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OPIC, USAID & Afghan Government Partner to Develop Landmark Natural Gas Project

OPIC President Elizabeth Littlefield and Afghan Minister of Mines Wahidullah Shahrani sign an agreement to develop the Sheberghan Gas Field Project
OPIC President Elizabeth Littlefield and Afghan Minister of Mines Wahidullah Shahrani sign an agreement to develop the Sheberghan Gas Field Project.
September 22, 2011
WASHINGTON, D.C. – Afghanistan’s only indigenous source of energy – natural gas – stands to transform development of the country’s industrial north following the conclusion of an agreement today between the Overseas Private Investment Corporation (OPIC), the U.S. Government’s development finance institution, the U.S. Agency for International Development (USAID) and the Government of Afghanistan to commence a 200-megawatt project years in the making.
With the support of private sector investment through a joint venture involving a U.S. independent power producer (IPP), the project will build and operate a gas-fired power plant adjacent to three natural gas fields in Sheberghan, capital of Afghanistan’s Jowzjan Province. Reliable and low-cost electricity generated by the plant will provide a significant portion of power for the country’s industrial northern region and, through connection with Afghanistan’s North East Power System (NEPS), other parts of the nation as well.
Overall cost of the project is $600 million, which includes the $300 million power plant, development of natural gas reserves to fuel the IPP, and construction of transmission facilities connecting the plant to NEPS. Through the agreement, OPIC is expected to finance up to 75 percent – $225 million – of the power plant costs and to provide political risk insurance to eligible investors who invest in the project. USAID will finance the rehabilitation of two existing wells in the gas fields and the drilling of one or two new wells to prove gas reserves for the proposed plant.
Industrial Promotion Services, the industrial development arm of the Aga Khan Fund for Economic Development (AKFED), and already a significant investor in Afghanistan, will partner with a US company to develop the project.
Development of the Sheberghan gas fields has long been key to the region’s economic growth. According to a 2010 USAID report, between 1959 and the 1980s, 144 gas wells were drilled in the three Sheberghan gas fields, with 70 completed as production wells and nearly 64 billion cubic meters of gas produced. But the three fields have been estimated to hold an additional 34 billion cubic meters of gas in the produced reservoirs.
“Electricity generation has been a challenge for Afghanistan, a country with virtually no indigenous energy sources – but for the natural gas reserves that this project taps,” said OPIC President and CEO Elizabeth Littlefield. “The Sheberghan Gas Field project stands to become the cornerstone in the new foundation of northern Afghanistan’s energy security. The power generated by this plant will meet Afghanistan’s growing demand for electricity, at a reasonable cost, utilizing indigenous resources, and employing U.S. private sector investment to do so. The agreement we sign today acknowledges the perseverance and hard work of our colleagues at USAID and in the Afghan Government in turning this great prospect into a reality.”
Thomas Nides, Deputy U.S. Secretary of State for Management and Resources, said, “the project consortium established today is proof that Afghanistan can move forward on the New Silk Road vision with public private partnerships. I applaud the efforts of AKFED, the Government of Afghanistan, USAID, OPIC and the Asian Development Bank to support the establishment of the largest private thermal power plant in Afghanistan’s electric system and to restart the gas sector on an industrial scale.”
Wahidullah Shahrani, Afghanistan’s Minister of Mines, said “this project is a clear indication of cooperation between Afghanistan and the United States which helps Afghanistan to achieve energy security by developing its vast natural gas reserves with the support of USAID and the US private investors through the active involvement of OPIC.”