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    Uzbekistan’s Strategy to Become a Gas Exporting Country

Summary

Though Uzbekistan lacks sufficient infrastructure for exports, the country has taken steps to monetize its gas reserves in recent years by forging partnerships with Russian and Asian firms and has now opened the doors to US and EU investors as well.

by: Olgu Okumuş

Posted in:

Natural Gas & LNG News, News By Country, , Uzbekistan, Featured Articles, Caspian Focus

Uzbekistan’s Strategy to Become a Gas Exporting Country

The 17th Uzbekistan International Oil and Gas Conference took place on May 15 and 16, 2013, in Tashkent. The event was officially supported by Uzbekneftegaz and organized under the supervision of Uzbekistan's cabinet.  The conference took place in the same week as the 18th Uzbekistan International Oil and Gas Exhibition, held at the UzExpocentre with 21 countries and 7000 
visitors participating. 

Experts and decision makers from Uzbekistan and Western stakeholders both attended the conference. Shavkat Mazhitov, first deputy board chairman at NHC Uzbekneftegaz, in his opening speech underlined the evolution of the Central Asian oil and gas market, emphasizing the position of Uzbekistan’s oil and gas sector. Uzbekneftegaz, the state oil and gas holding company, is responsible for all exploration, production, and downstream operations within Uzbekistan. Mazhitov stated Uzbekistan’s priorities for development during 2013‐2015, showing the equal influence of the EU, the US, and neighboring countries in the development of Uzbekistan’s oil and gas industry. He also called foreign investors' attention to investment opportunities for oil and gas in the Navoi Free Industrial Economic Zone and the Angren Free Industrial Zone. Other Uzbek decision makers echoed the idea that Uzbekistan could one day become the largest gas exporter of central Asia. Debates and remarks highlighted opportunities and threats that this strategy may face in coming years.

Luigi Iperti, the president of the Italy‐Uzbekistan Chamber of Commerce and the vice president of TECHINT, used his time on stage to discuss how the European gas market may influence gas exports from Uzbekistan and other Central Asia countries. Iperti’s intervention shed a light on the process of opening Uzbekistan's oil and gas sector. Carolyn B. Lamm, the chairperson of the American‐Uzbekistan Chamber of Commerce, illustrated this trend by pointing to the development of US-Uzbekistan bilateral trade and investment relations over the last ten years. 

Esemurat S. Kanyazov, the country's first deputy minister of justice, spoke about the country's investment attractiveness. Currently, Uzbekistan attracts less foreign direct investment than other Caspian nations, and investment in the hydrocarbon industry is insufficient to raise oil and condensate production. Kanyazov drew attention to the fact that Uzbekistan recently began easing legislation in order to attract foreign capital.The new transparent legislation will be the most important asset for investors. Jean‐Georges Malcor, the CEO of CGG Investment, noted international treaties as well as Uzbekistan's national regulations regulate the protection of foreign investors.  According to Malcor, as a rule all disputes are settled through consultations and--in case of further dispute--parties go to international arbitrage.

Besides the legislation, reliable hydrocarbon resources were also on the agenda. Gaybulla S. Abdullayev, director of the Institute of Geology and the Exploration of Oil and Gas Fields at NHC Uzbekneftegaz, gave an updated overview of the country's reliable hydrocarbon resource base--a foundation for attracting international investment into oil and gas sector. He highlighted the initiative undertaken recently by Islom Abdug‘aniyevich Karimov, Uzbekistan's president, under which new regulations opened new opportunities and larger investments for exploration projects and foreign investments. Abduallayev concluded by saying Uzbekistan's rich sources would be better developed without direct foreign investments.

The first two sessions, which evaluated investment opportunities in Uzbekistan, preceded a third session where participants evaluated supply routes for natural gas and prospects for diversification.  The third session’s chairman was Bakhodir B. Eshmuratov, the first deputy director and leading engineer for Uztransgaz, who gave an overview of the current state of Uzbekistan’s gas transport infrastructure. Since independence in 1992, Uzbekistan has increased its natural gas production by 44 percent and today the country is the second largest gas producer in the Eurasia region. Domestic consumers take nearly 80 percent of country’s gas production. Uzbekistan sends over half its natural gas exports to Russia and the remainder to neighboring states such as Kazakhstan, Kyrgyzstan, and Tajikistan. Uzbekistan is also a transit country for Turkmenistan's gas exports to Russia and China. Tashkent’s plan is to triple its gas exports by 2020 and diversify its gas export markets towards both Eastern and Western markets.

John Roberts, an energy security specialist at Platts, made remarks on how the diversification of export roads would be the wisest way to develop the country economically.  He added that he is optimistic Uzbekistan will soon be an important gas exporter and concluded by listing three steps Tashkent should take to help accomplish this. The first is changing attitudes towards domestic consumption, the second a better approach to foreign companies, and the third further integration between upstream and downstream segments.

As the US Energy Information Administration has reported, Uzbekistan lacks sufficient pipelines to export more hydrocarbons and suffers from inefficient and old infrastructure. The 17th Uzbekistan International Oil and Gas Conference showed the country has taken steps to monetize its gas reserves in recent years by forging partnerships with Russian and Asian firms for oil and gas production and has now opened the doors to American and European investors as well.

Olgu Okumuş is an affiliated lecturer in energy diplomacy at Sciences Po, Paris and director of strategy at LEO energy diplomacy and political risk advisors. She is also PhD candidate at Sciences Po, Paris, where her research focuses on Turkey’s energy transit policy.

She can be reached at olgu.okumus@leoadvisors.com