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Exxon Mobil May Lead Race into Afghanistan

Tuesday 17 July 2012

DALLAS (Dallas Business Journal, Katherine Cromer Brock) – After Exxon Mobil has shown an interest in drilling for oil and gas in Afghanistan, more top energy companies are likely to head to that region, according to a Reuters report.

The U.S. government has said the country likely holds just a fraction of the reserves of other Middle East producers. But it is largely unexplored, and simply attracting the attention of Irving-based Exxon Mobil is likely to turn heads toward Afghanistan.

“Exxon would not go into an area unless the areas are very promising. They are not looking for potatoes,” said Chakib Khelil, former Algerian oil minister, now an energy consultant in Paris, in the Reuters report.

Exxon was one of eight firms that this month expressed interest in an oil and gas auction of six blocks in the Afghan-Tajik basin. A tender was won by China National Petroleum Co (CNPC) late last year.

Afghanistan has about 1.9 billion barrels of undiscovered technically recoverable crude reserves, the United States Geological Survey (USGS) said in 2011, although it didn’t say how much of it was economically recoverable.

Kabul, which has long depended on international donations to finance its economy, now hopes revenue from raw materials will help the country stand alone, especially as an impending pullout of most foreign troops by the end of 2014 is creating donor fatigue.

However, drilling in Afghanistan is fraught with risks, most notably those related to security, and sovereign risk is a serious concern. Violence in Afghanistan was at its worst this year since the Taliban regime was toppled 10 years ago, United Nations said. Besides violence, companies operating in the country also have to deal with the still prevalent infighting between groups, which could disrupt their operations.

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