The country’s cabinet approved a deal to allow China National Petroleum Corporation (CNPC) to develop oil blocks in the Amu Darya Basin.
The deal comes as China is looking to expand its oil resources in wake of a growing domestic demand.
“The Afghan cabinet has ordered mines minister Wahidullah Shahrani to sign an oil exploration contract for Amu Darya with China National Petroleum Corporation,” Afghanistan president’s office said in a statement.
‘The state-owned CNPC will carry out the oil exploration and extraction with a local partner, the Watan Group.
While there has been a lot of talk about the potential of natural resources in Afghanistan, analysts said that it was too early to predict the profitability of the venture.
The approval is a major win for China as it has been looking to invest in resource-rich Afghanistan.
However, analysts said that resources is not the only sector that China is looking to invest in.
“The deal is a way of getting a foot inside the door,” said Charles Chaw of China Knowledge Consulting.
The ongoing war in Afghanistan has seen its infrastructure and economy being damaged.
Analysts said that as peace returns to the country, it will require a lot of rebuilding activity in order to trigger economic growth in coming years, something that China is keen to tap into.