UZBEKISTAN - The Energy Base.

The energy base of Uzbekistan has seen slow expansion from 45 million tons of oil equivalent (oe) per annum in 1985 to a government estimate of about 55m tons or 2006; but this year's consumption could be lower. The main component of the energy mix is natural gas, accounting for more than 90% of the country's energy consumption.

Uzbekistan has considerable energy resources, particularly fossil fuels, which have enabled the state implicitly to subsidise other sectors of the economy. The state has kept low prices for petroleum products, natural gas, and electricity to support living standards. It has expanded the access of the population to natural gas, with the goal being 100% coverage. Over 3.5m households, almost 95% of the population, get natural gas.

Uzbekistan's energy sector - from oil and gas fields to retail petrol pumps and the electricity system - is fully owned by the state. The policy-making responsibilities are with the Fuel Energy Complex (FEC) headed by a deputy prime minister. Regulatory responsibilities are split between several institutions - the Pricing Department of the Ministry of Finance has the responsibility for economic regulation, i.e. price setting of all energy forms, while technical regulation is the responsibility of UzGosEnergoNadzor (UGEN) for the electricity sector, and UzNefteGazInspectsia (UNGI) for the hydrocarbon sector.

Energy price setting responsibilities in the Ministry of Finance are further split between two units, one dealing with all energy prices to industry as well as with electricity prices to households, and the other with prices of coal and petroleum products applicable to retail consumers. In addition, the State Committee for Nature Protection is responsible for regulating the environmental aspects.

Operational responsibilities are those of UzbekNefteGaz (UNG) for the hydrocarbon sector, UzbekEnergo (UE) for electric power, and UzbekUgol for Coal. UzbekUgol is an autonomous entity within UzbekEnergo.

Despite the existence of the various entities and organisations, the energy sector is considered strategically important. The President of the Republic, Islam Karimov, and the Council of Ministers are the decision makers for energy policy, including decisions for those relating to industry structure, form and content of sector regulation, pricing, corporate structures of operational entities, privatisation and private sector participation.

Implementation of these decisions is delegated to the FEC and the individual agencies such as UNG, UE, etc. Decisions regarding privatisation and private sector participation are implemented by GKI (State Property Committee), headed by another deputy prime minister.

In addition, many decisions of an operational or commercial nature affecting industry players are administratively regulated and/or subject to approval by the Ministry of Finance, the Anti-Monopoly Committee or the Council of Ministers. For instance, Special Regulation No. 021 approved by the Ministry of Finance regulates the distribution of cash received by subsidiaries of UNG. The cabinet's Decree on Natural Gas Delivery provides a list of consumers who have the right to suspend payments for gas for up to 120 days.

UZBEKISTAN'S ENERGY CONSUMPTION 1985-2005
(In Million T/Y Of Oil Equivalent)

                1985   1990    1995    2000    2002    2003    2004    2005
    Oil         11.4   12.6     6.7     6.8     6.8     6.5     6.3     6.0
    Gas         29.6   33.2    38.1    42.4    47.2    42.5    46.2    45.0
    Coal        3.5     4.1     1.4     1.2     1.4     1.4     1.4     1.4
    Hydropower  0.5     0.6     1.4     1.2     1.3     1.3     1.3     1.4
    Total      45.0    50.5    47.6    51.6    56.7    51.7    55.2    53.8