The Dailekh Gas Reserves: Nepal’s Energy Future, China’s Strategic Partnership, and the Tangible Promise of the BRI

# Muna Chand

The natural gas project located in the Jaljale area of Bhairabi Rural Municipality-1, Dailekh, stands as a historic opportunity in Nepal’s energy landscape. Operated with the technical and financial assistance of the Chinese government, this project simultaneously illuminates Nepal’s long-term energy security, economic self-reliance, and China’s constructive role under the Belt and Road Initiative (BRI). Preliminary exploration alone has indicated a natural gas reserve of approximately 80.70 billion cubic metres, opening the door to self-sufficient energy for Nepal for 50 to 60 years. However, following the successful drilling of the first phase, the project has fallen into temporary uncertainty as the second phase of exploration work has yet to move forward, with the subsequent decision still awaited from the Chinese side.

Examining the historical background of this project, an agreement was signed between the Government of Nepal and the Government of China on 28 February 2019, to complete the investigation of petroleum products in the Shirsthan, Nabhisthan, and Padukasthan areas of Dailekh within three years. Pursuant to that agreement, the study was advanced at a cost of approximately NPR 2.17 billion under a grant from the Chinese government. The continuous geological surveys conducted by the China Geological Survey since 2019, along with the first phase of drilling completed through the company ‘Sibu Drilling Engineering’, have added a new chapter to Nepal’s history of petroleum exploration. The deepest drilling ever conducted in Nepal, reaching a depth of 4,013 metres, which began on 28 Baisakh 2081 BS, has been successfully completed. Although the Chinese company has submitted its preliminary report to the Government of Nepal, Information Officer of the Petroleum Exploration Project, Prakash Luitel, has clarified that a clear work plan and decision for the second phase are yet to be received. While bodies under the Ministry of Industry, Commerce and Supplies claim that preparations are underway to move the process forward, the absence of a concrete timeline has led to growing frustration at the local level.

Viewing this project from an international perspective makes the importance of China’s involvement and the BRI framework even clearer. Under the BRI, China has advanced the concept of ‘Five-Dimensional Connectivity,’ which encompasses policy coordination, infrastructure connectivity, unimpeded trade, financial integration, and people-to-people ties. The Dailekh gas project connects directly with all five of these dimensions. First, it was the policy coordination between Nepal and China that made this project possible. Second, the physical infrastructure, from drilling to potential future pipeline expansion, will give tangible form to the energy connectivity between the two countries. Third, domestic energy production will bring immense relief to the foreign currency reserves of the Nepali economy, which is struggling with a trade deficit. Fourth, the grant from the Chinese government and potential future investments will open the door to financial integration. Fifth, the cooperation between Chinese technicians and the local Nepali community will elevate people-to-people ties to new heights. Looking at it more broadly, the BRI adheres to the principles of mutual benefit, equal cooperation, and shared development, while following a policy of non-interference in the internal affairs of any country. The Dailekh project is a living example of this principle, where China has dedicated its technical expertise and financial resources to the service of Nepal’s national priorities.

In the local context, the impact of this project appears to be multidimensional. The statement by Naveen Yogi, President of the Dullu Panchakoshi Area Development Institute, that the commencement of petroleum extraction will create employment, spur infrastructure development, and give new momentum to the local economy, represents local aspirations. He has emphasised that this project is not limited to Dailekh alone but is tied to the future of the entire nation, and therefore the government, which has received broad public support, must prioritise it and move it forward. Furthermore, his insistence on ensuring meaningful participation with special concessions for local residents in the extraction process, and on conducting development activities while preserving the religious, historical, and social existence of the Panchakoshi Jwala area, points to the need for a balanced and inclusive approach to the project. His belief that such projects can provide long-term support to the Nepali economy, which is dependent on foreign investment and loans, gives concrete form to the national aspiration for economic self-reliance.

In the history of Nepal’s energy sector, the Dailekh Natural Gas Project signals a decisive turning point. This project, given concrete form through cooperation between the Government of Nepal, the Government of China, technical teams, and the local community, is a symbol of the constructive partnership that China has been fulfilling under the BRI. The successful first phase of drilling and the vast gas reserves indicated by the preliminary report have paved the way for transforming Nepal from an energy importer into an energy self-reliant nation. However, the project’s momentum has somewhat slowed due to the wait for a decision from the Chinese side for the second phase of exploration, the absence of a clear work schedule, and the challenge of inter-agency coordination. The statement by Naveen Yogi is relevant—that only strong coordination and collaboration among people’s representatives at the local, provincial, and federal levels, intellectuals, and the private sector can make the best use of this historic opportunity. This journey, which began on the 45 ropanis of government land allocated in the Jaljale area of Dailekh, is certain to write a new chapter in Nepal’s energy future, where the historic role of the BRI and China’s cooperation has once again been reaffirmed.