Uzbekistan

 
General Information
The Republic of Uzbekistan is slightly larger in area than California, and has a population of 24.8 million. Uzbekistan is bordered by Kazakhstan to the north and west, Kyrgyzistan and Tajikistan to the east, and Afghanistan and Turkmenistan to the south. The capital city, Tashkent, is located in the northeast part of the country and has a population of about 2.1 million. Uzbekistan's currency, the som, has an exchange rate of about 693 som per U.S. dollar (as of April 2002). The gross domestic product (GDP) in 2000 was estimated to be $60 billion (purchasing power parity).

The Republic of Uzbekistan is slightly larger in area than California, and has a population of 24.8 million. Uzbekistan is bordered by Kazakhstan to the north and west, Kyrgyzistan and Tajikistan to the east, and Afghanistan and Turkmenistan to the south. The capital city, Tashkent, is located in the northeast part of the country and has a population of about 2.1 million. Uzbekistan's currency, the som, has an exchange rate of about 693 som per U.S. dollar (as of April 2002). The gross domestic product (GDP) in 2000 was estimated to be $60 billion (purchasing power parity).

On February 23, 2001, the Uzbek government adopted a resolution on "Deepening Reforms in the Energy Sector" which could indicate a more favorable investment climate. The February 2001 resolution called for turning various state-owned energy functions into corporations and partially privatizing them. The Ministry of Power Energy was renamed Uzbekenergo State Joint-Stock Company. The Uzbek government also announced that major power plants and distribution units would be turned into joint-stock companies with some shares offered to foreign investors. However, it was announced that Uzbekenergo would continue to control these companies.

The February 2001 resolution presented a 10-year plan for reconstruction of electric generating and transmission facilities that will require major foreign investments. The Uzbek government estimated the cost of the 10-year program to be $1.4 billion (based on the exchange rate then of 387.5 som per dollar). The 10-year program laid out detailed estimates of power plant capacity to be built, reconstructed, or retired, on a plant-by-plant basis. It also spelled out the power lines, substations, and switching networks needed and presented financial estimates of the money expected from foreign investment, the money to come from privatization sales, and the money from Uzbek investment. Uzbekistan has indicated that all receipts from selling energy enterprises will be used in the energy sector. In November 2000, the Uzbek government issued Resolution No. 456, which states that procurement of projects using foreign contractors should be done with an open tender process. These rules allow for bidders to propose financing sources, such as long term loan arrangements, and get exceptional preferences.

An historical summary of Uzbekistan's Total Primary Energy Production (TPEP) and Consumption (TPEC) is shown in Table 1.

Oil
Production and Consumption
Uzbekistan possesses about 600 million barrels of oil reserves. Since 1990, Uzbekistan has dramatically increased its production of crude oil; in the early 1990s, Uzbekistan was a net importer of oil, but now it is a net exporter. An historical summary of petroleum production and consumption in Uzbekistan is shown in Table 2.

Refineries
There are three oil refineries in Uzbekistan, with a combined capacity of 220,000 b/d; the two older refineries are at Fergana and Alty-Arik and the newest refinery is at Bukhara. The Bukhara refinery was built in the 1990s at a cost of $400 million, and currently has a capacity of 50,000 b/d, which is expected to be expanded to 100,000 b/d. Bukhara can refine both crude oil and natural gas condensate.

In 2000, Uzbek refineries operated at below capacity, refining 5.2 million tons (104,200 b/d) of crude oil and condensate. In 2000, the Uzbek refineries produced 31,000 b/d of diesel, 27,200 b/d of gasoline, 26,700 b/d of heating oil, 6,600 b/d of kerosene, and 2,600 b/d of lubricants and other products. The refined products are shipped via railroad and truck.

Uzbekistan has entered joint ventures with foreign firms to upgrade refinery capacity. In 2001, Mitsui of Japan completed a $200 million upgrade at the Fergana refinery, expanding the desulfurization system. Texaco and Uzbekistan's Uzneftepererabotka formed the UZ-Texaco joint venture in 1996 to produce and market Texaco brand lubricants for engines, transmissions and hydraulic systems. Under Texaco's arrangement with the Uzbek government, they are allowed to convert earning in soms into dollars, which is usually not permitted by Uzbekistan in its contracts with outsiders.

Natural Gas
Reserves, Production, and Consumption
Uzbekistan has estimated natural gas reserves of 66.2 trillion cubic feet (Tcf), with the largest reserves in the Ustyurt Region. Uzbekistan produced 1.96 trillion cubic feet (Tcf) of natural gas in 2000, with the Shurtan and Kokdumalak natural gas fields having the largest output. Old fields with declining production included Uchkir and Yangikazen. The development of the existing gas fields at Kandym and Garbi has continued. Uzbekistan's Uzbekneftegaz has signed a 50-50 product-sharing agreement with Russia's Itera for exploration and development of new reserves.

In January 2001, Trinity Energy of Britain reached agreement with the Uzbek government to invest $400 million in gas exploration and production over a 40-year period. This effort is directed at producing from gas deposits in the Plato Ustyurt region.

A historical summary of natural gas production and consumption in Uzbekistan is shown in Table 3.

Downstream Processing
Uzbek natural gas is high in sulfur content and the sulfur level must be reduced considerably in processing. The Mubarek gas processing plant is the largest one in the nation and it has a capacity of over 1 Tcf.

In December 2001, the pumping stations for the Shurtan Gas Chemical Complex started operating. The complex represents an investment of $1 billion. The Japanese Bank of International Commerce supplied $400 million of this money and the U.S. Ex-Im Bank supplied $200 million. The gas processing plant at the Shurtan Gas Chemical Complex will be able to clean the gas and compress it. The Complex will also have plants to produce 125,000 tons of polyethylene and 137,000 tons of liquified natural gas per year. The Complex is located in the Shurtan gas field in southwestern Uzbekistan in the Kashkadarinsky region.

Gas Exports
Uzbekistan exports natural gas to Kazakhstan, Kyrgyzstan, Russia, Ukraine, and Tajikistan. Uzbekistan has an arrangement with Tajikistan trading natural gas for pipeline passage rights, and in 2000, Uzbekistan traded $25 million of gas for this transit right for the pipeline that crosses the Leninabad region in northern Tajikistan. Under current arrangements, gas from Turkmenistan transits across Uzbekistan. A typical route is Uzbekistan-Kazakhstan-Russia.

Turkmenistan supplied 700 Bcf of gas to Russia in 2000. This could increase to 1.8 Tcf in the next several years. While Russia has paid for gas deliveries from Uzbekistan in a timely manner, Uzbekistan has experienced trouble collecting payment for gas delivered to Kazakhstan and Kyrgyzstan. This has resulted in Uzbekistan cutting off deliveries to these countries to compel payment for past deliveries. The gas export arrangement with Kazakhstan is continuing to evolve as both countries seek a more favorable deal. Kazakhstan has been paying $1.13 per million Btu to Uzbekistan, but the Kazakhs have announced their intention to use more of their own gas, extracted from the Amangeldy gas field in Kazakhstan. In dealing with Kyrgyzstan, Uzbekistan sells gas at $1.19 per million Btu. Kyrgyzstan pays for it 50% in cash and 50% in Kyrgyz products (including water during the Uzbek cotton growing season). There have been several instances where Uzbekistan has stopped delivery to Kyrgyzstan in retaliation for late payment, the most recent in January 2001.

An historical summary of coal production and consumption in Uzbekistan is shown in Table 4.

It is estimated that Uzbekistan has coal reserves of 4.4 billion short tons. Half of these coal reserves are located in Angren, which contains 2 billion tons of brown coal. The Angren surface mine produces about 90% of Uzbekistan's coal.

The coal industry in Uzbekistan uses old equipment that has not been upgraded since the early 1990s, though the Uzbek government has tried to get the coal equipment upgraded. A tender for upgrading the Angren mine was won by Krupp Fordertechnik; the Krupp project is expected to be performed over a ten-year period in six stages and is expected to double production levels, from the current level of 2.5 million short tons per year to eventually reach 5 million short tons per year. Production costs are expected to be cut from the current cost of $23 per ton to a goal of $12 per ton. The first stage of the Krupp project will cost $20 million, and will be funded by German bank credit with a guarantee of the Uzbek government. Krupp is already delivering equipment for this project.

There are also hard coal deposits at Baisun and Shargun. The Uzbek government estimates that with additional investments in the mine at Shargun, it could double or triple its production from the current level of 200,000 short tons per year. It also estimated that Baisun could quintuple it production from the current level of 100,000 short tons per year.

The Ugoli joint stock company operates Uzbekistan's coal mines, and has five subsidiary mining enterprises -- three of them are developing the Angren open pit mine, while the other two are underground mines at the hard coal deposits. One of the enterprises is attempting to exploit the Angren brown coal deposit with underground coal gasification technology, with the intent of producing more than 2 billion cubic meters of gas from the brown coal seams.

Hydroelectric
There are two major river systems in Uzbekistan, the Amudarya and the Syrdarya, both of which flow northwestward and empty into the Aral Sea; the Amudarya itself forms part of Uzbekistan's southern border (including its border with Afghanistan), while the Syrdarya passes through Uzbekistan's eastern region, coming from Tajikistan, before passing into Kazakhstan. Most of Uzbekistan's hydroelectric power plants are on the Syrdarya and its tributaries. Uzbekistan's power generation sector includes 28 hydroelectric power plants, with a cumulative generating capacity of 1,420 megawatts (MWe). In addition, there are two other hydroelectric stations with a combined capacity of 290 MWe that belong to the Ministry of Agricultural and Water Management that are also connected to the power grid. A summary of Uzbekistan's major hydroelectric power plants is shown in Table 5

Additional hydroelectric capacity is in the planning or construction stages, and if all projects eventually come online it will add more than 700 MWe generating capacity. A summary of the major hydroelectric power plants that are planned and under construction is shown in Table 6.

Energy Transmission Infrastructure
Electricity Grid
The United Central Asia Power System (CAPS) was built in the Soviet era, connecting the power lines of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. It includes a 500 kilovolt (kV) ring system, which was completed in 1991. There are also 110 kV and 220 kV lines linking these five countries. Uzbekistan is the main contributor to CAPS, generating 51% of the power the system carries, while Tajikistan generates 15%, Kyrgyzstan 14%, Turkmenistan 11%, and Kazakhstan 9%. Balance and synchronization of CAPS is done at the Unified Dispatch Center (UDC) located in Tashkent, Uzbekistan.

CAPS and UDC have aging equipment from the Soviet era, much of which was produced in Russia, and the condition of the equipment has been causing reliability problems. In order to develop a responsive regional wholesale power market, modern equipment will be needed, but there is no current capability to produce such equipment in Uzbekistan. Only with a thorough rehabilitation of the system will CAPS and UDC be able to do modern telemetering, telecommunication, frequency control and supervisory control and data acquisition (SCADA).

The government of Uzbekistan has signed a $5 million Contract with ABB of Switzerland for the construction of three substations at Tashkent.

Oil Pipelines
Uzbekistan does not have sufficient exports to justify building a new pipeline. The import pipeline that brings oil from Omsk in Russia to Uzbek refineries has been inactive for several years. The domestically-produced crude used in Uzbek refineries comes from the Kashkadarya region and the Fergana Valley.

Natural Gas Pipelines and Storage
Uzbekneftegas built an underground gas storage facility at Kodzhaabad in the Andhizan Region at a cost of $72 million. This facility opened in 1999 and is being used to send gas to the industrial plants in the Fergana Valley. Uzbekistan exports natural gas to Kazakhstan, Kyrgyzstan, Russia, Ukraine, and Tajikistan via the Central Asia-Central Russia pipeline.

Uzbekistan is trying to develop more pipeline routes to provide additional options for selling natural gas to neighboring countries. It had been proposed in 1996 that the Central Asia-Central Russia pipeline be expanded to provide more access to European markets. There was a memorandum of understanding with Turkmenistan, Pakistan, and Afghanistan (before the Taliban takeover) on a Central Asia Gas (Centgas) pipeline project. Uzbekistan could use the Centgas pipeline to export gas to Pakistan and possibly India. However, since Afghanistan is still in transition, this project is in limbo. Uzbekistan is also interested in a proposed 5,000-mile pipeline that would supply gas to China from Turkmenistan and Kazakhstan.

Electricity
Generation and Consumption
Uzbekistan relies largely on conventional thermal-electric power generation for its electricity supply; more than 85% of its generation is presently based on fossil fuel. Overall, the demand for power has been relatively flat over the past decade, though there were signs near the end of the 1990s that increased consumption will occur in the next decade as the country continues to modernize.

An historical summary of electricity generation and consumption in Uzbekistan is shown in Table 7.

Uzbekistan has a seasonal arrangement with Kyrgyzstan and Kazakhstan for importing and exporting energy and water. In the winter, Uzbekistan exports natural gas to Kazakhstan and natural gas, fuel oil, and electricity to Kyrgyzstan. In summer, Kyrgyzstan supplies Uzbekistan with electricity from the excess power from its hydroelectric plants.

Installed Capacity
Presentlly, Uzbekistan's electricity generating capacity is heavily weighted toward conventional fossil fuel thermal-electric generation, and this is not expected to greatly change in the forseeable future. An historical summary of installed electricity generating capacity in Uzbekistan is shown in Table 8.

Industry Overview
Uzbekistan's production of electricity is the largest among the Central Asian republics. However, much of the generating capacity is in poor condition and several units need to be rehabilitated and modernized. A summary of Uzbekistan's thermal-electric generating power plants is shown in Table 9.

In February 2001, the government of Uzbekistan announced its intention to increase the country's total power plant generating capacity by 20% by the year 2010. The Uzbek government estimated, in March 2001, that this plan will cost $1.4 billion to implement (based on the currency exchange rate at that time of 387.5 soms per dollar). The plan is expected to reduce oil consumption and save 540 million cubic meters of natural gas annually. The net effect will be to add nearly 1,400 MWe of capacity. The changes in capacity of various power plants under the plan is shown below in Table 10.

The cost and estimated completion dates of the new capacity additions described in Table 10 above are shown below in Table 11.

The rehabilitation of the Syrdarya gas-fired power plant will involve reconstruction of two of the ten turbines. Germany's Siemens won the tender for this replacement in 1999, and the EBRD has allocated a loan of $28 million for the work. It is expected that the total cost of the project will be $45 million and that new capacity plus upgrades will add 640 MWe to this power plant. Uzbekistan also plans to construct a new 800 MWe unit at Talimarjan power plant. The installed capacity at Talimarjan will eventually increase to 3,200 MWe, with four 800 MWe units.

Uzbekistan is working with international financial institutions to obtain funding to modernize several other power plants:

• Tashkent Power Plant turbine modernization
  This will require installation of new turbines in the newly constructed block. The government of Uzbekistan is negotiating a loan with Japanese JBIG fund, which has expressed interest in the project.
• Navoi Power Plant turbine modernization (condensing type)
  Uzbekistan plans to privatize this power plant by 2003. The Italian power company ENEL is conducting a feasibility study of the project and could invest $70 million in it. The Mitsui Company of Japan has also expressed an interest. Preliminary results from the feasibility study are expected soon.
• Mubarek Power Plant reconstruction
  The French-Swiss Alstom group is currently doing the feasibility study of this power plant.
• Angren Power Plant reconstruction.
  The Mitsui Company of Japan and Tyssen-Krupp of Germany are performing the feasibility study.

Uzbekistan is seeking international contractors and suppliers to do these projects. The first tender announcement for these projects may be issued in 2002.

ABB Kraftwerker Berlin won the tender for rehabilitation of the steam turbines, pumping equipment, and generators at the Novo-Angren power plant.

The heavy oil burned by power plants in Uzbekistan is a problem, since it contains 5% sulfur. The established worldwide norm is 0.7% sulfur. None of the power plants in Uzbekistan are equipped with flue gas desulfurization units. The UN review mission found that the SO2 emissions from Fergana were 57.52 kilograms per metric ton of oil equivalent, a high sulfur level. The mission found that the quality of coal delivered to the Angren power plant was very low, with ash content reaching 40%, sulfur content of 2.0-2.5%, and 38% moisture.

Greenhouse Gas Emissions
Uzbekistan's growing dependence on natural gas has resulted in more than a 25% increase in carbon dioxide (CO2) emissions from natural gas usage over the past decade. This has been somewhat alleviated by a corresponding decrease in CO2 emissions from coal and petroleum usage, mainly due to fuel switching in some of the thermal-electric power plants in the country. An historical summary of CO2 emissions from fossil fuel use in Uzbekistan is shown in Table 13.

In May 2000, a plan was announced to privatize 49% of Uzbekneftegaz, the state-owned oil and gas company that controls most oil and gas activity. However, this did not attract any investors, so on March 9, 2001, a new privatization program was announced, which again included Uzbekneftegaz. This time, Uzbekneftegaz is to be structured as 7 joint stock companies, and the holding company itself is to be privatized. The next step in the privatization of Uzbekneftgaz will be an assessment of its assets. It is expected that the firm doing this assessment will be selected via a tender. The March 2001 announcement also offered to sell 48% of the shares in four power plants to foreign investors:

• Syrdarya is a gas-fired power plant located in Shirin City in the Syrdarya region. It was commissioned in 1972. There are 10 units of 300 MWe each, for a total of 3,000 MWe. The plant is situated on 378.1 hectares of land and includes 17 kilometers of railroad track and 26 kilometers of roads.
• Fergana is a thermal power plant which was commissioned in 1956. The output of the plant varies from 560 MWe to 690 MWe.
• Tashkent is a gas-fired combined-heat-and-power (CHP) plant which was commissioned in 1939, located southeast of Tashkent. The capacity is 1,860 MWe, and the plant includes production shops, pump houses, distribution facilities, and chemical cleaning shops.
• Murabek is a gas-fired CHP plant which is located in the Kashkadaria region and has a capacity of 60 MWe. Most of the equipment was installed in the 1984-85 period. All the electricity and steam output of the plant is taken up by the nearby Murabek gas processing plant and the Kashkadaria regional electric distribution company.

The Uzbek government intends that all four power plants will remain under state control after the proposed partial privatization. This includes management, competition, pricing of electricity and steam, and expansion to external markets.

An historical summary of Uzbekistan's macroeconomic indicators is shown in Table 14.

Uzbekistan's imports in 2001 were $2.9 billion. The main imports were machinery and metals. The imports are predominantly from Russia, South Korea, Germany, the United States, Turkey, and Kazakhstan.

Uzbekistan is taking steps toward joining the World Trade Organiztion (WTO), but Uzbekistan has been slow to implement free trade policies. Uzbek government policies have restricted imports and controlled currency exchange, which has led to low levels of foreign investment. To encourage foreign investment, Uzbekistan offers firms exclusivity, tax incentives, and tariff exemption. Since the Uzbek government has little capital to invest it encourages investors to utilize Ex-Im banks and international financial institutions. The Uzbek government provides letters of guarantee.