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    Uzbekneftegaz Set to Split


The Central Asian oil and gas company also plans to raise $2bn in new debt.

by: Dalga Khatinoglu and Ilham Shaban

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Natural Gas & LNG News, Asia/Oceania, Corporate, Mergers & Acquisitions, Investments, Greater Caspian News, News By Country, Uzbekistan

Uzbekneftegaz Set to Split

State-run Uzbekneftegaz will be split up and raise $2bn in new debt as it bids to compete with international rivals, CEO Bahodirjon Sidikov said May 15.

“The company constitutes 70% of Uzbekistan’s gas production and 15% of GDP, but fundamental reform is needed,” he told journalists during at a conference in Tashkent.

The CEO said the firm will be split into three independent companies operating in the upstream, mid-stream, and downstream segments, to improve “management and transparency”. The plan for the demerger should be completed this year, he told NGW.

Sidikov also spoke of plans to sell a $1bn Eurobond in mid-2020 and borrow a further $1bn from the Asian Development Bank. The proceeds would be used to “help accelerate investments,” he added, especially to improve the state of the country’s gas grid, through which around one-fifth of total production is currently lost.

Uzbek energy minister Alisher Sultanov said that the state is busy carrying out reform across all of the country’s energy sectors in a bid to boost efficiency, productivity and transparency, and to boost revenue.

The country plans to complete a gas to liquid (GTL) plant worth $3.6bn by the end of 2020, of which $2.3bn has already absorbed from various financial sources. “We import 1mn mt/yr of liquid fuels,” he said. “The GTL plant would stop that. We have another project to convert methane to olefins as well.”

“Currently Uzbekistan supplies gas to its neighbours and China,” Sultanov noted to NGW. “In 2016, we approved a plan to boost production by 30% to 73bn m3/yr by 2021. That gas will be used both for export and for processing into value-added products. For 2019, we plan output of 63.6bn m3 - 43bn m3 would come from Uzbekneftegaz. We also plan to transit 3bn m³/yr of Turkmen gas to Russia and China (36-37bn m3) and deliver 1bn m3 to Kazakhstan’s southern regions.”

However, Uzbekistan is struggling to hit its targets. Gas production grew by just 6.1% last year to total 59.84bn m3, the central Asian republic's state statistics committee said January 16. The gain fell far short of the planned 16.8%.

Such shortfalls may be behind the March 5 claim of Russian independent Lukoil that Uzbekistan racked up $600mn in debt in 2018, as it took more than its share of gas from local fields that the pair shares.

Plans for the power sector might help here. A nuclear power plant is also targeted by 2030, which would reduce the 85% share of electricity generation produced by gas-fired plants.