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The Energy Industry Has Reached a Critical Juncture in Afghanistan

Energy in Central Asia

The race is on to modernize the energy industry in central Asia. The region is rapidly becoming a key player in the global pursuit to access new energy resources. While much of the region was once held by the Soviet Union, the former Soviet republics are moving forward with initiatives to expand and modernize their energy industries. Vast new reserves of oil and gas are being discovered in the regions surrounding the Caspian Sea, which is the world’s largest inland body of water. Global energy analysts expect the region’s oil and gas exports to rise by nine to 11 percent over the next two decades (Romanowski, 2014). Even though the region is being transformed into a global energy hub with a sophisticated network of oil and gas pipelines, some countries in the region are still crippled with relatively severe geopolitical challenges.  

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Afghanistan’s Opportunity

The country of Afghanistan has become a complicating factor in central Asia’s quest to modernize its energy industry. As a nation that is intensely fragmented both geographically and politically, addressing Afghanistan’s geopolitical issues may be necessary to ensure that the surrounding region is able to address energy challenges. However, some global policy experts say that the only way to restore peace and stability involves efforts to ensure that Afghanistan’s residents are able to access affordable and reliable sources of energy. As Afghanistan continues to face political and economic challenges of insurgency, widespread poverty, and declining economic growth, the country has reached a critical juncture. As the surrounding region moves forward with initiatives to expand and modernize the energy industry, Afghanistan has the ability to either help or hinder these efforts.  

With a population of nearly 39 million, Afghanistan is a major central Asian country that can bridge the gap between the energy industry in the Middle East and the emerging energy industry surrounding the Caspian Sea. Although, with a long history of conflict, weak governance, and extremely low levels of economic development, some economists and energy experts question whether Afghanistan can be a part of the energy solution. Even with its legacy of violence and political instability, Afghanistan’s leaders still have the opportunity to make investments to improve energy supplies, modernize domestic and regional distribution and transmission networks, and develop a more synchronized energy sector.

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A Global Energy Transit Hub

One of Afghanistan’s greatest opportunities comes as a result of its geographical location. With its strategic location between major Middle Eastern fossil fuels producers, the emerging Caspian Sea region, and key developing countries like India and China, Afghanistan could become a regional and global energy transit hub. Being located between regions with excess supplies of energy and regions with energy deficits could provide Afghanistan with an opportunity to dramatically enhance economic development while also serving to bridge the gap between energy supplies and energy needs. As part of Afghanistan’s National Development Strategy, the country’s leaders have highlighted the need to reconstruct its energy industry to support the recovery of the national economy.

In addition to serving as an energy bridge between other nations, some energy analysts have highlighted how Afghanistan may be able to develop a more robust domestic energy industry. Since 2007, the Norwegian Agency for Development Cooperation has been providing technical assistance to the Afghanistan Ministry of Mines. With this agency’s support, Afghanistan was able to develop the Afghan Hydrocarbons Law, which outlines the process of extracting fossil fuel reserves from the country’s northern Jowzjan province. While Afghanistan is located very close to major fossil fuel producers, the country itself has not been able to move forward with initiatives to jumpstart its own fossil fuel industry. However, Afghanistan had previously started to develop its own fossil fuel industry with support from the Soviet Union.

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Past Fossil Fuel Development

Afghanistan’s first oil field was discovered in 1959 within the country’s northernmost region. Between 1979 and 1989, the Soviet Union worked extensively to extract the region’s oil and gas reserves (Strand et al, 2010). Most of the oil and gas resources were transported via pipelines back to the Soviet Union. Although, some of the fossil fuels stayed within the country and supported local economies, such as a fertilizer factory that was located in Mazar-e-Sharif. In the initial years, the country’s domestic energy industry was looking quite promising. The Afghan Gas Company managed the development of the country’s fossil fuel reserves, while a local technical college in Sherbergan was also established to train and educate local staff and technicians to be able to work in the fossil fuel industry. However, as conflict started to break out as a result of the Soviet Union’s invasion into Afghanistan, the country’s fossil fuel industry started to crumble.

The Soviet–Afghan War caused enormous political and economic destruction in Afghanistan. While there are a multitude of convoluted reasons why the Soviet Union decided to invade Afghanistan, many policy experts say that it is highly probable that the main motivation was to secure Afghanistan’s natural resources and fossil fuel reserves. The Soviet Union was once the world’s biggest producer of fossil fuels. However, since the Soviet Union was known as an advanced technological and industrial power, the federal socialist state was not thought of as merely a petro-state. Although, with its invasion to secure Afghanistan’s fossil fuels, some researchers say that the Soviet Union was a petro-state. At the height of Soviet control over Afghanistan’s oil and gas industry, nearly 2,000 Soviet technicians were brought in to assist with fossil fuel exploration and extraction (Girardet, 1982).

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Future Oil and Gas Exploration

Following the collapse of the fossil fuel industry in Afghanistan, there have been many speculations about the remaining oil and gas reserves. In 2006, the United States Geological Survey released estimates that conveyed how northern Afghanistan still had around 1.6 billion barrels of oil and 15,687 billion cubic feet of natural gas in proven reserves (Strand et al, 2010). The Norwegian Agency for Development Cooperation has been working with the country’s political leaders to once again open up northern Afghanistan to oil and gas exploration. Unlike many other parts of Afghanistan, the northernmost regions in the country have experienced some levels of peace in recent years. However, fragile political and economic relations may jeopardize this brief period of peace. Instability related to a change in the internal political balance has discouraged international oil and gas companies from moving in to extract the remaining fossil fuels. An extremely high degree of mistrust between local political leaders and the central government also complicates the situation with oil and gas development.

Renewable Energy Initiatives

Despite the fact that local governments in northern Afghanistan have expressed interest in reviving the oil and gas industry, the central government has been moving forward with initiatives to capitalize on renewable energy investments. Ironically, some of the factors that have prevented the revival of the oil and gas industry have supported growth in the renewable energy sector. The fragmentation of Afghanistan with periods of political and economic instability have hindered the development of large-scale oil and gas projects. These projects require significant levels of central government coordination and cooperation with individual provinces to be successful. Since these characteristics have not been abundant within the political climate of Afghanistan, large-scale fossil fuel projects have been largely unsuccessful in recent years. On the other hand, the decentralized political system in Afghanistan has allowed local governments to pursue a variety of small-scale renewable energy projects.

While there has yet to be significant progress made to revive Afghanistan’s fossil fuel industry, the country needs more energy. In 2014, the Asian Development Bank released a report that highlighted how increasing GDP in Afghanistan will continue to lead to higher levels of energy consumption (Bochkarev, 2014). Existing levels of energy efficiency have not been a strong focal point in Afghanistan. According to a 2008 report from the United Nations Environment Program, nearly 30 percent of Afghanistan’s supply of natural gas is lost due to leaks in pipelines or deliberate gas theft (UNEP, 2008). To make up for this lost energy and the increasing demand for electricity, local communities have been implementing renewable energy projects. Investments in small-scale hydro plants and wind turbines are becoming much more prevalent. The central government has set a goal to receive ten percent of electric power from renewable sources of energy by 2032 (World Bank Group, 2018).

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Energy Grid Challenges

With high levels of annual sunshine and significant wind power potential, Afghanistan may find more success in renewable energy investments than large-scale fossil fuel projects. Based on estimates from Afghanistan’s Ministry of Energy and Water, the country has 318 gigawatts of capacity to produce renewable energy (Ahmadzai and McKinna, 2018). However, even with this relatively high capacity to produce renewable energy, only about 29.7 percent of households in Afghanistan have access to the electric grid (World Bank Group, 2018). This is problematic for both fossil fuel energy generation projects and renewable energy projects. Moreover, low taxes and unpaid utility bills continue to undercut Afghanistan’s energy industry. Reforms are needed that support the energy sector while simultaneously providing households with better access to affordable sources of electricity.

Many households in Afghanistan that are not connected to the energy grid are cost burdened by the price of electricity generated from gas and diesel generators. Fuel-generated electricity costs Afghanistan’s residents between 35 and 40 U.S. cents per kilowatt hour, which is six to seven times more expensive than the electricity available in neighboring countries (Bochkarev, 2014). The United States Agency for International Development (USAID) has been working with local communities to move away from the costly and unstainable electricity generation from gas and diesel generators. Other international groups and non-governmental organizations have also been assisting within energy-related projects in Afghanistan. For example, grid improvements through the development of the North-East Power System in northern Afghanistan was funded by the German Ministry for Economic Cooperation and Development (Bochkarev, 2014).

A Mechanism for Peace

For many years, social, political, and economic uncertainty in Afghanistan has adversely impacted the country’s energy sector. However, Afghanistan now has the opportunity to fulfill its National Development Strategy to reconstruct the country’s energy industry. There are many ways that Afghanistan could make progress with its energy sector. Small-scale renewable energy projects in partnership with other large-sale projects to improve access to the energy grid could improve the lives of millions of households in the country. It’s clear that Afghanistan is getting significant levels of support from the international community to support the revival of its energy sector. Moreover, with large domestic fossil fuel reserves, the country’s political leaders could start to move forward with organized initiatives to make it easier for international oil and gas companies to come into the country to extract these fossil fuels. Lastly, the potential to develop a regional energy corridor with neighboring countries could also bring tangible economic benefits and serve as a mechanism to spread peace throughout the region.

Sources

Ahmadzai, S., and McKinna, A. (2018). “Afghanistan electrical energy and trans-boundary water systems analyses: Challenges and opportunities.” Journal of Energy Reports. Volume 4, Pages 435-469.

Bochkarev, D. (2014). “Afghanistan Reconnected: Linking Energy Supplies to Consumers in Asia.” The East West Institute.

Girardet, E. (1982). “Soviets grab Afghan resources, saving their own.” The Christian Science Monitor.

Leach, A. (2015). “Race to renewable: five developing countries ditching fossil fuels.” The Guardian.

Romanowski, M. (2014). “Central Asia’s Energy Rush: The region’s major powers are in a tussle to control its rich energy sources.” The Diplomat.

Strand, A., et al. (2010). “Afghan Hydrocarbons: A Source for Development or for Conflict?” The Christian Michelsen Institute.

UNEP. (2008). “Afghanistan’s Environment 2008: An Analysis from the National Environmental Protection Agency of the Islamic Republic of Afghanistan.” The United Nations Environment Program.

World Bank Group. (2018). “Afghanistan Renewable Energy Development Issues and Options.” The World Bank Group.

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