Page 7 - FSUOGM Week 29 2019
P. 7
FSUOGM PIPELINES & TRANSPORT FSUOGM
China, Uzbekistan to fast-track work on Line D
UZBEKISTAN
Line D’s construction will be supported by $800mn of loans and FDI, according to UNG.
CHINA and Uzbekistan have agreed move ahead more quickly with the development of the long-delayed Line D of the Central Asia Gas Pipeline (CAGP) system.
Uzbekistan’s state-owned Uzbekneftegaz (UNG) said on July 19 that its o cials had held a meeting with counterparts at China National Oil and Gas Exploration and Development (CNODC), an overseas division of China’s state- owned CNPC. e two sides “agreed to take joint measures to accelerate the construction of the gas pipeline,” the company said.
CAGP currently consists of three strings that start in eastern Turkmenistan and pass through Uzbekistan and Kazakhstan and terminate in north-western China. ey are capable of ow- ing up to 55bn cubic metres of gas per year.
e proposed fourth string would run along a di erent route through Uzbekistan, Tajikistan and Kyrgyzstan, carrying up to 30 bcm of gas per year. Line D was initially anticipated to start up in 2020, but Beijing put the project on hold because of slowing gas demand growth in China.
The Line D’s Uzbek section is 205 km in length and should be developed by a joint ven- ture between UNG and CNPC. According to UNG, building work will be supported with $800mn of foreign direct investment (FDI) and loans, presumably from China.
Both Tajikistan and Kyrgyzstan have sug- gested over the past year that construction on Line D will resume, indicating that China is eager to see the project revived.
CAGP exports to China reached 50.9 bcm last year, utilising 93% of the pipeline’s capac- ity. Some 38.7 bcm of this supply derived from Turkmenistan, while 6.4 bcm came from Uzbekistan and 5.8 bcm from Kazakhstan. Under IHS Markit’s base-case outlook, deliver- ies are predicted to reach 54 bcm in 2020, with Turkmenistan supplying 40 bcm, Uzbekistan 7.5 bcm and Kazakhstan 6.5 bcm. In a recent report, the London-based information pro- vider forecast that China and other countries involved would aim to bring Line D on stream around 2025.
POLICY
UNG restructuring to follow ADB plan
UZBEKISTAN
Social concerns and debts represent two obstacles to UNG’s restructuring.
THE restructuring of Uzbekistan’s state-run oil and gas producer Uzbekne egaz (UNG) will be based on a corporate plan prepared by the Asian Development Bank (ADB), the latter’s Tashkent o ce has said.
Under this plan, UNG will be restructured into a corporate legal entity that is independently run with enhanced governance and nancial management structure. Its gas transmission arm Uztransgaz will be spun o in order to remove any con ict of interests with UNG’s upstream operations.
“Unbundling UNG into independent pro- duction, service, and transmission companies— and divesting non-core assets - is consistent with goodinternationalpractice,”saidADBcountry director for Uzbekistan Cindy Malvicini.
UNG will also adopt international nancial reporting, auditing and governance standards, the bank said, helping it to raise capital from international investors.
Uzbekistan plans to privatise a 49% stake in UNG by 2024 through initial and secondary
public o erings, its energy ministry said ear- lier this month. How much the government is expecting to net from these sales is unknown, however.
While the Uzbek government appears com- mitted to reforming UNG, progress has been slow. If carried out e ectively, the restructur- ing would entail the loss of thousands of jobs at UNG, which is Uzbekistan’s biggest employer. Tashkent is naturally eager to mitigate this social impact to avoid civil unrest.
Another issue is UNG’s outstanding debts, with the terms of some of its loan agreements preventing it from re-organising. It will there- fore need to seek approval from creditors on a case-by-casebasis.
By streamlining UNG’s operations, the government is also preparing the ground for the company’s maiden Eurobond sale, slated to take place next year. Russia’s Gazprom has been hired as one of two global co-ordinators for the placement, Reuters cited UNG as saying in January.
Week 29 24•July•2019 w w w . N E W S B A S E . c o m P7
