1.5 Billion Barrels of Oil, and No Takers

Oil

Western energy firms are noted for venturing into volatile regions and areas that scare off more faint-hearted capitalists. But one country is even giving these hardened energy companies pause — Afghanistan. On September 22, Afghanistan issued a bid for tenders to exploit its vast mineral and hydrocarbon wealth, but found no important takers. Why is that?

As the U.S. government’s Bureau of Economic and Business Affairs’ February 2013 Investment Climate Statement — Afghanistan report dryly noted: “Security threats limit investors’ opportunities to develop businesses in some provinces, and certain sectors (such as mining and hydrocarbons) still lack a regulatory environment that fully supports investment. Domestic and foreign investors also rank endemic corruption high on the list of impediments.” The report then optimistically adds, “Despite these challenges, Afghanistan’s investment climate presents opportunities in all sectors of the economy.”

Insurgency aside, just how bad are things? The report notes that the 2012 Transparency International “TI Corruption Index” ranks Afghanistan “174/176 (Tied for last place with Somalia and North Korea.)”