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UZBEKISTAN - Part 2 - Oil & Gas Exports.

*** Experts Say Int'l Majors Can Increase Recoverable Oil Reserves In Post-Saddam Iraq To More Than 325 Bn Barrels And Production Capacity To 10M B/D In 5 to 6 Years

*** A Petroleum Working Group For Baghdad Is To Hold Its 1st Session In Washington Next Month

*** Iran Will Have To Offer An Alternative To The Buy-Back Formula If Its Recoverable Reserves Are Reach 200 Bn Barrels Of Oil And 60 TCM Of Natural Gas

*** Kuwait Will Be Compelled To Speed Up The Work On Developing Its Oilfields

Landlocked Uzbekistan exports about 95,000-98,000 b/d of refined petroleum products, plus about 15,000 tons per month of LPG. This year its exports of natural gas are expected to reach almost 8 BCM, up from 6.3 BCM in 2001.

To meet the requirements of its three oil refineries, which have a combined capacity of 224,000 b/d, Uzbekistan imports about 80,000 b/d of crude oil from Russia. It also imports some refined oil products.

Oil products and gas exports at present depend entirely on the Russian system of pipelines, built many years ago as part of a centralised Soviet energy sector.

Exports of oil and gas are limited to fellow members of the Commonwealth of Independent States (CIS). This is because the Russians do not allow Uzbek exports to pass through their system to non-CIS markets.

The LPG exports are moving from one of the Shurtan gas fields which is the site of the largest petrochemical and gas processing complex in Uzbekistan and the biggest of its kind in the CIS. On stream since mid-2001, the gas plant has the capacity to produce 137,000 tons/year of LPSs/NGLs. The bigger complex is being fed with gas from the Shurtan fields.

The plant has gas separation and treatment units, with the capacity to process up to 4.5 BCM of raw gas per annum. The plant's units also can produce 4.2 BCM per annum of dry natural gas, 130,000 tons/year of light condensate, and 4,000 tons/year of sulphur (see Downstream Trends No. 19).

LPG exports are moving to neighbouring CIS countries and to Iran. Shipments to Iran began in mid-June 2001 at the rate of 2,000-4,000 tons per month. A long-term contract is being negotiated between the state-owned Uzbekneftegaz and National Iranian Gas Co.

Most of the exports of natural gas this year are moving to Russia, with less than 1 BCM going to Kazakhstan. The other importers of Uzbek natural gas are Kyrghyzstan, Tadjikistan and Ukraine.

Uzbekistan is the second biggest gas producer in the CIS next to Russia, with output this year set to hit a record of 60 BCM (see Gas Market Trends No. 19.

Uzbekistan is a transit point for Turkmenistan's gas exports to Russia, which are pumped through Kazakhstan. The gas enters the Russian territory at the Alexandrov Gay point, the key to the Central Asia-Central Russia line.

Alexandrov Gay is the hub on the Russo-Kazakh border for the Central Asia-Central Russia trunkline, which originates at gas fields in Uzbekistan and runs north through Turkenistan and Kazakhstan to Russia. Russia and Uzbekistan have been negotiating a long-term gas transit agreement calling for delivery of up to 60 BCM/year of Central Asian gas into the Russian pipeline network.

The first round of talks was held at Tashkent in late June 2002 between officials from Russia's Energy Ministry and gas monopoly Gazprom and counterparts from the Uzbek government and Uzbekneftegaz. It was understood that the transit agreement will be signed before end-2002.

Negotiations so far have covered measures to inspect, repair and replace equipment throughout the Central Asia line. The aim is for the line to transport up to 50 BCM/year through the Central Asia-Centre trunkline in 2003-2004. The throughput will be raised to 60 BCM/year for the 2005-2012 period. The Central Asian republics have no alternative transport outlets for their huge natural gas reserves. In early 2002 Russian President Vladimir Putin called for the establishment of a "Eurasian gas alliance" between Russia, Kazakhstan, Turkmenistan and Uzbekistan. The new organization would be able to arrange interaction between gas producers, primarily on gas export shipments to third countries.

Setting up such an alliance is good for Uzbekistan. Tashkent intends to raise its natural gas exports to 11.8 BCM/year from 2005. Larger exports in the subsequent years would depend on a major increase in Uzbek gas production.

Itera, a private Russian company registered in Florida, is the only steady buyer of the country's gas as the other importing clients have been regularly underpaying the Uzbeks. Itera and LUKoil, the largest oil company in Russia, are jointly to develop major gas fields in Uzbekistan under a PSA with Uzbek-neftegaz (see Gas Market Trends No. 19).

Itera and Uztransgaz, the Uzbekneftegaz subsidiary in charge of the country's gas pipelines and gas distribution operations, are partners in a 67-km pipeline gas project being built in the country. To be completed before end-2002, this will run from the Gazli gas field to Kagan.

The pipeline will link the gas producing region of Bukhra-Khiva with the Bukhara-Ural and Central Asia-Central Russia gas trunklines. The link will also allow more gas to be pumped from the fields into a storage facility at Gazli. The line will have a capacity of 30 MCM/day. It will allow Itera and LUKoil and their local partner Uzbekneftegaz to export gas from the Kandym group of fields and from the Bukhara-Khiva and Gissar regions. Itera has access to Gazprom's network of gas pipelines.

The pipeline is being part financed through a loan provided by Itera. The loan is guaranteed by the Uzbek government. Uzbekneftegaz is contributing to the project finance from its internal funds.

Sales to Kazakhstan declined this year as KazTransGaz (KTG) refused to pay a border price of $42 per 1,000 CM, despite the fact that Uzbekneftegaz lowered this from $45/1,000 CM at the beginning of 2002. KTG has insisted on paying $40/1,000 CM. The two sides have a five-year contract signed in mid-2001.

Kyrghystan is paying the $42/1,000 CM price. In late 2001, KTG claimed that Kyrghystan had been siphoning off up to 1 MCM/day from the Uzbek-Kazakh gas pipeline, which crosses Kyrghyz territory. The issue had become a recurring problem between Kazakhstan and Kyrghyzstan every winter.
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Publication:APS Review Oil Market Trends
Geographic Code:9UZBE
Date:Nov 11, 2002
Previous Article:UZBEKISTAN - The US E&P Role.
Next Article:Iraq, Post-Saddam, Will Become The World's Biggest Oil Exporter.

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