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Uzbekistan to Sign 3 Upstream Gas Deals

Saturday 21 September 2019

TASHKENT (Reuters) — Uzbekistan plans to sign at least three deals with large foreign energy companies this year and five more next year as it aims to boost its natural gas output, chief executive of state energy firm Uzbekneftegaz said on Friday.

The list of potential partners in exploration and development agreements includes BP, Total, Azerbaijan’s SOCAR, Russia’s Rosneft and Novatek, Bahodir Sidikov said on the sidelines of an energy conference in Tashkent. Potential investors are seeking guarantees that they would be able to export whatever they produce, Sidikov said, but Tashkent is instead offering them guaranteed offtake at prices “at which the project makes economic sense.” “We have some projects where if you use the international price you can get 60% IRR (internal rate of return),” he said. “Nobody expects 60% IRR.”

Asked what profitability levels he considered acceptable, Sidikov said: “Between 11 and 15-16%.”

Next year, Sidikov said, Tashkent plans to sign five more agreements.

Uzbekistan started actively working on attracting foreign investment after President Shavkat Mirziyoyev took over in late 2016 following the death of his predecessor Islam Karimov.

Among the challenges faced by the resource-rich nation in its quest to bring in investors was the fact that all of its geological data was only available on paper and in the Russian language, Sidikov said. Tashkent is now working with Schlumberger to build a digital geological database.

Sidikov said Uzbekneftegaz, which produces 42 bln m³ (bcm) of gas — out of Uzbekistan’s total output of 63 bcm, aimed to add 4-5 bcm to the figure next year to ensure it can fully meet domestic demand.

He said the company was pressing ahead with plans to issue a debut $1 bln Eurobond next year and expand the pipeline through which it pumps gas to China by 2022-23. “We do have available natural gas to export additionally to China”, he said, adding that the volumes and pricing were still being discussed.

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