Page 9 - FSU OGM Week 26 2021

FSUOGM COMMENTARY FSUOGM

Uzbekistan changes oil and gas

priorities

Uzbekistan is now prioritising profit over energy independence, marking a
shift away from the old Soviet-style thinking

UZBEKISTAN ECONOMIES in the former Soviet Union have gas-based petrochemical plants, including
a tendency to prioritise volume over value. This methanol-to-olefins and ammonia facilities, a
WHAT: is to say, they often focus more on maximising gas-to-liquids plant that will produce synthetic
Uzbekistan now wants to production of a product, and less on maximising motor fuels, and an expansion at the Shurtan gas
focus on making its oil the economic benefit derived from it. complex. As conventional motor fuels are scarce,
and gas sector profitable When Uzbek President Shavkat Mirzi- Uzbekistan has developed one of the most exten-
instead of focusing yoyev took power in late 2016 after the death of sive networks of filling stations for compressed
on achieving energy long-serving ruler Islam Karimov, few specta- natural gas (CNG) in the former Soviet Union.
independence. tors could have foreseen the radical economic In some regions, 99% of vehicles use natural gas
reforms that would follow. Yet his initial plan as a fuel, Narmatov said.
WHY: to take the country’s oil and gas industry out of Recently Uzbekistan has been consuming
Gas is valuable for Uzbek stagnation was very much in line with the old more gas than it produces. Instead of selling gas
industry, whether it is volume-over-value way of thinking. His admin- to Russia, it bought 1.5 bcm of gas from Russian
imported or domestic. istration set overly ambitious targets to expand state supplier Gazprom in the first quarter, the
oil and gas production, with little consideration minister confirmed.
WHAT NEXT: to the economic benefit that doing so would “The Uzbek government is no longer focused
Uzbekistan is preparing bring. on achieving long-term energy independence
an IPO at Uzbekneftegaz Since then there has been a policy shift in from the import of fuels such as natural gas
in order to boost sector Tashkent, however. The government’s priority and crude oil,” Narmatov said, noting that gas
returns. now is to extract as much profit from the indus- imports bolster the Uzbek economy. “If Gaz-
try as possible, rather than ramp up production prom is offering us a good price, we are buying
in the hope of making Uzbekistan fuel self-suf- from Gazprom.”
ficient, Uzbek Deputy Energy Minister Bekhzot And he does not see any political risk arising
Narmatov told a webinar hosted by international from reliance on Russian gas.
oilfield services firm ERIELL on June 23. “Even during the Cold War, the West pur-
Uzbekistan produces far less oil and gas than chased gas from the Soviet Union, and despite
neighbouring Kazakhstan and Russia. Yet with all the US sanctions, the volume of supplies of
1.2 trillion cubic metres in proven reserves, Russian oil products to the US reached its peak,”
according to BP, and 60bn cubic metres of the deputy minister said. “If the price is right, it
annual supply, it is a considerable gas producer doesn’t matter whether its 1.5 bcm or 10 bcm.”
in its own right. Uzbekistan still wants to expand domestic
Monetising this gas has always been an issue, upstream development, but focusing on those
however. Uzbekistan has only Russia and China projects that are the most cost-effective. Further-
as markets for this gas, and neither is willing more, it is only looking to maintain the current
to pay a particularly high price. Tashkent is rate of gas production rather than increase it.
therefore looking to use gas at home as fuel at “We are moving away from a volume-based
power plants and for vehicles, and as a feedstock to a profit-based approach,” Narmatov said,
for delivering polymers and chemicals at pet- adding that Uzbekistan was preparing to hold
rochemicals plants, in order to drive forward an initial public offering (IPO) at state oil and
economic growth. By 2025, it expects to be con- gas company Uzbekneftegaz. Once the firm has
suming all its gas at home with none spare for private shareholders, it “will be held responsible
export. for every dollar spent,” the deputy minister said.
“Uzbekistan is shifting its attention from the Uzbekistan’s energy ambitions extend
export of natural gas to creating new opportu- beyond oil and gas, Narmatov continued, not-
nities for domestic production of value-added ing the country’s strong solar and wind power
products and increasing the return on gas pro- potential. The government’s target is to have 3
duction for citizens of this country,” Narmatov GW of wind energy online within two or three
explained at the webinar. years, and have a further 1 GW of solar capacity
Uzbekistan is developing a raft of new installed. ™

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