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Kazakhstan Likely To Insist on Revisions to Kashagan Oil Contracts

Kazakhstan is demanding compensation for lost profits from the North Caspian Operating Company (NCOC), the consortium that manages the Kashagan oil field, and arbitration claims have risen to $150 billion. Sources close to Kashagan told The Times of Central Asia that this should send the message to western energy companies that Kazakhstan is looking to revise previously signed contracts. While Bloomberg has reported the sum of the claims, citing people familiar with the matter, Kazakh government officials have declined to comment on the situation, claiming that it is a "commercial dispute." In April 2023, proceedings against the companies developing the Kashagan and Karachaganak fields began as part of a dispute over cost deductions from oil-sale proceeds of more than $13 billion and $3.5 billion, respectively. An additional $138 billion claim relates to the calculation of the cost of oil production "that was promised to the government but not delivered by the field developers," according to Bloomberg. The Ministry of Energy has not yet commented on the new claims. It states that the Kazakh authorities seek to maximize profits from their oil-production projects with the participation of foreign investors, but have been relatively flexible in previous disputes with oil corporations. International sources note that Eni, Shell, Exxon and TotalEnergies have already invested around $55 billion in Kashagan, and currently the field produces about 400,000 barrels of oil per day. NCOC investors, led by Italy's Eni, are convinced that production can be increased to 1.5 million barrels per day. NCOC has stated that it acts in strict compliance with the contract. Representatives of Eni confirmed that the Kazakh authorities have applied to the court for arbitration settlement, but did not disclose details. Earlier, Kazakhstan won a lawsuit against the Kashagan consortium which required them to pay $5.1 billion for damage to the environment. Kashagan is developed by the NCOC consortium, which includes the national company KazMunayGas (KMG) and several foreign energy companies: Eni, Shell (Great Britain), ExxonMobil (USA), Total (France), Inpex (Japan), and CNPC (China). Member of the Public Council of the Kazakh Ministry of Energy, Olzhas Baidildinov believes that the sharp increase in the amount of the lawsuit is a signal from the Kazakh side to the consortium to revise the contracts. "In my opinion, it's obvious that Kazakhstan wants to revise the terms of work on large consortia. At the same time, I have proposed many times to exchange the frozen assets of the Russian Federation for stakes in major projects: Tengiz, Karachaganak and Kashagan. There is a nuance here: for example, the shares in Karachaganak and Kashagan are managed by PSA LLP, which is determined by the authorized body, while the share in Tengiz is managed by KazMunayGas. As we see, on Kashagan and Karachaganak there are arbitration claims filed in international arbitration, there is an environmental issue - but on Tengiz they are silent for some reason. This is either KMG's unprofessionalism, because the amount of investment expense is very high, or some other unknown issues that need...

Energy Central Asia Oil & Gas Afghanistan Export/import Uzbekistan Economy

Poor-Quality Gasoline Refused by Taliban Doesn’t Belong to Uzbekistan

The Customs Committee of Uzbekistan denied that gasoline returned by the Taliban due to its poor quality in fact belongs to Uzbekistan, according to a post on the committee's Telegram channel. The Times of Central Asia has reported that the Taliban returned 120,000 liters of gasoline imported via the Hayraton border point to Uzbekistan due to its poor quality. It has been reported that the returned oil products didn't originate in Uzbekistan. On the contrary, 120 tons of gasoline loaded in two tanker trucks were sent to Afghanistan from Russia and moved through the territory of Uzbekistan only in transit mode. On February 7, these tankers left for Afghanistan through the Ayritom station in Surkhandarya, Uzbekistan. These oil products returned by Afghanistan entered Uzbekistan on April 6 through the Ayritom station. Also, the Customs Committee asked certain mass media operating in the country not to distribute unverified, one-sided, unconfirmed information. “At this point, we ask the mass media to study carefully before disseminating such information, taking into account the friendly relations between the two countries,” the Customs Committee report said.

Coal Legislation Uzbekistan Energy

Uzbekistan Planning to Abandon State Regulation of Coal Prices

A decision to end Uzbekistan's price caps on coal has been made against the background of rising costs for electricity. To date, hard coal in the country is a social commodity, which is sold to the population at fixed prices. Currently, coal is sold under direct contracts to the population, state organizations and thermal power plants, and because it's included in the list of socially important goods, its price is regulated by the state. Wholesale and retail prices for coal are considered and approved by the Interdepartmental Commission on Tariffs at least once a year (valid through June 1). Retail coal is sold to the population through coal warehouses run by the state company "Kumir ta'minot". The Ministry of Energy, together with other agencies, has a mandate to make proposals for the formulation of wholesale and retail prices "based on market principles" within a month. In 2023 Uzbekistan's coal production rose to 6.19 million tons, up 15.5% from the previous year. However, imports also increased -- 3.1 million tons were purchased from Kazakhstan alone. At the beginning of this year, Uzbek president Shavkat Mirziyoyev instructed domestic mining companies to increase coal production by 22%, taking into account the needs of the population, social sphere and industries. According to experts, the potential of the coal industry is not being properly utilized. At the same time, coal combustion is the main air pollutant in Uzbekistan, especially in Tashkent, which has recently taken a leading position on the list of cities with the worst air quality. During the fall and winter period, greenhouses on the outskirts and industrial enterprises of the Uzbek capital massively use coal and fuel oil as heating and power generation fuel. This has led to a sharp deterioration of air quality indicators and an increase in respiratory diseases among citizens.

Investments Social Uzbekistan Economy Central Asia Energy

Uzbekistan to Raise Energy Prices for First Time in Five Years

Electricity and natural gas tariffs in Uzbekistan will increase from May 1, and social consumption quotas will also be established. The price increase will be the first since August 2019. The quota for electricity use was defined up to 200 kWh per month, for gas -- from March to October -- up to 100 cubic meters, and from November to February, up to 500 cubic meters. The authorities attribute the price increase to inflation, which has cumulatively reached 66% over the past five years. At the same time, most energy companies are suffering severe losses, with state company JSC Thermal Power Plants reporting losses of 1.6 trillion sum ($125 million). The Uzbek government has announced assistance to the vulnerable in the form of raising the official poverty line, pensions and allowances. "About $80 million has been allocated from the state budget to support low-income families. These funds have clear sources and will be allocated in a timely manner and without any delays," Economy and Finance Ministry spokesman Khurshed Mustafayev said.

Energy

Kyrgyz PM Zhaparov In U.S. For Talks With Energy Investors

Kyrgyzstan's prime minister Akylbek Zhaparov is in the United States this week, and will meet with potential investors as Kyrgyzstan looks to grow its energy sector. Zhaparov will meet with the heads of the World Bank, International Monetary Fund, the U.S. Agency for International Development (USAID), the U.S.-Kyrgyz Chamber of Commerce, Asian Infrastructure Investment Bank, Asian Development Bank and the European Investment Bank. He will also meet with representatives of leading tech corporations, according to the Kyrgyz government's press service. Kyrgyzstan's largest energy project is the construction of a hydroelectric power plant on the Naryn River, for which the World Bank has allocated a soft loan of $5 million for a feasibility study. Kyrgyz authorities are also negotiating a $500 million loan to construct the hydropower plant. In total, according to current estimates, the project will cost about $5 billion. The Times of Central Asia has previously reported that the Kyrgyz Chamber of Commerce and Industry intends to open representative offices in the U.S.

Uzbekistan Oil & Gas Energy Investments

Uzbekistan Aims to Become One of World’s Largest Producers of Olefins

Uzbekistan's largest private oil and gas company, Sanoat Energetika Guruhi (Saneg) will build a gas chemical plant to produce olefins from methanol. The work will be done in partnership with the Chinese state-owned energy giant, Sinopec. The complex will utilize natural gas from the Mubarek fields. Olefins are raw petrochemical materials used for a range of polymer products, such as plastics and films. The $3.3 billion plant will be able to process 1.3 billion cubic meters of natural gas by 2026. About 44% of the production will be exported, mainly to China and Turkey. In addition, the project will make it possible to produce value-added products from natural gas rather than simply burning it for energy or exporting it. The construction of the complex will also stimulate the development of related industries. The Karakul free economic zone in the southeastern Bukhara region will house plants producing textiles, carpets, footwear, plastic pipes and fittings, and other polymer products. "Uzbekistan's gas-chemical complex plans to produce 300,000 tons of polyethylene terephthalate annually, 350,000 tons of polypropylene, and other materials. This is expected to reduce the country's imports of polymers by $500 million a year and attract $350 million a year from their exports," said Bakhodyr Khafizov, director of the Karakul free economic zone. Saneg representatives said that, according to a marketing study, annual polymer consumption in Uzbekistan is now 5.5 kilograms per capita, far below that of other developing economy peers. For example, that figure in Turkey is 23 kilograms, meaning that the Uzbek domestic market shows significant room for expansion. However, there may be problems with exporting polymers abroad, as Uzbekistan has no direct access to the sea. In this regard, production will require additional investments taking into account overland logistics.