Fuelling energy woes, Uzbekistan sees drop in gas output

Fuelling energy woes, Uzbekistan sees drop in gas output
Output fell over 4 percent in 2022. / Uzbekneftegaz handout
By Joanna Lillis for Eurasianet February 24, 2023

After gas shortages during an unusually freezing winter left Uzbeks shivering in the dark, new extraction data is adding to worries about the country’s near-term energy security.

Gas production fell in 2022 to 51.66bn cubic metres (bcm), down 4.1% on the 53.8bcm extracted the previous year, government statistics show, and 8.3% below Tashkent’s optimistic forecast of 56.3bcm.

The large shortfall does not bode well for Uzbekistan’s chances of hitting its ambitious target of ramping up gas production to 66.1bcn by 2030 – a rise of 28% on last year’s figure. Such an increase is intended to meet rising domestic demand, which the government forecasts will jump nearly a fifth by the end of the decade, from some 47bcm last year to over 56bcm by 2030.

Demand regularly rockets during cold spells to levels that supply cannot match. This year’s severe winter caused pervasive nationwide power outages, sparking public anger.

Amid gas shortages, the government said in December it had completely halted exports, most of which go to China, to redirect supplies to domestic consumers.

Tashkent blamed discrepancies in statistics collection when Beijing’s data showed China still receiving imports from Uzbekistan in December, when Tashkent put exports to China at zero. Uzbekistan exported gas worth $910.9mn to China last year, its statistics show. But China reported receiving $1.07bn, or 18% more. Tashkent ascribes this to Chinese data including transit gas from Turkmenistan.

Tashkent has pledged to end gas exports completely by 2025, to free gas for domestic power generation and the petrochemical industry.

This winter the government has had to increase imports to meet demand, from Turkmenistan for example.

Russia is looking to cash in on rising demand in both Uzbekistan and Kazakhstan (also short of gas this winter), as it seeks new export markets now that Europe shuns its supplies.

Last month both Tashkent and Astana signed roadmaps with Russia’s Gazprom paving the way for gas exports to both countries, in volumes as yet unspecified.

That sparked controversy over the influence this will afford Central Asia’s former colonial ruler.

It has now emerged that Russia is in talks with Kazakhstan about building a gas pipeline to China through Kazakh territory. Gazprom and Kazakhstan’s state-owned QazaqGaz are discussing a feasibility study, Kazakh Energy Minister Bolat Akchulakov said on February 22.

In January Tashkent sought to dampen controversy about Russian sway over the sector by assuring citizens there was “no threat of handing over the gas transportation system to anyone, or to our sovereignty.”

But concerns were compounded by the subsequent release of an investigative report from Radio Free Europe/Radio Liberty (RFE/RL) alleging that Russian vested interests had benefited from alleged cronyism and lack of transparency in the awarding of contracts in Uzbekistan’s energy sector.

“Uzbek and Russian insiders took control of hundreds of gas and oil fields in the Central Asian nation and were awarded lucrative construction, drilling, and export rights, often with no public evidence of competitive bidding,” it suggested.

Tashkent has furiously rebutted many of its claims.

Compounding the doom and gloom surrounding the energy sector, tax revenue from the extractive industries fell by 12% last year, a government report shows. Still, at 13.9 trillion som ($1.2bn), it was slightly above the government forecast.

The drop is mainly due to tax cuts for the extractive sector that came into force from January 2022 as part of the government’s efforts to attract investors.

Joanna Lillis is a journalist based in Almaty and author of Dark Shadows: Inside the Secret World of Kazakhstan.

This article first appeared on Eurasianet here.