First Afghan hydrocarbon bidding round 2009

On 17th March 2009, the government of Afghanistan, represented by the Ministry of Mines, announced the First Afghan Hydrocarbon Bidding Round 2009. The bidding round is for the award of Exploration and Production Sharing Contracts for Hydrocarbon Operations in three blocks in Northern Afghanistan. All three blocks have known hydrocarbon-bearing accumulations and it is estimated that there are reserves in excess of 52 Bm3 (gas) and 64.4 MM Bbl (oil). The blocks are situated in the Sar-e pol and Jowzjan provinces in the northeast of the country, both areas which are less affected by counter-insurgency activities against NATO forces.

The sites

The gas and oil fields, which were discovered in the 1970s by the Soviets, are in three blocks: Jangalikalan (Gas); Juma-Bashikurd (Gas); and Kashkari (Oil). The Angoat field in the Kashkari block was discovered in 1967 and is the only oil field which has been in sustained production. However, the Kashkari field in the Kashkari block reportedly only produced modest amounts in the late 1980s. The remaining gas and oil fields in the tender have not been in production.

Legal Regime

The principal legislation for the conduct of petroleum exploration and production in Afghanistan is the Hydrocarbon Law which was drafted with the assistance of the Norwegian Ministry of Foreign Affairs. This sets out the main state structures and the basic legal framework for exploration and production, including land rights, the conduct of contractors and construction of pipelines. The Ministry of Mines has recently published the draft Hydrocarbon Regulations, which contain more detailed information on the tender process and the type of contracts and rights that will be granted, as well as specific conduct requirements for after the award of the contract.

The tender process

The Ministry of Mines states that the award of the Exploration and Production Sharing Contracts will be subject to an open, transparent and competitive bidding round, and will be assessed on the following criteria:

• Royalties (a minimum of 8% for oil and gas) (40%)
• Additional Work Commitment (40%)
• Bonus (10%)
• Technical Competence (10%)

Once the Exploration and Production Sharing Contracts have been awarded and concluded, one or more pre-qualified bidders will acquire the exclusive right to explore for hydrocarbons in the blocks. If a commercial discovery is made the bidder(s) will acquire a further right to develop and produce the hydrocarbons.

Pre-qualification and qualification requirements

In addition to meeting the pre-qualification requirements (a good legal and financial standing, technical expertise and managerial capability), all applicants must be qualified and eligible in accordance with Articles 30 and 31 of the Hydrocarbon Law. The law states that, in addition to meeting the above requirements, foreign nationals wishing to obtain a licence for oil and gas operations must either establish and maintain a permanent representative office in Afghanistan or appoint an authorised representative agent resident in Afghanistan.

Applicants bidding for the two blocks containing gas reserves must also have experience in producing sour gas (gas with a hydrogen sulphide content of 50 or more ppm).

The Road Show

The Ministry of Mines has organised a Road Show, which is shortly to visit Dubai, London, Calgary, Houston and Singapore. The website www.afghanistanpetroleum.com contains further information on the application process and details of the Road Show.