• KGS/USD = 0.01118 0%
  • KZT/USD = 0.00222 0%
  • TJS/USD = 0.09131 0%
  • UZS/USD = 0.00008 0%
  • KGS/USD = 0.01118 0%
  • KZT/USD = 0.00222 0%
  • TJS/USD = 0.09131 0%
  • UZS/USD = 0.00008 0%

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World Bank Says Central Asia Natural Gas Supply-Demand Dynamics Unbalanced

The World Bank released a report on February 22nd entitled "Achieving Carbon Neutrality by 2060: A Sustainable Energy Future for Europe and Central Asia." The report states that the countries of Central Asia will soon have to address a widening gap between the supply and demand of natural gas, as well as challenging decisions on a number of energy and environment fronts. China is the primary destination of Central Asia’s substantial net gas exports, but it is becoming increasingly difficult for countries in the region to meet their own high domestic winter demand and fulfill their export obligations due to Central Asia’s increasing demand and stagnant gas production - especially in Kazakhstan and Uzbekistan. The natural gas supply and demand balance in Central Asia could be improved by the formation of a “gas troika,” which Russia has proposed to Kazakhstan and Uzbekistan, to move gas volumes between the three countries and to export to China. However, there are concerns about the dependability of Russian gas supplies, and the appalling condition of the countries’ Soviet-era gas pipeline infrastructure. Furthermore, the report says, it's feasible to replace coal in Kazakhstan and close the supply gap in Uzbekistan by boosting gas imports from Turkmenistan and launching a regional gas trade in Central Asia. The report also states that increasing demand in Central Asia will be met with increased gas volumes.

Exclusive: Breaking Down Kazakhstan’s $21.6 Billion Claims Against International Oil Consortiums

The total amount of claims brought against the consortiums, North Caspian Operating Company (NCOC) and Karachaganak Petroleum Operating (KPO) is the largest in the history of Kazakhstan. In March 2023, PSA LLP, the authorized state institution overseeing these projects, brought forward claims in international arbitration in relation to Kashagan and Karachaganak for $13.5 billion and $3.0 billion, respectively. In addition, the Atyrau Region environmental regulator filed a claim for $5.1 billion against the NCOC consortium for storing too much sulfur on site, discharging wastewater without treatment, etc. The claims of PSA LLP cover the period 2010-19 and relate to the oil consortiums’ costs for carrying out large projects, as well as tenders and insufficient work completed. The shareholders of NCOC, which is developing the offshore Kashagan Field, include: KMG Kashagan (16.877% stake), Shell Kazakhstan Development (16.807%), Total EP Kazakhstan (16.807%), Agip Caspian Sea (16.807%), ExxonMobil Kazakhstan (16.807%), CNPC Kazakhstan (8.333%) and INPEX North Caspian Sea (7.563%). Their total investments over the period have not been disclosed, but, according to various estimates, exceed $60 billion – meaning the state is currently calling into question about 23% of all costs. The KPO consortium is Shell (29.25%), Eni (29.25%), Chevron (18.0%), Russia’s Lukoil (13.5%) and Kazakhstan’s state-owned KazMunayGas (10.0%). Investments in this oil and gas condensate field are estimated at $27 billion, hence the filed claim is significantly smaller both in absolute terms and as a percentage of costs, standing at about 11%. A production sharing agreement was signed in 1997 for Karachaganak and in 1998 for Kashagan, with the contracts to be in effect for 40 years. In 2022, the sole participant in PSA LLP became Samruk-Kazyna Trust Corporate Fund, part of the state holding National Welfare Fund Samruk-Kazyna, while Kazakhstan’s Ministry of Energy is currently entrusted to run PSA LLP. Say two, but mean three? NCOC and KPO dominate the industry through control of three fields. Tengiz, Kashagan and Karachaganak are the largest oil and gas fields in Kazakhstan. The country’s oil and gas condensate production in 2023 amounted to 89.9 million tons (about 1.8 million barrels per day), with the share of the “three whales” – as these projects are called – accounting for 67% of oil production: Tengiz with 28.9 million tons, down 1% versus the 2022 level; Kashagan with 18.8 million tons, a 48% increase; Karachaganak with 12.1 million tons, up 7% year-on-year. The stabilization contract for Tengiz was one of the first signed at the dawn of Kazakhstan’s independence in 1993, also for a term of 40 years, meaning it should be the first to expire in 2033. The shareholders of the Tengizchevroil JV are Chevron (50%), ExxonMobil (25%), KazMunayGas (20%) and Lukoil (5%). After completion of its FGP (Future Growth Project), Tengiz should produce about 900,000 barrels per day, a significant figure even by world standards. It is surprising that Kazakhstan has not yet raised or voiced any claims against TCO, even though the FGP budget has swelled from an initial $12 billion to $25 billion...

Uzbekistan Plan to Invest $470 Million to Increase Gas Imports From Russia

State natural gas pipeline company, Uztransgaz plans to use loans from international banks to fund upgrades to the country's gas pipelines at a cost of $470 million dollars. The upgraded pipelines are intended to handle increased natural gas imports from Russia. The objective is to boost Uzbekistan's natural gas intake to 32 million cubic meters per day from the current 9 million cubic meters. This plan is in accordance with Decision #92, adopted by the Cabinet of Ministers on February 14th. Following a Moscow event on October 7th, 2023, the presidents of Uzbekistan, Kazakhstan and Russia began the process of supplying Uzbekistan with Russian gas through Kazakhstan. The group planned the reversal of the "Central Asia-Center" trunk-line gas network in order to make these deliveries. The network was constructed in the 1960s to transport gas from Turkmenistan and Uzbekistan to Russia. Uzbekistan's gas trading company, UzGasTrade and Russia's Gazprom Export signed a two-year commercial contract which outlines the purchases.

Major Kazakh Oil Company Fined Over Fire that Wasn’t Extinguished for 200 Days

The Buzachi Oil Company has been fined 350 million tenge ($777,536) over a fire at the Karaturun field that burned for 200 days. As a result of a large methane leak at the field in June 2023, natural gas ignited at well number 303.  The fire was finally extinguished on December 25th. Consequently, representatives from a regional Department of Ecology office conducted an unscheduled inspection of Buzachi Oil LLP, and according to the data gathered, the maximum permissible concentration (MPC) of methane in the air in the vicinity of the field was 480-times higher than normal. Furthermore, the concentration of petroleum products in the soil was 168.13 mg/kg higher than the permissible limit. According to a since deleted post on petrocouncil.kz, the fire started on June 9th when a gas-water mixture was released during the lifting of the drilling tool and ignited. Members of Parliament subsequently called on the government to terminate the contract with Buzachi Neft and return the field to the state. It transpired that the well had been drilled a year earlier than it should have been - not in 2024, as indicated in the permit, but in May 2023. "Based on the results of the inspection, the enterprise was issued a prescription on the need to develop a remediation program to eliminate the environmental damage caused, as well as compliance with the norms of emissions into the environment. Four administrative protocols were drawn up. According to preliminary calculations, the fine will amount to more than 350 million tenge," the Ministry of Ecology and Natural Resources said. Experts estimate the volume of methane leakage at the field in Mangistau region amounted to 127,000 tons. If these estimates are correct, the methane leak at Karaturun may be the second largest in the history of observed leaks. Speaking to The Times of Central Asia, environmentalist Timur Yeleusizov said that Kazakhstan needs to open a full-scale inspection of multiple enterprises, hold them accountable, and fine them. Yeleusizov claims that multi-million dollar fines are imposed in theory, but it's not known how many of them have been levied in practice. "This is not the first such case. Last year Kazzinc dumped cement dust, then the Ulba River was colored white, and now it is green," Yeleusizov told TCA. "How long will this continue and how long will our state inactivity last? Recently, there have been frequent cases of waste discharged into water bodies and rivers from which people drink. This problem concerns all the enterprises of Kazakhstan, because the issue of waste processing has not been solved so far. Moreover, companies can [afford to] pay these multi-million dollar fines without harming themselves." Yeleusizov also emphasized that the areas where hotels and resorts are located are in great danger, as none of them meet environmental standards. "I've repeatedly raised this issue with the Ministry of Ecology and Natural Resources. We are now developing ecological tourism - glamping and camping in specially protected areas. Nevertheless, not a single mountain resort in Kazakhstan meets...

Kyrgyzstan Wins ICC Case Against Kazakh State Gas Company

Officials at the International Chamber of Commerce's (ICC) International Court of Arbitrations in Paris, France, have ruled unanimously ruled in favor of the Kyrgyz Republic in a case brought by Kazakhstan's state natural gas company QazaqGaz that sought $35 million, according to the Ministry of Justice of the Kyrgyz Republic. The Kazakh company's claim was filed in 2020. QazaqGaz had originally sought $35 million during the arbitration proceedings, but later reduced its claims to $15 million by waiving its claim to lost profit. The claims against the Kyrgyz government were based on "expropriation and other violations of the claimant's rights." In 2004, QazaqGaz, together with the Kyrgyz national gas operator, JSC Kyrgyzgaz, established a joint venture (JV) for the purpose of modernizing and operating the Kyrgyz section of the Bukhara-Tashkent-Bishkek-Almaty gas trunk-line.  Under the agreement, the Kyrgyz gas operator transferred its share of the gas pipeline to the new JV. The investment agreement called for pipeline modernization, but later the contract was terminated by mutual consent. The Kazakh company then made claims based on three legal instruments: the Kyrgyz-Kazakh intergovernmental agreement on the promotion and protection of investments; the International Energy Charter, which includes substantive guarantees for the protection of foreign investments; and the Kyrgyz Republic's law on investments, which protects investors coming into the country. "The arbitration tribunal agreed with the Kyrgyz Republic's argument on the expiration of the statute of limitations on the plaintiff's claims arising from the Law on Investments in the Kyrgyz Republic and considered them inadmissible," the Kyrgyz Ministry of Justice said in a statement. It's worth noting that according to Kyrgyz law, the statute of limitations is three years from the moment the claimant discovered the violation of their rights. The International Arbitration Court rejected the claim on two other legal instruments. According to the Kyrgyz Ministry of Justice, the arbitration panel agreed with the defendant's argument that the actions of Kyrgyzgaz - which allegedly violated the rights of the plaintiff - cannot be attributed to the Kyrgyz Republic under the rules of international law on state responsibility. Therefore, the Kyrgyz Government cannot be held liable for the actions of Kyrgyzgaz in allegedly wrongfully terminating the contract. The International Arbitration Court ordered the Kazakh company to reimburse the Kyrgyz side for 60% of its arbitration costs. The decision can be appealed within one month. KyrgyzGaz is now called Gazprom Kyrgyzstan, and is owned by the Russian state gas company.

What Will the Future Hold for Uzbekistan’s Gas Problems?

What Will the Future Hold for Uzbekistan’s Gas Problems? Can the infrastructure of Uzbekistan carry the country into a geopolitical resource hub? The country has certainly benefited from energy exports: In terms of available reserves, Uzbekneftegaz remains the sacred cow of the state, which has generated significant foreign exchange earnings. Prime Minister Abdulla Aripov even started to switch industrial enterprises “of no social significance” from natural gas to coal so that more gas would be available for export. In 2019, natural gas was sold on the domestic market at a price of US$118 per thousand cubic meters while Uzbekistan sold gas for export at US$145 per thousand cubic meters. The money came in foreign currency. The conversion of small and medium-sized businesses (such as restaurants and factories for the production of building materials) to coal made it possible to free up over 2.1 billion cubic meters of gas, that is, around US$315 million. On the other hand, gas supply on the domestic market left much to be desired. During the winter period, temperatures unexpectedly dropped below -20 degrees Celsius. Due to a lack of heat in residential buildings in November and December in several regions like Andijan, Karakalpakstan, Nukus, Fergana and Khorezm, the population began to attend unauthorized rallies. In 2020, the Ministry of Energy reluctantly admitted that there was a shortage of gas due to depletion of gas fields. On December 16, 2020, the government decided to reduce the export of gas and direct it towards domestic needs. That said, exports were being reduced even earlier than this. In fact, the first reports of the suspension of fuel supplies to other countries appeared in March 2020, when the global COVID-19 pandemic began and the main gas consumer, China, reduced imports from Uzbekistan. In 2021, Uzbekistan once again experienced extremely low air temperatures. Gas exports were again limited. Even though Deputy Chairman of Uzbekneftegaz, Bakhodir Sidikov, said that fuel reserves would last for several decades (in his words, “We have very large, promising areas for geological exploration, but the current approved hydrocarbon reserves will last for 20-30 years”) the coming months proved that these forecasts to be overly optimistic. Soon after, the Ministry of Energy announced that even with limited exports, Uzbekistan lacked about 20 million cubic meters of gas per day. On the night of December 31, 2022, supplies to Uzbekistan from Turkmenistan stopped due to burst gas pipelines. Unusual frosts caused increased gas consumption, resulting in a shortage of fuel for power plants and boiler houses. The country began experiencing long-term power outages, problems with heating, hot water, and gas pressure in homes. Against the backdrop of the emerging energy shortage, the authorities were forced to close gas stations and industrial enterprises in order to distribute the remaining gas to the population and social facilities. And thus, what was already known by many Uzbeks became apparent to the rest of the world. More than half of the gas pipelines in Uzbekistan (45 thousand km) were laid more than...

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