Page 10 - FSUOGM Week 16
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FSUOGM PERFORMANCE FSUOGM
Uzbek gas output slides further in Q1
UZBEKISTAN
Gas exports were likely affected by COVID-19 lockdowns in China.
UZBEKISTAN’S gas production fell by a further 7.8% year on year in the first three months of 2020, sliding to 13.07bn cubic metres, according to data published by its state statistics committee.
The result marks a further setback in the gov- ernment’s efforts at revitalising the oil and gas industry in order to ramp up exports and boost economic growth.
The committee has not published export volumes for the three-month period. But one of Uzbekistan’s key customers for gas is China, which saw a slowdown in gas demand this year as a result of coronavirus (COVID-19) lockdowns in major cities.
Uzbek oil production amounted to 172,000 tonnes (13,850 bpd) in the first quarter, down 1.5% y/y, while extraction of gas condensate totalled 383,600 tonnes (37,940 bpd), down 5.1%.
After taking office in late 2016, Uzbek Pres- ident Shavkat Mirziyoyev unveiled ambitious plans to reinvigorate the country’s oil and gas sector, which had stagnated under his predeces- sor Islam Karimov because of a lack of invest- ment and mismanagement. However, national oil firm Uzbekneftegaz (UNG) has repeatedly
missed government-set growth targets.
Part of the problem has been Uzbekistan’s fail- ure to attract major new investors to its upstream sector. Tashkent has invited a number of foreign oil companies to partner with UNG at new pro- jects, including newcomers such as BP and estab- lished players such as Russia’s Lukoil. But it has been unable to seal any deals, in part because of
low oil and gas prices in recent years.
The government also wants to expand Uzbek-
istan’s oil refining capability. But it suffered a setback last year when it was forced to abandon plans to build a new oil refinery in the Jizzakh region, after difficulties securing feedstock. It now intends to modernise the country’s existing processing plants instead, but is yet to finalise these plans.
Diesel production was down 4.8% in the three-month period at 254,500 tonnes, the com- mittee reported, while gasoline output grew by 15.5% to 282,700 tonnes.
One project that is making progress is the construction of a gas-to-liquids (GTL) plant, which Uzbekistan’s energy ministry recently confirmed would start up before the end of this year.
Fitch downgrades SOCAR’s outlook
AZERBAIJAN
SOCAR will come under strain from lower oil prices and mandated cuts to production.
FITCH Ratings has downgraded the outlook of Azerbaijan’s national oil company (NOC) SOCAR from stable to negative, the agency reported on April 17, in light of the slump in oil prices.
The producer’s long-term issuer default rating and senior unsecured rating have both been affirmed at BB+, Fitch said. The revision to SOCAR’s outlook comes after Fitch took a similar step concerning the sovereign rating of Azerbaijan. SOCAR is wholly owned by the Azeri state.
Explaining its decision, Fitch said it expected the NOC to struggle with higher leverage owing to lower than previously forecast oil prices between 2020 and 2022. The agency predicts Brent oil to average $35 per barrel in 2020, rising to $45 in 2021 and $53 in 2022.
SOCAR’s oil output is also anticipated to be lower than earlier thought as a result of Azerbai- jan’s commitments under this month’s OPEC+ deal on supply cuts. The Azeri government is set to reduce national supply to 554,000 barrels per day in May and June, versus 763,900 bpd in March. SOCAR accounts for roughly a third of total production.
Fitch predicts the company’s output to fall by 11% in 2020 and only recover to the 2018 level
of 256,000 bpd in 2022. Its capital investments are anticipated to total AZN12bn ($7bn) in the 2019-2022 period, down from an earlier guid- ance by Fitch of AZN14bn.
SOCAR’s liquidity was AZN7.8bn at the end of 2019, while its short-term debt stood at AZN4.6bn. The liquidity includes AZN6.8bn in cash and cash equivalents and AZN1bn in undrawn credit relating to the modernisation of the Heydar Aliyev oil refinery.
SOCAR’s working capital inflow is expected to be AZN0.8bn in 2020 and the same level the following year. It is forecast by Fitch to generate negative cash flow in both years.
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w w w . N E W S B A S E . c o m Week 16 23•April•2020
