Great.
By Zainab Calcuttawala for Oilprice.com
More Top Reads From Oilprice.com:
- What Really Caused The Oil Price Rebound?
- Oil Prices Rally Into The Weekend On Flurry Of Bullish News
- Is This Finally A Real Energy Storage Breakthrough?