ENERGY RESOURCES IN AND MEASURES TO IMPROVE FOR SUSTAINABLE DEVELOPMENT

NADEEM MALIK Lecturer Commerce Department, University of Balochistan Quetta Pakistan [email protected]

1 Abstract the population continues to suffer from shortages of Afghanistan‘s energy sector and its economy are at a housing; clean water, electricity, medical care, of the crossroads. Energy is a very important input in the highly prolific, natural gas-prone Amu Darya Basin, has sustainable development of Afghanistan. If it is not the potential to hold a sizable undiscovered gas resource supplied imprudently it will pull down the base, especially in sedimentary layers deeper than what Government‘s development efforts and be a drag on were developed during the Soviet era. Afghanistan’s economic growth. The availability of secure energy crude oil potential is more modest, with perhaps up to within Afghanistan was significantly disrupted by the 100 million barrels of medium-gravity recoverable from conflicts of the past two decades. The release of new Angot and other fields that are undeveloped. Afghanistan estimates showing that Afghanistan may possess also may possess relatively small volumes of gas liquids substantial reserves of oil and gas may shake up and condensate. Central Asia’s increasingly competitive energy “Ref [2]”Outside of the North Afghan Platform, very contest and alter the region’s geopolitical balance. limited oil and gas exploration has occurred. Geological, The energy sector in Afghanistan is predominately aeromagnetic, and gravimetric studies were conducted in state owned and operated with little private sector the 1970s over parts of the Katawaz Fault Block (eastern participation. Although encouraging private Afghanistan – along the Pak border) and in the Helmand investment is a stated goal of the IROA, the and Farah provinces. The hydrocarbon potential in these substantive work that is required to create the areas is thought to be very limited as compared to that in enabling environment for meaningful private sector the north.The Soviets had estimated Afghanistan's proven participation is absent. The energy sector and its sub- and probable natural gas reserves at up to 5 trillion cubic sectors are undergoing significant expansion. feet (Tcf) in the 1970s. Afghan natural gas production However, poor infrastructure, insufficient budgetary reached 275 million cubic feet per day (Mmcf/d) in the resources, lack of trained personnel and weak mid-1970s. The Djarquduk field was brought online government policies have complicated and in some during that period boosted Afghan natural gas output to a instances significantly delayed energy resource peak of 385 Mmcf/d by 1978-79. After the Soviet pullout development and deployment. The result is that each and subsequent Afghan civil war, most gas wells at sub-sector‘s entities often are not able to effectively area fields were shut in due to technical maintain, repair, manage or expand the system to problems and the lack of an export market in the former meet the country‘s needs. The findings of the study Soviet Union. At its peak in the late 1970s, Afghanistan describe the important energy resources available to supplied 70%-90% of its natural gas output to the Soviet the country and suggest measures to improve it. Union's natural gas grid via a link through . In Development of Afghanistan‘s require large capital 1992, Afghan President Najibullah indicated that a new investment and significant private sector natural gas sales agreement with Russia was in progress. participation to reach fruition. However, several former Soviet republics raised price Major objective of the paper is to describe the and distribution issues and negotiations stalled. In the existing energy resources and suggest measures to early 1990s, Afghanistan also discussed possible natural improve these resources. gas supply arrangements with Hungary, Czechoslovakia, and several Western European countries, but these talks Key Words: Energy Resources, possess substantial never progressed further. Afghan natural gas fields reserves, private sector participation, energy resource include Djarquduk, Khowaja Gogerdak, and Yatimtaq, development, enabling environment, measures all of which are located within 20 miles of the northern town of Sheberghan in . In 1999, work resumed on the repair of a distribution pipeline to Mazar- i-Sharif. Spur pipelines to a small power plant and 1. INTRODUCTION fertilizer plant also were repaired and completed. Mazar- i-Sharif is now receiving natural gas from the pipeline. “Ref [1]”Afghanistan's economic outlook has improved The possibility of exporting a small quantity of natural significantly since the fall of the Taliban regime in 2001 gas through the existing pipeline into Uzbekistan also is because of the infusion of over $8 billion in international reportedly being considered. assistance, recovery of the agricultural sector and growth “Ref [3]”Soviet estimates from the late 1970s placed of the service sector, and the reestablishment of market Afghanistan's proven and probable oil and condensate institutions. Real GDP growth is estimated to have reserves at 95 million barrels. Most Soviet assistance slowed in the last fiscal year primarily because adverse efforts after the mid-1970s were aimed at increasing gas weather conditions cut agricultural production, but is production. Sporadic gas exploration continued through expected to rebound over 2005-06 because of foreign the mid-1980s. The last Soviet technical advisors left donor reconstruction and service sector growth. Despite Afghanistan in 1988. After a brief hiatus, oil production the progress of the past few years, Afghanistan remains at the Angot field was restarted in the early 1990s by extremely poor, landlocked, and highly dependent on local militias. Output levels, however, are though to have foreign aid, farming, and trade with neighboring been less than 300 b/d. Near Sar-i-Pol, the Soviets countries. “Ref[2]”It will probably take the remainder of partially constructed a 10,000-b/d topping plant, which the decade and continuing donor aid and attention to although undamaged by war, is thought by Western significantly raise Afghanistan's living standards from its experts to be unsalvageable current status, among the lowest in the world. Much of

2 Table 1 Energy Infrastructure at a Glance capacity 6. Following , thermal generation, Oil primarily diesel generation, supplies power mainly to urban areas. Utilization of indigenous fossil fuels (natural Produces a small quantity of crude oil; located in Sar-i-Pol Angot Oilfield province. Primitive retorts used at the field and near Sheberghan gas and coal) for power generation is very limited as is to refine produced oil. utilization of solar, wind and other renewable energy

Natural Gas resources. Reliance on diesel is both expensive and environmentally hazardous. Diesel generation costs Sheberghan The Djarquduk, Khowaja Gogerak, and Yatimtaq natural gas almost 30 US cents per khw compared to natural gas at Area Gas fields are all located within 20 miles of Sheberghan. Fields 3.5 US cents per kWh. Efforts are underway to utilize local natural gas for power production and this should A pipeline connects these natural gas fields to Mazar-i-Sharif. Limited amounts of gas currently are supplied to a 48-MW remain a top priority. Pipeline to power plant near Mazar-I-Sharif (which is operating at less than Mazar-i-Sharif one-third full capacity) and for the 100,000 mt/y fertilizer plant, which is partially operational. Table 2 Historical Electricity Data

Local Small-diameter pipelines supply gas to the Khwaja Gogerdak pipelines and Djarquduk gas fields with Sheberghan and nearby villages .

Electricity

Located in Helmand province near ; transmission lines to Kandahar repaired in early 2002, after being damaged by airstrikes in November 2001. Upgrading and expansion program Source: US EIA is underway.

Installed capacity of 66 MW. Near . Operational only two Table 3 Afghanistan electricity Production Mahipar Dam to three months out of the year (springtime) but currently lacking adequate water.

Installed capacity of 100 MW. Operational. Provides most of the electricity used in Kabul.

Installed capacity of 11 MW. Operational. In Nangarhar province near .

Sarobi Dam Installed capacity of 22 MW.

Dahla Dam Kandahar province. Operational.

Mazar-i-Sharif Small natural gas-fired power plant near Mazar-i-Sharif, Power Plant partially operational at under 30 MW.

Note: This listing of Afghanistan’s energy infrastructure was compiled from information available in press and media sources, and should not necessarily be considered comprehensive. Only facilities which have been reported to be Source: CIA World Fact Book functional or under repair have been included. Table 4 Afghanistan Electricity Consumption

II. METHODOLOGY AND OBJECTIVE OF THE Year Electricity - consumption (billion kWh) STUDY 2000 0.51 The major objective of the study is to make a 2001 0.4806 descriptive review of the existing energy resources in 2002 0.45375 Afghanistan and at the end suggest some important 2003 0.5114 measures in order to make the best possible use of these 2004 0.5114 resources. The methodology of the study was observation 2005 0.6522 and interviews conducted with the respondents related to 2006 1.042 2007 0.7829 the study. The nature of the study was descriptive so the 2008 1.088 data was collected from the Afghan government reports, 2009 1.418 World Bank, Asian development Bank reports, research Source: CIA World Fact Book papers and other sources. Rural power supply continues to rely mostly on III. MATERIAL AND METHODS micro-hydro plants (MHPs), limited diesel (mostly privately owned), and batteries, with very limited The State of the Energy Sub-sectors in Afghanistan availability to the rural population.7Most rural power detailed Analysis Electricity generation efforts are funded by donors with limited cost- “Ref [4]”Electricity drives modern economies and per sharing by the Government. The financial condition of capita consumption of electricity in Afghanistan is one of the sector and the utility is going from bad to worse the lowest in the world. After a long period of decline, because there has been little improvement in tariffs and generating capacity, is beginning to grow again as are operations while at the same time substantial assets have generation and consumption. Hydro plants account the been added to the system. Maintaining and operating largest share of capacity with imports in second place these is expensive and if the Government does not shift and growing. The most promising long-term resource for its focus from building new infrastructure alone to power generation in Afghanistan is hydropower, which efficiently operating and maintaining what is has, the accounts for over 50% of grid-connected installed burden on the economy will be enormous.

3 “Ref [5]”Energy in Afghanistan in recent history can be Table 7 Natural gas - consumption: 20 million cu m categorized as a period where supply has always been Natural gas - Percent Date of Year Rank short of demand, as it has in many similar countries. The consumption Change Information demand for energy outstrips current supply in every 2004 220,000,000 92 2001 est. category of energy, including traditional energy which is 2005 220,000,000 92 0.00 % 2001 est. unsustainably harvested. Much of the deficit in supply 2006 50,000,000 101 -77.27 % 2003 est. can be blamed on the lack of investment, cannibalization 2007 20,000,000 107 -60.00 % 2004 est. and carnage that has accompanied Afghanistan‘s civil crises since 1978. As civil strife strains financial 2008 20,000,000 108 0.00 % 2006 est. resources new investment is abandoned, routine 2009 20,000,000 109 0.00 % 2006 est Source: CIA World Fact Book maintenance is postponed; spares are taken from one plant for another; skilled human resources that are needed to maintain the capital stock leave; and soon parts are stolen and sold for other uses. Sad and unpreventable as this is, a large share of the gap can be blamed on faulty resource allocation policies. Petroleum Relative to other forms of energy and to the region, Afghanistan has minimal oil and gas resources and consumption at this time is mainly transportation fuels and liquid fuel for power. Currently petroleum products such as diesel, gasoline, and jet fuel are imported, mainly from Pakistan and Uzbekistan, with limited volumes from Turkmenistan and Iran. Natural gas holds potential for power generation but suffers from a severe lack of investment. Natural Gas Natural gas it not yet a significant energy resource, although it has the potential to be a significant source of energy for the country and an important source of revenue to the Government. The consumption of natural gas is supply constrained just as it is for all other energy resources.

Table 5 Natural Gas Energy Data (Billions of Cubic Feet)

Source: US EIA

Production of gas is estimated at about 21.2 million cubic feet/day, although it is likely that this is an overestimate8. In 2003, the World Bank reported that Afghanistan ―meets only 40% of increasing domestic natural gas demand, produces gas at 25% of its peak level in the 1980‘s, and loses 30% of that production to leakage - posing revenue and safety issues. By 2006, this had fallen to about 20% of gas demand being met. To increase production, both the complete infrastructure must be re-built and/or constructed as new and new exploration and development must be undertaken.

Table 6 Natural gas - production: 20 million cu m Year Natural gas - production Rank Percent Change Date of Information 2004 220,000,000 68 2001 est. 2005 220,000,000 68 0.00 % 2001 est. 2006 50,000,000 76 -77.27 % 2003 est. 2007 20,000,000 84 -60.00 % 2004 est. 2008 20,000,000 87 0.00 % 2006 est. 2009 20,000,000 86 0.00 % 2006 est. Source: CIA World Fact Book

4

“Ref [6]”Like other energy prices, fields to expand production and to current gas prices are too low to cover upgrade the existing gas pipeline costs of rehabilitation, O&M and network to supply the fertilizer plant and expansion of production and the local market. Activities to promote infrastructure. For incremental gas exploration and development of production, tariffs may be less than half additional gas resources have been of the level needed to cover costs. underway for some time. Moreover, the IROA collects no taxes or Progress in developing these resources is royalties from the natural gas sector, being delayed by a number of factors missing out on a potentially major that affect the ability to develop this source of revenue. As a result, sector resource and attract private investment. entities have been unable to effectively Technical assistance and training operate, repair and maintain the system. activities provided through donor A large part of the infrastructure for funding have been ongoing for a number storage, transmission and distribution of year to help resolve this impediments. has been damaged while the remaining To date, results have been mixed and capacity is in need of rehabilitation. many of the activities are behind There is no incentive to conserve or to schedule. optimize use of gas resources as the Due to the importance of the natural gas present cost is so low and operations are sector as a significant contributor to so inefficient. Afghanistan‘s domestic energy There is a good deal of uncertainty about production, as well as provide an reserves that can only be resolved with important revenue source to the GOA, further exploration. Studies put proven efforts to develop the sector need to be reserves between 1 trillion cubic feet given a high priority within the IROA ‗s (tcf) and 15 to 20 tcf. Other studies overall Energy Sector Strategy. estimate additional probable reserves of 15 or 20 tcf. Regardless, of the whether Crude Oil reserves are 1 tcf or more, there is still “Ref [8]”Afghanistan has only limited sufficient gas to justify immediate supplies of oil. According to the USGS exploration and develop and utilization reserves are 13-14 million tons. in power and, possible, for compressed Domestic oil production is insignificant natural gas (CNG) vehicle. with current production is about 400 barrels/day (Technical Annex, January “Ref [7]”Development of Afghanistan‘s 2004). natural gas resources has the potential of As a result, Afghanistan depends on improving domestic energy resources, imports for most of its consumption. Oil reducing environmental impacts and is produced in limited quantities supporting economic growth. Natural primarily from the Angot oil field, gas reserves are potentially large enough located in Sar-i-Pol province. The U.S. to support development of electricity government estimates that total oil generation as well as a fertilizer plant reserves could be as much as 270 billion and local commercial and residential barrels. markets in the Sheberghan area. Plans If investments take place as envisioned, are underway to rehabilitate the gas it is estimated that oil production could

5 increase from the current 400 bpd (barrel by 2008; 5,000 bpd by 2010 and 10,000 of oil production per day) to 3,000 bpd bpd by 2015. Clearly, however, the increased investment will require environment conducive to expanded changes in the laws, rules and private sector involvement. regulations in the sector and creating an capacities seem small in comparison cylinders with capacities of 10, 20, and with the estimated overall LPG demand. 40 kg. LPG is sold to final consumers in

Coal levels of production. The supply of coal Like all other in Afghanistan, the is essential for domestic energy / heating demand for coal does not drive and industrial uses. The quantity and production but rather production limits quality of coal resources remains consumption. The table below illustrates relatively unknown and programs to the production and consumption position assess alternatives could take up to three since 1980. The Afghan coal industry is years. As such, there will be a continued operating at low production rates, less reliance on existing producing mines in than 200,000 tons reported per year; Baghlan province as well as small mines devastation of more than 2 decades of in Bamyan provinces. war and years of neglect, Afghanistan‘s coal mines struggle to sustain current

Table 8

Coal 1980 1990 2000 2004 2005 2006 2007 2008 Energy Production 0.131 0.116 0.089 0.092 0.096 0.099 0.103 0.099 Data Consumption 0.131 0.116 0.089 0.092 0.096 0.099 0.103 0.099 (million short tons) Source: US EIA

Until the end of 2006, Afghan coal indigenous energy resources for power operations were primarily contained in use as well as to examine the industry state enterprises of Northern Coal demand for coal as a fuel source. No Enterprise and Sabzak Coal with programmatic assistance has been oversight of the Ministry of Mines. provided to the Afghan coal sector. Some recent lease arrangements to Coal deposits and cost “Ref [9]”In private operators have since been put in general terms there are 11 coal mines in place that provide private firms with coal Afghanistan with approximately 5 that mining rights affiliated with cement have been deemed to be reasonably safe operations. In May 2007, President for operation and viable for local Karzai announced the establishment of a production and use. Considerable coal Coal Commission. The genesis of this reserves have yet to be explored in commission is the increasing discussion Afghanistan. Coal is used in these within Government to promote mining areas as well as transported into

6 Kabul and other cities; transport of coal is generally conducted by private market entities although some mines maintain their own transportation as well. The current price of coal is indicated to be $65-$90 per ton Afghanistan is approximately 250,000 depending on transport costs – the actual tones per year (for residential, coal price per ton is estimated to be commercial, and light industrial uses around $20-$25.00. In terms of regional nationwide). Over the next three years it coal costs, this is high. is expected that demand for coal will The health and safety conditions at the also increase as a result of the mines, many of which are underground, manufacture of cement and possible coal are horrific. An example is the ongoing power development. Therefore, recovery fires at the Dahne Tor coal mine. US of the cement industry will significantly Geological Survey (USGS) experts alter the total demand for coal. visited the site in 2006 and indicated that Mechanisms are not in place to unregulated mining observed is transparently and rapidly address winter conducted in a seam that is several coal issues. hundred feet (stratigraphically and Coal for power topographically) higher than the main “Ref [10]”In addition to the Aynak copper seam that was mined decades ago. The power needs, Government has begun to main mine was semi-mechanized, but assess the power needs of the proposed everything is now collapsed, attributed Hajigak Iron Ore deposit as well as simply by Afghan coal managers to landslides, the generation of coal for power to supply poor technical oversight and general the central and western parts of the subsidence. It is estimated that millions country that now have no or limited power of dollars are required to sufficiently access. This is a topic where both the upgrade the health and safety conditions Ministry of Mines and the Ministry of at these mine operations. Energy and Water have important roles but have yet to determine strategic Longer-term strategies for growth in the priorities for development of coal for Afghanistan coal sector remain several power including methods to attract years away but consideration of coal sustainable investment. Opportunities such power is underway; the Ministry of as this argue for the development a Mines has included a 100MW coal fired cogeneration policy and simplified power power plant in its 1386 budget figures; purchase agreements for co generated this presents interesting inter-ministerial power. issues as the Ministry of Energy and Water is responsible for state power Rural and Renewable Energy generation which is implied in this Renewable energy offers the greatest budget proposal. The confirmed quantity hope for Afghanistan in general and and quality of coal resources remains rural energy in particular. Renewable relatively unknown but appears good. energy includes hydro, solar, wind, Coal Uses geothermal, and wood. Hydro, Afghan coal is primarily used for home both large and small, represents cooking and heating needs. The significant untapped resources. estimated demand for coal in According to the ADB, there is 18,400

7 MW of untapped hydro potential in the compared to diesel as shown in the table country. below. Afghanistan has excellent wind potential in many areas and is economical

Table 9 Wind Potential Wind Resource Wind Class Wind Speed m/s Total Capacity Utility Scale Installed (MW) Good 4 6.8-7.3 75,970 Excellent 5 7.3-7.7 33,160 Excellent 6 7.7-8.5 33,100 Excellent 7 > 8.5 15,800 Total 158,100 Source: National Renewable Energy Laboratory

“Ref [11]”Not all of this potential wind guidelines be followed and the as with energy can be economically converted any energy project, public debate is an into electricity because of a number of important tool. factors such as distance from population There is an overwhelming view that centers and wind speed. However, the rural areas need electricity and that first initial survey indicates that there is providing access is the best use of significant potential which can be tapped resources for energy. An Asia at around US$ 0.09 per kWh. Foundation survey in 2006 concluded There is significant solar potential but it that at the local level electricity was the still remains a high cost energy resource second most important problem behind for electricity. The Indian Government unemployment. When survey has funded a solar village initiative. respondents were asked what were the While solar PV is expensive compared largest problems at the national level, to the cost of generation for other they citied electricity as the ninth most alternatives, there is strong evidence that important problem The Asia Foundation with the proper enabling environment of sample was not representative of the micro credit and training, solar home country from an energy perspective and systems are a viable electricity source. used a definition for rural that obfuscates Solar cookers have shown significant the real patterns of importance in promise in other countries and may have planning development assistance The widespread application here. Solar results from other countries consistently cookers were deployed in Afghan indicate that there is a hierarchy for refugee camps in Pakistan. demand to services and electricity is “Ref [12]”It is important to note that usually further down on the ladder than there are many environmental benefits services such as an all weather road, from using renewable energy such as water supply, schools, and clinics. For reduced emissions (both indoor and example, if the preponderance of survey outdoor) but the development of respondents already has access to road, renewable energy must also consider the water and schools, then electricity may potentially negative environmental well be their next choice of service. In impacts. It is important that EIA rural-remote Afghanistan, if Afghans are

8 similar to the peoples of the region, then electricity will bring economic benefits. access to electricity will not be their Simply look around in Kabul and other most urgent priority. urban areas where residential access has “Ref [13]”Additionally, experience the increased. If access to electricity is not world over has provided an important targeted to or coupled with income lesson with regard to blindly providing generating activities, then rural access access to electricity. There is no brings lighting and little else guarantee that increased access to .

Demand “Ref [14]”Although there is little data required to sustain a healthy life. 19 for Afghanistan on rural energy use, Unemployment is rampant. Average inferences can be drawn from similar household income is estimated to be no countries in the region. There is a greater than $231 a year. tendency to assume that grid connected “Ref [15]”Probably less than 4% of rural electricity offers the best form of energy households have access to electricity. Of for rural populations. Experience those with access, 7% use electricity for throughout the world has shown that lighting. Kerosene lamps are the major there is a progression in the use of source of lighting, representing roughly energy. Due to the dispersed nature of 86 percent. It is highly likely given what the rural population, renewable energy is known about other countries, that the offers the best solution for electrification main source of cooking fuel is from self for the majority of Afghanistan‘s rural collected fire wood from which there is population that currently does not have no monetary outlay or charcoal. This access to electricity and has no real information is valuable because it tells expectation of connection to the grid us how much of a rural household‘s It is very important that the economic money income is devoted to energy. conditions and opportunities of rural Using detailed data for Balochistan, the population be fully understood when average rural household spends only devising a rural energy strategy. Too 3.5% of its budget on energy and this often donors and Government officials includes imputed or no cash outlays. have blindly followed a policy of rural Clearly, for many families on the lower electrification. The result has been much end of the income spectrum, the vast higher cost energy delivered than people majority of energy services are self can afford and little, if any, associated supplied – that is through the gathering economic activity. The goal of of fuel wood, crop residues, and other increasing energy is poverty reduction biomass. Energy expenditures were and economic growth. Electricity alone dominated by wood, charcoal, and in rural areas is unable to do that job. kerosene. Wood and charcoal are used What is not known about rural Afghan‘s mainly for cooking and heating, while economic and energy characteristics? kerosene is the main source of lighting. First, rural Afghani‘s are poor by most Rural Afghanistan is similar. countries‘standards. ―Over 20.4% of Extreme poverty in rural areas also is the rural population cannot meet the related to lack of income earning minimum level of dietary energy opportunities. The productive use of

9 energy helps reduce poverty by into these areas economically infeasible. providing alternative sources of Therefore, the application off-grid livelihoods and increase educational and technologies to these areas—including training opportunities. The remoteness renewable energy resources— and other of rural locations and the rough terrain forms of energy is the primary focus of make expansion of the electricity grid IROA activities.

Supply of factors, including high upfront costs, “Ref [16]”There is no reliable data on lack of suppliers, inadequate financing traditional energy use in rural mechanisms, and weak institutional and Afghanistan. The bulk of commercial technical capacity. energy is supplied by kerosene, Hydro power and diesels. Hydro, wind and The Role of the Private Sector solar offer opportunities for small scale “Ref [17]”Throughout the world, the supply. Following hydro, role of the private sector in energy is has the greatest potential as a renewable growing and is significant in most energy source but cost remains a major countries. In Afghanistan, it is virtually barrier. Estimates indicate that in nonexistent. The roles of the private Afghanistan solar radiation averages sector vary from managing government about 6.5 kWh per square meter per day owned assets to outright ownership and and the skies are sunny about 300 days a operation. There are examples where all year. Consequently, the potential for these mechanisms coexist in one solar energy development is high, not country. There are other examples where only for solar water heaters for homes, countries have chosen one model and hospitals and other buildings, but also yet, others where the country transitions for generating electricity. In addition, over time from the simplest model some 125 sites have been identified for (management contract) to complete micro-hydro resource development with ownership and operation. the potential to generate 100 MW of To be sure, there are obstacles in power. Afghanistan to greater private sector Other renewable energy technologies, involvement, primarily to investment, particularly micro-hydro and wind but some of these obstacles can be energy, have broad applicability within completely overcome and others offset rural areas of Afghanistan and offer with innovative mechanisms. The employment opportunities directly private sector can be called upon to through operation and maintenance manage, operate, invest and/or own requirements, and indirectly through energy entities and operations. Each businesses like agroprocessing that different mechanism has its advantages provide off farm work. and disadvantages. Often, there is a Hydropower, solar, wind and biomass progression from management through offer the most potential to contribute to ownership that takes into account the energy supply. Development, however, current situation. Take the electricity requires sound institutional and financial sub-sector for example. It is highly support, sustained commitment and a unlikely under the current security, long-term development horizon. Use of institutional, policy and legal/regulatory renewable energy is beset by a number situation, that private investors will be

10 attracted to invest in a large-scale power could be given on management contract. plant. However, until these issues are There are a variety of mechanisms resolved, there are many other ways to available now for the IROA to tap the use the private sector. Billing can be private sector as it prepares the enabling outsourced. Individual power plants frameworks and other requisite investors will develop power plants, mechanisms to foster full private sector operate and own distribution systems ownership and operation. and develop in situ resources, just as The single most important challenge they have begun to do in many countries. facing energy is attracting the private But that is the distant future. For now, sector in a meaningful way. The sector is Afghanistan must work hard to increase plagued by inefficiency and under energy production, doing so efficiently investment. Private sector participation and in a cost effective manner. It can do in Afghanistan‘s energy sector is crucial this by building new capacity and by to achieving its long term objectives of improving the efficiency of existing the sector. Efforts to attract private infrastructure, building capacity in its investment are incorporated with IROA workforce, and reorganizing its energy programs and projects, but there is no operations to make them more coordinated approach to achieving this transparent, increase operating efficiency goal. In particular, options for private and prepare them for eventual entry into participation beyond equipment and the private sector. At the same time supplies and management contracts need though, it must begin laying the ground- to be explored, and effective policies put work for the eventual large-scale into place. participation of the private sector.

Perhaps the single biggest constraint in “Ref [18]”The time has come that the sector is the very limited capacity Afghanistan must not only focus on the given the tasks that need to be immediate energy needs but turn accomplished. Both the Ministries and attention to the longer run. It knows the SOEs are characterized by limited where it is going and but not necessarily capacity, the low numbers of how to get there. This strategy will trained/skilled personnel below the address the questions of where we are senior levels. It is imperative that basic going and how we get there. What this managerial skills be provided and that means for energy is that as we continue training in accounting and finance also to focus our efforts on short run options take place. to increase supply, one must begin developing the foundation that will IV. Suggested Measures to Improve support long run sustainable growth. Energy Sector in Afghanistan Afghanistan must be laying the legal, There is a time in Afghanistan‘s future regulatory, commercial and institutional when energy will be abundant, blackouts foundations to unleash the power of the will be a thing of the past, and most of private sector when conditions are its energy needs will be provided appropriate. directly by the private sector. Private

11 The following factors will help in the increase access in urban areas from an improvement of the energy sector. estimated 27% currently to 65% by  Increased Private Sector 201031; and, country-wide from 6% Provision of Energy currently to almost 25 % by 2010. By 2015 the goal is to increase urban access  Better Sector Governance to 90% and achieve an overall national access rate of 33%.  Increased trade with neighboring countries, focusing on the Natural Gas transmission of energy “Ref[19]”Development of Afghanistan‘s natural gas resources has the potential of  Expand the availability of improving domestic energy resources, electric power reducing environmental impacts and supporting economic growth. Natural  Develop a Master Plan for Rural gas reserves are potentially large enough Energy; and, to support development of electricity generation as well as a fertilizer plant  Establish market-based tariffs and local commercial and residential with a clear timetable to phase markets in the Sheberghan area. Plans out subsidies are underway to rehabilitate the gas fields to expand production and to Electricity upgrade the existing gas pipeline Afghan government should rehabilitate network to supply the fertilizer plant and hydro and thermal generating facilities; the local market. Activities to promote increase power imports and develop exploration and development of PPAs with Central Asian countries; additional gas resources have been purchase small diesel generating sets for underway for some time. supplementing power supply in selected Afghanistan needs to develop indigenous urban areas; develop selected energy resources, including natural gas transmission lines to maximize reserves in the Sheberghan area. Data on deliverability from domestic generation gas reserves indicate that there is sources and increase use of imported sufficient low-cost gas reserves available power; and develop micro-hydro and to operate a combined cycle turbine other energy resources in rural and plant at Sheberghan for 25 years and that remote areas. Through these combined the cost per kWh of power generated efforts, the supply of electricity would be in the 2.8 to 3.5 cent range. throughout Afghanistan has increased by While this is more expensive than the 66% albeit from a very low base. cost of imported power, which currently A key objective of these initiatives is to is in the 2.0 to 2.5 cents/kWh range, increase the number of connections, future prices are expected to be 4.0 adding about 850,000 residential and cents/kWh or more. Also, non-residential connections by 2010 to it is important to note the domestic funding of a 100MW gas-fired power benefits resulting from developing the plant to be located near the Khwoja gas fields and gas-fired power plant. Gegertak, Jarkaduk and Yatimtaq gas USAID is exploring options for some

12 fields and an associated urea plant. and structural changes to support longer- USAID is confirming the size of the term sector development and expansion. reserves, quality of the gas and delivery Progress to date has been slow, thereby prospects for the plant and plans to move limiting investor interest. Options to forward with construction of the speed up this process and to increase generating plant pending results of these private sector involvement need to be assessments. explored. “Ref [20]”In addition, current gas prices are too low to cover costs of Crude Oil and Petroleum Products rehabilitation. For incremental gas “Ref [21]”Afghanistan has only limited production, tariffs may be less than half supplies of oil. Domestic oil production of the level needed to cover costs. is insignificant and current production is Moreover, the IROA collects no taxes or about 400 barrels/day.55 As a result, royalties from the natural gas sector, Afghanistan depends on imports for missing out on a potentially major most of its consumption. Oil is produced source of revenue. As a result, sector in limited quantities primarily from the entities have been unable to effectively Angot oil field, located in Sar-i-Pol operate, repair and maintain the system. province. Given the serious supply A large part of the infrastructure for shortfall, in order to meet country‘s storage, transmission and distribution needs, most petroleum products—diesel, has been damaged while the remaining gasoline and jet fuel included—are capacity is in need of rehabilitation. imported primarily from Pakistan and The majority of more than 12,000 Uzbekistan. residential customers and more than 700 Infrastructure for local production of oil business customers are not metered. is largely non-existent and what Afghan Gas management indicates that infrastructure is present is functioning metered and non-metered customers inefficiently and suffers from chronic generally pay the same rate for gas. No under-funding. In addition, the level of meaningful data is available to local expertise in oil exploration and adequately present the costs of operating development is limited. As a result, and maintaining the system at this sector entities have been unable to time.53 Moreover, the technical standard operate effectively, to repair and of Afghan gas operations is extremely maintain the system, nor engage low. There is no incentive to conserve or effectively in new exploration and to optimize use of gas resources as the development. A large part of the present cost is so low and operations are infrastructure for storage, transmission so inefficient. and distribution of petroleum products The operational strategy of the has been damaged, while the remaining Government for the gas sector is to capacity is in need of rehabilitation. promote economic growth by removing Much of the petroleum resource impediments to the reconstruction and potential of Afghanistan and all of the modernization program and to open the known crude oil and natural gas reserves sector to private investment, particularly are in northern Afghanistan, located in for gas exploration and development. parts of two geologic basins – the Amu Efforts to attract private investment Darya Basin to the west and the Afghan- depend on developing policy reforms Tajik Basin to the east. Most of the

13 undiscovered crude oil is in the Afghan- However, the real extent of coal deposits Tajik Basin, and most of the in the country is not known and there is undiscovered natural gas is in the Amu an urgent need to assess the resource Darya Basin. The U.S. government base. estimates that total oil reserves could be Some current coal operations are taking as much as 270 billion barrels. place at Karkar and Ispushta mining If planned investments take place as districts. The literature indicates that envisioned, it is estimated that oil Dara-i-Suf appears to have the greatest production could increase from the potential for significant reserves, current 400 bpd (barrel of oil per day) to estimated to be over 84 million tons. 3,000 bpd by 2008; 5,000 bpd by 2010 This coal is believed to be of coking and 10,000 bpd by 2015. Clearly, grade with a high calorific value in the however, the increased investment will range of 7,000 kilo-calories/kg. The require changes in the laws, rules and mines at Kalich in the Ispushta district regulations in the sector and creating an are active. Coal in these districts is environment conducive to expanded extracted by either crude, inefficient, private sector involvement. Total mechanized mining methods or by revenue streams from these investments ―artesian methods. Current are estimated to increase, at a minimum, production from all operations is from $5.1 million in 2004 to about $292 estimated to be about 110,000 short tons. million/year by 2015 assuming a price of The existing industrial sized coal mines $80 a barrel. These revenue estimates do are marginal (if not out of operation) due not include additional revenue from to antiquated machinery and lack of value added taxes that could be derived maintenance and new investment. from converting the crude oil to refined However, there is considerable small petroleum products. scale production. At present, the small scale mining sector, including coal is Coal wholly unregulated and occupies large “Ref [22]”Afghanistan has reasonably numbers of persons in difficult security, good quality coal resources and is health, and environmental conditions. estimated to have significant coal Moreover, coal demand and prices in reserves (probable reserves estimated at urban centers have risen due to domestic about 400 million tons), most of which energy needs during the winter months are located in the northern part of the and also due to increasing industrial country in the region between Herat and demand to fire construction bricks. Badashkan58. Although Afghanistan Development of coal and other mineral produced over 100,000 short tons of coal resources requires investments in excess annually as late as the early 1990s, of government abilities. Therefore the production had fallen to only around IROA‗s policy is to establish an 1,000 short tons in 2000. enabling environment conducive to The primary coal resources in attracting and retaining investment by Afghanistan occur in the Katawaz Basin both private local and international south and west of Kabul. Prospective groups. However, privatization and/or economically viable coal deposits are leasing of existing state owned mining found in four coal districts: Karkar, enterprises to private groups is, at Ishpushta, Dara-i-Suf, and Chalow. present, held up by the lack of adequate

14 mining legislation and the need for a training opportunities. The remoteness clear policy on sector development. of rural locations and the rough terrain Enabling legislation and a proper make expansion of the electricity grid mineral concession system is needed to into these areas economically infeasible. establish clear lines of authority and Therefore, the application off-grid responsibility for the Government and technologies to these areas including for private developers. renewable energy resources are the “Ref [23]”To develop the coal sector and primary focus of IROA activities. increase production to support new The role of the IROA is to provide electricity generation, the Government policy and regulatory frameworks to needs to adopt appropriate policies and encourage and facilitate participation by programs to stimulate private sector the private sector and civil society in investment, rather than direct rural electrification and application of government investment in operations. To renewable energy technologies. Ultimate achieve these objectives internationally responsibility for renewable and rural competitive mining legislation and fiscal electrification resides in the Ministry of measures are necessary. Afghanistan‘s Energy and Water (MEW), although coal sector requires immediate capital other entities, particularly the MRRD investment to support development of and its program, NSP, CDCs, NGOs, resources as well as for development of and donors are active in rural power plants that utilize coal for fuel. development projects. MEW also is charged with establishing a renewable Rural and Renewable Energy and rural energy policy in conformance “Ref [24]”Due to the dispersed nature of with the development objectives of the the rural population, renewable energy IROA. offers the best solution for electrification Hydropower, solar, wind and biomass for the majority of Afghanistan‘s rural offer the most potential to contribute to population that currently does not have energy supply. Development, however, access to electricity and has no real requires sound institutional and financial expectation of connection to the grid. support, sustained commitment and a Most of Afghanistan‘s 25 million people long-term development horizon. Use of have no access to modern forms of renewable energy is beset by a number energy. Fuel wood accounts for an of factors, including high upfront estimated 75% of total rural energy costs,61 lack of suppliers, inadequate supplies. This is having an adverse financing mechanisms, and weak impact on forests and watersheds. In institutional and technical capacity. addition, burning these fuels increases indoor air pollution, which adversely Afghanistan as Energy Transit Route affects the health of women and children in particular. “Ref [25]”Due to its location between Extreme poverty in rural areas also is the oil and natural gas reserves of the related to lack of income earning Caspian Basin and the Indian Ocean, opportunities. The productive use of Afghanistan has long been mentioned as electricity helps reduce poverty by a potential pipeline route, though in the providing alternative sources of near term, several obstacles will likely livelihoods and increase educational and prevent Afghanistan from becoming an

15 energy transit corridor. During the mid- obvious problem, while tensions 1990s, Unocal had pursued a possible between India and Pakistan make it natural gas pipeline from Turkmenistan's unlikely that such a pipeline could be Dauletabad-Donmez gas basin via extended into India and its large (and Afghanistan to Pakistan, but pulled out growing) gas market. Financial problems after the U.S. missile strikes against in the utility sector in India, which Afghanistan in August 1998. would be the major consumer of the natural gas, also could pose a problem “Ref [23]”The Afghan government for construction of the TAP line. Finally, under President Karzai has tried to the pipeline's $2.5-$3.5 billion estimated revive the Trans-Afghan Pipeline (TAP) cost poses a significant obstacle to its plan, with periodic talks held between construction. the governments of Afghanistan, Pakistan, and Turkmenistan on the issue, V. Conclusion and Recommendations but little progress appears to have been made as of early June 2004 (despite the The above energy resources and the signature on December 9, 2003, of a measures to improve it have provided a protocol on the pipeline by the base for better planning and governments of Afghanistan, Pakistan management of this sector. However in and Turkmenistan). President Karzai has order to implement these measures there stated his belief that the project could is some cutting issues which should be generate $100-$300 million per year in kept in mind. These include the transit fees for Afghanistan, while environment, counter narcotics, anti- creating thousands of jobs in the corruption, gender and regional country. cooperation in addition to capacity building. “Ref [24]”Afghanistan is well positioned Capital investment in energy is rising to be a transit route for electricity rapidly attesting to the efforts to the produced in CAR countries and exported Islamic (IROA) to South Asia, and perhaps eventually it and the donor community. At the same might also become a net exporter of time though, the efficiency of energy power produced from its own hydro, operations is not increasing. If left natural gas, and coal resources. Efforts unchecked, much of the investment that are currently underway to increase is being made will be wasted. Post- electricity imports from Uzbekistan, conflict efforts by the Islamic Republic Tajikistan, Turkmenistan and Iran and to of Afghanistan (IROA) and international upgrade cross-border transmission links donors to date have focused on expanding the availability of energy “Ref [25]”Given the obstacles to resources throughout the country. development of a natural gas pipeline Particular emphasis has been on across Afghanistan, it seems unlikely expanding and rehabilitating the that such an idea will make any progress electricity sector in the major economic in the near future, and no major Western hubs of the country and providing basic companies have expressed interest in service in rural areas. Efforts also have reviving the project. The security been taken to improve the supply of situation in Afghanistan remains an natural gas, increase availability of

16 hydro-electric generation, rehabilitate accountability; thereby indirectly and expand electricity and natural gas strengthening anti-corruption, and anti- transmission and distribution systems, narcotics measures. Finally, the develop renewable energy resources in introduction of a multi-sector regulator rural and remote areas and improve the outside the concerned ministries and capability of energy sector institutions. under the Ministry of Economy will According to the findings, undiscovered provide greater oversight. petroleum resources in northern The most important areas furthering Afghanistan range from 3.6 to 36.5 regional cooperation include expansion trillion cubic feet (TCF) of natural gas, of energy trade by upgrading electricity with a mean of 15.7 TCF. Estimates of transmission ties with Central Asian oil range from 0.4 to 3.6 billion barrels countries and exploring options for (BBO), with a mean of 1.6 BB0. transport of electricity and natural gas Estimates for natural gas liquids range through Afghanistan for regional supply. from 126 to 1,325 million barrels Finally, the major emphasis within the (MMB) with a mean of 562 MMB. Energy Sector Strategy placed on These estimates represent an 18-fold institutional strengthening and capacity increase in the country’s potential oil building—and on institutional reform, resources, and more than triple the such as consolidating authority over natural gas resources. rural electrification and rural energy Focusing on policies and projects that projects and separating policymaking improve the operating efficiency of from regulatory authority—will result in energy production It strives to get the fostering a professional, open most energy delivered for the minimum environment and increase opportunities environmental impact. For example, for participation in energy sector reducing technical losses or cogeneration activities on behalf customers and other Years of neglect cannot be overcome stakeholders. until the Afghanistan government has the capability to recover costs, expand VI. Acknowledgements its capabilities, and conduct operations This work would have not been possible and maintenance of the energy sector. without the online support of Dr. Barnett The energy sector directly tackles Rubin, Director of CIC, New York corruption in several ways. One of the University, USA. I would like to express most important measures for reducing my gratitude for efficient help and corruption is limiting the role or kindness of Dr. Omar Zakhilwal, senior influence of Government. In energy, we advisor to the Ministry of Rural are promoting increased private sector Rehabilitation and Development of participation; we are reducing the role of Afghanistan. I am grateful to Prof. Government. Additionally, in SOE‘s, Najibullah Safdari for his kindly such as DABM, we introduced loss comments about the study. I am also reduction programs that are targeted at indebted to many colleagues and locals finding and deploying ways of in Kabul, Bamiyan, Parwan, and Herat controlling corruption. Furthermore, provinces, who have generously increasing private investment in the provided us with guidance, logistical energy sector requires rule-of-law and support and encouragement throughout increased transparency and this work.

17 The Afghanistan Center for Policy and R. Rubin; The Center for Preventive Development Studies has facilitated and Action; Council on Foreign Relations; supported this research study in CSR NO. 12, March 12, 2008 pp12-19 Afghanistan. The Kabul Polytechnic Institute and the Herat University in [6]CELT Overview: Capacity, Energy, Afghanistan have provided local support Load Transmission; Afghanistan Energy and research facilities. The Department Information Center; USAID, January of Geological Survey of the Ministry of 2009. Mines and Industry of Afghanistan has kindly provided permission to access the [7] Donor Comments on Infrastructure pertaining archive information on the Strategies: Afghanistan National previous work. I am grateful to the Development Strategy; Compiled by the AIMS office of the UNDP Kabul, for World Bank, July 13, 2009 pp 29-44 generously providing the graphical maps of Central and Western Afghanistan to [8] Energy and Natural Resources this study. Workshop; Infrastructure and Rehabilitation Program (IRP); Louis VII. References Berger Group, Inc. and Black and [1] Akhi, M. Wazir: The Services of Veatch Special Projects Corp. Joint Abdullah Khan Malekyar in Herat. Hand Venture for USAID, November 25, scripted biography, in Persian. London, 2006, Kabul Afghanistan. Ontario, (2001) pp 605 [9] Energy Sector Review and Gas Development Master Plan: Final Report; [2] Anil Malhotra Private Participation TA 4088-AFG; Sofregaz, June 28, 2004 in Infrastructure: Lessons from Asia‘s pp 128-156 Power Sector; Finance and Development, December (2006). Pp205- [10] Energy Sector Strategy for the 299 Afghanistan National Development Strategy (With Focus on Prioritization); [3] Mary Louise Vitelli, Afghanistan FIRST DRAFT; Islamic Republic of Energy Sector: Corruption Assessment; Afghanistan; Ministry of Water and Asian Development Bank Afghanistan Power, July 23, 2009. Country Partnership Strategy and Program (CPSP), June (2009) pp 25-59 [11] Establishing a Gas Regulatory Framework Report; ADB TA 4354- [4] Afghanistan: Energy Strategy; AFG; Energy Markets Limited, May Preliminary Findings and 2009 pp225-234 Recommendations; the World Bank, February 2009 pp58-66 [12] Evaluation of Investment Options [5]Afghanistan Fact Sheet; Energy for the Development of Oil and Gas Information Administration; United Infrastructure in Afghanistan; Final States Department of Energy, June 2008 Report; Prepared for the International pp125-136 Bank for Reconstruction and Development by Hill International, [5] Afghanistan‘s Uncertain Transition March 28, 2009. from Turmoil to Normalcy; by Barnett

18 [13] Gender Mainstreaming Guidelines: [20] Saba, D.S., and R. K. Avasia, A Guide on Mainstreaming Gender in Power Sector Strategy for the Sector Strategies; Draft; Islamic Afghanistan National Development Republic of Afghanistan, July 15, 2009 Strategy (With Focus on Prioritization); pp 56-59 Islamic Republic of Afghanistan; Ministry of Energy and Water; Draft, [14] Musazai, A) Needs Assessment (2009) pp56-96 Infrastructure Report: Energy and Transportation Sector; Contract No. 306- [21] Shareq, A., Chemeriov Power I-00-06-00517-00; Prepared by the Louis Strategy: Executive Summary; Ministry Berger Group, Inc. and Black and of Energy and Water; Islamic Republic Veatch Special Projects Corp. Joint of Afghanistan (2006), pp 144-159 Venture for USAID . (2009), pp23-56 [22] Tester John, Regulation by [15] Julia M. Fraser; May Lack of Contract: A New Way to Privatize Access to Energy; The Enabling Electricity Distribution?; World Bank Environment Conference: Effective Working Paper No. 14; The World Bank Private Sector Contribution to Group, September 2008. Development in Afghanistan; The World Bank Group, (2009) pp85-112. [23] UNEP: Securing Afghanistan‘s Future: Accomplishments and the [16] Nuti, S. Ministry of Mines Strategy Strategic Path Forward; OIL AND GAS for Afghanistan national Development Technical Annex, January 2009. Pp112- Strategy (With Focus on Prioritization); 126 Draft; Islamic Republic of Afghanistan; Ministry of Mines, (2009) pp215-251 [24] WEA, a Quantitative Assessment of the Implementation of Strategy in the [17] Nyrop, Richard F., and Seekins, Electric Power Sector in Afghanistan; Donald M. April, National Capacity Afghanistan Energy Assistance Program Building Policy and Program for the (AEAP); Advanced Engineering Islamic Republic of Afghanistan; Associates, Inc., USAID, March 7, 2009. Ministry of Economy, Draft, (2007) Pp74-85 pp422-459 [25] WE Afghanistan: Challenges of Increasing Access to Electricity; [18] Rybach, L., Brunner, M., and Prepared by The World Bank Group, Gorhan, H. Petroleum Storage November 2006. pp175 Rehabilitation; report of the ADB project (2008): pp 52-85

[19] Ross, H. P., December 8, Policy for Renewable Energy Rural Electrification; Government of \Afghanistan; Ministry of Energy and Water (2009) pp74-89

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