Final Feasibility Report on Industrial Development and Natural Gas Market Development in Afghanistan

The Sheberghan Gas Generation Activity (SGGA) is a key initiative aimed at expanding the country's natural gas market. The project is supported by the United States Agency for International Development (USAID) and the Government of the Islamic Republic of Afghanistan. Afghanistan's energy history dates back to the 1950s, with the discovery of natural gas reserves in the 1960s. The country's energy sector has experienced significant growth, with the production of natural gas increasing from 0.5 billion cubic feet per day in 2001 to 1.2 billion cubic feet per day in 2012. The regional natural gas market perspective indicates that Afghanistan's natural gas production is expected to increase, driven by the development of new gas fields and the expansion of existing infrastructure. The current natural gas market in Afghanistan is characterized by a significant gap between supply and demand. The country's natural gas production is estimated to be around 1.2 billion cubic feet per day, while the demand is projected to be around 2.5 billion cubic feet per day. The unmet demand is primarily driven by the lack of competitive gas pricing, which is a major barrier to the expansion of the natural gas market. Competitive gas pricing is a critical pre-condition for expanded demand in the natural gas market. The capital asset pricing model (CAPM) indicates that the current gas pricing is not competitive with other energy sources, such as coal. The coal market in Afghanistan is characterized by low prices, which makes it an attractive option for industrial and commercial consumers. To address this issue, the SGGA project proposes the development of a gas pricing mechanism that takes into account the costs of production, transportation, and distribution. The demand for natural gas in Afghanistan is projected to increase significantly over the next decade, driven by the growth of the industrial, commercial, and residential sectors. The fertilizer production and power generation sectors are expected to be major drivers of demand, with the demand for natural gas projected to increase by 50% over the next five years. The industrial and commercial sectors are also expected to drive demand, with the demand for natural gas projected to increase by 30% over the next five years. The SGGA project proposes a conceptual roadmap for the development of gas utilization in Afghanistan, which includes the development of a gas pricing mechanism, the expansion of the natural gas infrastructure, and the promotion of gas-based industries. The project also proposes a proposed institutional structure for an expanded gas market in Afghanistan, which includes the establishment of a gas regulatory authority and the development of a gas market framework. In conclusion, the industrial development and natural gas market development in Afghanistan is a critical component of the country's economic growth. The SGGA project is a key initiative aimed at expanding the country's natural gas market, and its proposals for a gas pricing mechanism, the expansion of the natural gas infrastructure, and the promotion of gas-based industries are critical to addressing the country's energy challenges.