VZCZCXRO5562
OO RUEHDBU RUEHIK RUEHLN RUEHPW RUEHVK RUEHYG
DE RUEHBUL #1982/01 1710836
ZNR UUUUU ZZH
O 200836Z JUN 07
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8715
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEKJCS/OSD WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC 0492
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHFR/AMEMBASSY PARIS 2974
RUEHML/AMEMBASSY MANILA 1589
RUEHBY/AMEMBASSY CANBERRA 0264
RUEHOT/AMEMBASSY OTTAWA 1384
RUEHNE/AMEMBASSY NEW DELHI 7086
RUEHJA/AMEMBASSY JAKARTA 0052
RUEHRL/AMEMBASSY BERLIN 2095
RUEHUL/AMEMBASSY SEOUL 0065
RUEHLO/AMEMBASSY LONDON 3726

UNCLAS SECTION 01 OF 03 KABUL 001982 
 
SIPDIS 
 
STATE FOR SCA/A, SCA/FO (A/S BOUCHER, GASTRIGHT, DEUTSCH) 
STATE PASS USTDA FOR DSTEIN/SGREENIP 
STATE PASS OPIC, USAID 
OPIC FOR MOSBACHER/ZAHNISER/STEELE 
MANILA PLEASE PASS ADB/USED 
PARIS FOR OECD/ENERGY ATTACHE 
NSC FOR AHARRIMAN 
USAID FOR JKUNDER, MWARD 
TREASURY FOR ABAUKOL 
OSD FOR SHINN, SHIVERS 
CENTCOM FOR CFC-A, CG CJTF-76, POLAD, JICENT 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: ENRG ECON EPET ETRD KPWR EAID PGOV AF
SUBJECT: Afghan Gas Fields -- Agreement in Principle 
 
Ref:  A) Kabul 1583/1206/1033/936/935/692/317/274/162 
B) 06 Kabul 5353 and previous 
 
KABUL 00001982  001.2 OF 003 
 
 
Sensitive but Unclassified. 
 
SUMMARY 
------- 
 
¶1.  (SBU) On June 11, the Afghan Minister of Mines convened a 
meeting attended by Embassy, USAID, and the Asian Development Bank 
(ADB), at which the ADB and the GoA agreed in principle to a USG 
proposal to combine USAID and ADB efforts to develop the natural gas 
reserves in the Amu Darya basin.  The joint project will combine a 
$12 million ADB grant to the GoA with an existing $12 million USAID 
project to create a $24 million project for comprehensive 
development of the most promising fields in the Amu Darya basin. 
This approach will save ADB the $4 million in mobilization and 
supervision costs that would be incurred by a separate project. 
USAID is proposing to go ahead with its initial development of the 
first block of wells near a proposed power plant site at Sheberghan, 
and then expand the project to more wells once the ADB money comes 
online.  Embassy believes this approach will save GOA and the donor 
community embarrassment for lack of progress on the ADB gas 
development project since it was first proposed in 2003.  End 
summary. 
 
 
USG PROPOSAL 
------------ 
 
¶2.  (SBU) In May 2007, the USG had proposed that USAID and ADB 
partner up and pool resources not just to rehabilitate selected 
existing wells but to foster further development of a large part of 
the Amu Darya gas basin.  USAID's $12 million project will 
rehabilitate three gas wells, with the aim of fueling the proposed 
Sheberghan Power Plant that the USG is committed to building at the 
site.  When the ADB's $12 million and USAID's $12 million are 
combined, there will be $24 million to cohesively develop the most 
promising fields in the Amu Darya basin.  (NOTE: The ADB's total 
loan to the Ministry of Mines is $24 million.  The Minister of Mines 
has recently made it clear that he wants the remaining $12 million 
of the $24 million ADB loan to fund rehabilitation of the Sheberghan 
to Mazar-i-Sharif pipeline.)  This development work will pave the 
way for private sector participation through a production sharing 
arrangement at Sheberghan.  At present, private players are 
reluctant to invest because they do not see a firm customer for gas 
on the horizon.  By the time the USAID-ADB development of the gas 
fields is completed in 2008, USAID will be further along in its 
design and planning for the Sheberghan Power Plant, which will be 
seen by the private sector as an anchor customer. 
 
¶3.  (SBU) USAID is poised to begin work at Sheberghan.  Through its 
contract with Black and Veatch International (BVI), USAID will seek 
a service provider to begin rehabilitating the initial block of 
seven wells, starting around October.  A task order has already been 
prepared.  To accelerate the project, ADB funds could be used under 
the USAID task order, which could be broadened to include 
development of several Amu Darya gas fields at Sheberghan.  USAID 
aims to award its tender in September 2007, so it will need to have 
a firm commitment on pooling resources from ADB in place within the 
next two months.  Our proposal has the blessing of the Minister of 
 
KABUL 00001982  002 OF 003 
 
 
Mines and agreement in principle with ADB staff in Kabul, which has 
received an initial go-ahead from Manila. 
 
Project Scope 
------------- 
 
¶4.  (U) The most promising potential for gas in the Amu Darya basin 
is in: two blocks within three existing fields (Jar Quduq, Khoja 
Gogerdaq, and Yatimtaq); two blocks with two exploratory fields that 
have had exploratory drilling but no production (Jangalikolon and 
Juma Bashikurd); and four wildcat blocks where there has been no 
drilling but experts believe the geologic formations are likely to 
contain gas reserves.  The estimated gas reserves of the five 
existing and exploratory fields are 77.6 billion cubic meters, more 
than enough to supply a proposed 100 MW electric power plant for 20 
years and meet the demand of future gas customers. 
 
¶5.  (SBU) If ADB does follow through on its agreement in principle 
to partner with USAID to launch a $24 million project, we envisage 
the following program components: 
 
a) $24 million will be allocated for testing, data and information 
gathering, and rehabilitation of wells in the three existing fields. 
 Data and information from these activities will serve to ensure 
sufficient gas supplies for the proposed 100 MW electric power plant 
and will be used for engineering design of the plant. There are 112 
wells in place in the three existing fields, but it is assumed that 
many of these wells are not usable. 
 
b) If still more funding becomes available in the future, completion 
of the first component would enable us to lay the groundwork for 
broader private-sector development of the resource with the 
following tasks: 
 
-- Conducting an international gas tender offer process for a 
Production Sharing Agreement (PSA) for the development and 
production of the three existing fields as well as an exploratory 
field.  After the award of this initial PSA, a second gas tender 
offer would be conducted for Juma Bashikurd exploratory field and 
the remaining wildcat blocks. 
 
-- Engineering design of a gas processing and treatment plant to 
remove hydrogen sulfide and condensates from produced "sour" gas 
from all eight blocks. 
 
-- Develop a detailed gas market plan and feasibility study to 
optimize utilization of the Amu Darya basin gas reserves, including 
the viability of investments in long range gas treatment and gas 
transmission and distribution systems. 
 
 
Background on ADB Natural Gas Project 
------------------------------------- 
 
¶6.  (SBU) The USG proposal came after a four-year ADB effort to find 
a way to rehabilitate selected gas fields at Sheberghan in the Amu 
Darya basin.  The ADB and the Ministry of Mines (MOM) had been on 
the verge of cancelling an ADB loan that was approved in 2003.  Each 
side blamed the other for failure first to find a service provider 
to rehabilitate 12 gas wells and a gas pipeline from Sheberghan to 
Mazar-i-Sharif, and after that was unsuccessful, for lack of 
 
KABUL 00001982  003 OF 003 
 
 
progress in preparing the groundwork for a tender for a production 
sharing agreement. 
 
¶7.  (SBU) On May 17, Minister of Mines Ibrahim Adel had complained 
to the Ambassador about the ADB's inability to get the project off 
the ground.  He said that President Karzai and his cabinet 
colleagues had taken him to task for not taking steps to develop the 
country's oil and gas reserves.  Minister of Energy and Water Ismail 
Khan and others in the GOA had also complained to us about delays in 
Sheberghan development.  ADB staff had expressed frustration at 
working with MOM.  The subsequent USG proposal appears to have 
provided a positive way forward for both sides. 
 
WOOD