UZBEKISTAN - The Oil & Gas Potentials.

The country's petroleum potentials, including the reserves in the Fergana Valley, have attracted less attention from foreign investors than in the case of Kazakhstan or Azerbaijan. This is mainly because foreign companies are less interested in a landlocked country like Uzbekistan, which is far from existing outlets to the major markets for oil and gas.

Another major reason is the very cautious nature of the Uzbek government, which tends to be wary of foreign motives, with its vague legal and regulatory system discouraging potential investors (see OMT of this week).

Uzbekistan's proven reserves are estimated independently at less than 600m barrels. Its proven reserves of natural gas have been estimated at 1.85 TCM (65.3 TCF). Its proven reserves of coal are 1,476m tons of oil equivalent. The country's hydro-electric potential is less than 1,700 MW.

The country's energy sector is grossly inefficient, with a great deal of waste resulting from an unsustainable government policy (see Downstream Trends of this week).

Uzbekistan's petroleum reserves are from 171 discovered oil and gas fields. Among these, crude oil is produced at 51 fields, natural gas at 27 fields, and condensate at 17 fields. The Bukhara-Khiva region contains over 60% of Uzbekistan's known oilfields, including the Kokdumalak field, which accounts for about 70% of the country's oil production.

The Fergana region contains another 20% of the country's oilfields. This as well as the Ustyurt plateau and the Aral Sea have been targeted for further exploration.

The richest natural gas district is in the Uzbek section of the Ustyurt Basin. Uzbekistan is the third largest natural gas producer in the CIS and one of the top ten gas-producing countries in the world. Since becoming independent, Uzbekistan has raised from 42.8 BCM in 1992 to almost 57.5 BCM in 2003, compared to 32.3 BCM in 1985. The output in 2004 is expected to reach 60 BCM. Most gas production is concentrated in 12 deposits, particularly in fields such as Shurtan and Kokdumalak.

The fields in Kokdumalak, Shurtan, Olan, Urgin Snd south-Tandirchi - all in south-western Uzbekistan - are being developed rapidly.

Uzbekistan's oil and condensate production has been declining in the past few years, now averaging 142,000 b/d compared to a peak of 191,000 b/d in 1998 and 1999. Most of the existing fields are being depleted faster than new commercial reserves are discovered. UzbekNefteGaz (UNG), the state-owned oil and natural gas company which is integrated, expects liquid hydrocarbon production in the country to fall to 120,000 b/d in 2005.

In an effort to stem the decline in production, the government is seeking foreign investment in the country's oil and gas resources. Since independence in 1991, the Uzbek government has invested about $1.5 bn in the entire petroleum sector and most of this has been borrowed from commercial banks and export credit agencies.