The Taliban-led Afghan government has canceled a significant oil contract with a Chinese company that was intended to boost domestic oil production.
On Tuesday, Afghanistan’s Ministry of Mines and Petroleum announced the termination of a 25-year oil exploration agreement with Xinjiang Central Asia Petroleum and Gas Co. (CAPEIC), which had been operating in the resource-rich Amu Darya basin.
Hamayon Afghan, the ministry's spokesperson, stated that the decision was made due to “repeated contractual violations.” Although the government did not provide specific details, sources cited by regional media outlets indicated that CAPEIC’s failure to meet its investment commitments was a key factor, leading to labor suspensions and delays in production.
The contract, signed in January 2023, marked a milestone as the first major international energy investment deal signed by the Taliban since their return to power in August 2021. It was expected to revitalize Afghanistan’s energy sector by developing oil fields in the northern provinces of Faryab, Sar-e-Pul, and Jawzjan, with estimated reserves of 80–87 million barrels of crude.
CAPEIC had committed to investing over $540 million over three years and increasing production to 15,000 barrels per day. Under the agreement, the Afghan government held a 20% stake in the operation and was to receive a 15% royalty on all oil sales.
Despite the close ties between Beijing and Kabul since the Taliban’s resurgence, the abrupt cancellation may reflect the Afghan government’s attempt to assert sovereignty over foreign investors. Analysts suggest that CAPEIC may have grown wary of committing substantial resources to a country still grappling with instability after decades of conflict.
Despite the cancellation, the Taliban may have alternative partners, such as Russia or the UAE, who Kabul has fully normalized relations with.
Last month, the Afghan government signed a number of energy deals with Russia, who after removing the Taliban from their list of banned organizations back in April, may also be seeking to expand back into the country.