Afghanistan Rail Network to Link Borders and Attract Mining Investors

PARIS (Reuters) – Afghanistan is building a vast rail network linking its borders to help attract investors to $3 trillion worth of mining projects, including oil deals, that will drive economic growth, its Mines Minister said on Monday.

Kabul hopes that untapped mineral deposits can help reduce the need to rely on Western cash for bankrolling its impoverished economy and for its soldiers to maintain security when foreign troops draw down numbers.

But ravaged by three decades of foreign interventions and civil war, the central government now faces Taliban insurgency and relies on foreign forces for control of many parts of the vast Central Asian country

“We have come up with a comprehensive programme to build a rail network in a gradual manner,” Wahidullah Shahrani told Reuters in Paris after briefing G8 nations on Kabul’s plans to establish a new railway authority.

“The discovery of the mineral resources which is $3 trillion most of which is iron ore and copper requires the development of the railroad,” he said.

Unlike its neighbours, where colonial powers Britain and Russia built grand railway projects, Afghanistan’s leaders more than a century ago resisted the railway age. It was only late in 2010 that the country’s first real railway track was completed

— a 75-km (47-mile) route linking the northern city of — a 75-km (47-mile) route linking the northern city of Mazar-i-Sharif to the Uzbekistan border.

Shahrani said the railway authority would be established over the next couple of weeks with technical assistance from the European Commission that would be in charge of creating and managing the network.

The Asian Development Bank financed the first project at a cost of about $180 million and Shahrani said Kabul was in talks with it for $450-500 million to finance the line’s extension from Mazar-i-Sharif to Andkhoi on the Turkmenistan border, potentially opening a link to the Caspian Sea within two years.

Another project in the pipeline includes a $300 million link from the southern city of Kandahar to Chaman on the Pakistani border, which would then join a rail track to the Arabian Sea.

“Afghanistan is a strategic and ideal location which we can use to facilitate transit to Southeast Asia, the Middle East, Central Asia and on to Europe,” Shahrani said.

Nearly 10 years after the Taliban government was toppled, foreign forces led by the United States and NATO have been unable to deal a decisive blow to neutralise the militant group.

The Afghan government remains weak and notoriously corrupt, billions of dollars of foreign aid have yielded meagre results and violence continues throughout the country.

Shahrani said he was not worried by the impending withdrawal of international troops saying that along with existing Afghan security forces a special mines protection unit had been set up.

“We have been able to secure all the mining activities and until now we have not had any incidents,” he said.

FIRST BIDS FOR OIL BLOCK

Shahrani also said the country had received its first bids on Sunday for an oil block. Various estimates of Afghanistan’s hidden wealth have been made in recent years, but the challenge of exploiting the resources in a country at war and with little mining infrastructure is daunting for most investors.

In a document seen by Reuters on Monday, the government said it had opened bids for three blocks in the Amu Darya area, where oil was first discovered in 1959 and where only one field was producing minimal amounts.

The document said Australia’s Buccaneer Energy (BCC.AX), CNPC International China, Pakistan’s Petroleum Exploration and Tethys Petroleum (TPL.TO) had submitted bids with CNPC offering the most royalty to the government.

“There are 82 million barrels proven there, but there is huge potential for exploration because the Russians only did limited work,” the former economics lecturer said, adding a contract award was expected in early August.

Kabul said last year it also had discovered an oilfield with an estimated 1.8 billion barrels in the north of the country near Mazar-i-Sharif.

“We will tender this huge block in February,” Shahrani said. “Eni (ENI.MI), Heritage Oil (HOC.TO) have shown interest and we are trying to get Total (TOTF.PA) interested.”

The untapped mineral resources include iron ore, copper, lithium, oil gas and gems which Afghanistan hopes to put for developing in coming years despite rising the insecurity.

China’s top integrated copper producer, Jiangxi Copper Co and China Metallurgical Group Corp, in 2007 became the first major investor developing the Aynak Copper Mine south of Kabul.

Shahrani said the $4 billion project would also see the construction of 921 km of rail.

Bids will also be submitted on Aug 3 for the Hajigak iron ore project which has deposits of about 2 billion tonnes and would employ as many as 20,000 people.

“The Indian companies are emerging as the main ones interested in this, Tata Steel (TISC.NS) and Jindal Steel JNSP.NS.NS for example,” Shahrani said, adding that two more copper and gold projects would also be tendered this year.

(Reporting by John Irish; Editing by Michael Roddy; )

 (C) Reuters 2011. All rights reserved

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