Where is Uzbekistan’s Gas?

Nurata Fuel Station by lensfodder at Flickr

by Nathan Hamm on 2/15/2012 · 10 comments

Gazeta.uz has a story trumpeting an increase in foreign trade turnover, rattling off a series of figures released by UzStat, the state statistics committee. Keeping in mind that Uzbekistan’s official economic’s figures should always be treated with extreme skepticism, there’s an interesting nugget in there.

Heating gas and petrol shortages have become an annual affair that this year appear to have gotten sharply worse and claiming lives recently in Andijon as a result of an explosion caused by makeshift measures to keep homes warm. There also have been small protests over the unavailability and high prices of fuels and the government’s campaign to switch customers off of natural gas.

Where is this gas? Uzbekistan produces and exports natural gas. Given the ways in which political elites predate on the population, some, including myself, have speculated that there’s been a preference to export at higher prices than to sell domestically. On the other hand, Uzbekistan The article notes a decrease in both the oil and gas and cotton sectors as shares of exports. (Fergana News breaks down the numbers, also noting an increase in food exports.) My back of the napkin calculations show a drop from about $3.27 billion to $2.78 billion year-over-year. Someone, hopefully, can enlighten me on the prices at which Uzbekistan sells its exports and whether or not these numbers show a decrease in exports or just the prices at which exports have been sold.

Several weeks ago, Alexander Benois said in a story on the widespread impact of fuel shortages that the government is meeting export commitments, but reducing extraction. Meanwhile, they are forcing businesses off of natural gas, and gas clearly isn’t reaching the general public in sufficient quantities. This leaves the gas sitting in the ground, where it can be used to negotiate additional export deals.

Doing this is doubly soaking the public, which is not only left cold, but also stuck with a big financial hit as prices for alternative fuels rise. While Uzbekistan’s government keeps society under heel on social and political issues, it is playing a much more dangerous game by so brazenly attacking the public’s pocketbooks and quality of life, especially when it is well within the government’s means to prevent these shortages. In the past, the government has backed off of extremely unpopular economic policies and/or blamed them on local officials in order to defuse small expressions of protest in the provinces. These tactical retreats have been followed up by attacking with renewed vigor. It is probable that the spring and summer will see expanded removal of businesses and residences from the natural gas grid, setting the stage for more widespread public suffering, and perhaps protest, next winter.

Photo: Nurata Fuel Stop by lensfodder.

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Nathan is the founder and Principal Analyst for Registan, which he launched in 2003. He was a Peace Corps Volunteer in Uzbekistan 2000-2001 and received his MA in Central Asian Studies from the University of Washington in 2007. Since 2007, he has worked full-time as an analyst, consulting with private and government clients on Central Asian affairs, specializing in how socio-cultural and political factors shape risks and opportunities and how organizations can adjust their strategic and operational plans to account for these variables. More information on Registan's services can be found here, and Nathan can be contacted via Twitter or email.

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Metin February 19, 2012 at 1:56 pm

From business perspective, selling abroad is more profitable. Prices for natural gas sold domestically are hugely subsidized, so you cannot make the same profit you do exporting.

Energy needs will probably be met by alternative sources like coal and solar power (both are abundant in the country). Energy saving technologies might help to ease the problem as well.

Will February 22, 2012 at 10:09 pm

Metin, how would you comment $90/tcm export price to China? Do you know what Uzbek officials told Tajiks, who pay more than $200/tcm? We’ll sell to Tajikistan what is left over after exports to China and Russia. $200+ vs. $90, this doesn’t look a profitable agreement to me.

Metin February 23, 2012 at 1:27 am

Not sure that the price reported by uzmetronom is accurate. I just googled and found out the price paid by China for Turkmen gas is $192/tcm. Both Uzbek and Turkmen gas are exported via the same pipeline for the same consumer. I guess the price for Uzbek gas is similar (uzmetronom might of omitted figure ‘1’).

That said, I agree with you that financial information of public companies must be transparent.

Will February 23, 2012 at 1:39 pm

I wish I was wrong. There is no reliable information about Uzbek gas price to China. It could be $192 if that’s what Turkmenistan receives from China.

Nathan Hamm February 23, 2012 at 1:41 pm

It’s not unheard of for the rates charged by different sources to be very different, even if on the same pipeline infrastructure. This is part of what was happening with all the disputes and rate changes that came out of Russia demanding Ukraine pay market rates several years ago.

Marianne Kamp February 22, 2012 at 5:14 pm

Natural gas prices plunged between July 2011 and Jan 2012. Cotton prices were at their highest in March 2011, and then took a 60% slide starting in August. I would guess that Uzbekistan has continued to export in order to earn income, but that it is not earning as much for exported commodities as it was last year. My home, Wyoming, has the same problem. Who knows, maybe Asia will see a rise in natural gas prices due to this winter’s deep freeze.

Nathan Hamm February 22, 2012 at 6:08 pm

Marianne, thanks for the comment. I suspect that you’re right. A colleague and I who have been following the impact on society of the shortages and forced switch to alternative fuels wondered why the problems started so severely and so early this year. The collapse in prices looks like a probable culprit.

Will February 22, 2012 at 10:01 pm

Uzbekistan has signed a contract with China to export 10bcm of gas at $90/thousand cm, which is at least twice less than the price it sells to Russia (around $200). $90/tcm is fixed and is quite low by any standards. Even before the price hike for Russia, the price was at least $100. I don’t understand what a clown would agree to sell gas at a such low price. If domestic prices are cheap and don’t want to sell to your own people, fine, keep it for future generations. But don’t sell it abroad at ridiculously low price, which is five times less than the price Russia sells to Europe. This leads me to suspect that China may be paying more than $90/tcm, the difference being secretly siphoned off to foreign accounts of, well you know who.

Source for $90 gas price: http://uzmetronom.com/2012/01/18/kitajjskijj_podrjad.html

oldschool boy February 23, 2012 at 1:37 pm

I have just run accross an article in Uzmetronom that says that for the last 10 years, Uzbekistan’s crude oil and gas production fell from 8 to 3.6 million t/year and that, from 2010 to 2011, annual gasoline and diesel fuel production fell by 6-7%.

oldschool boy February 23, 2012 at 6:50 pm

under “crude oil and gas” I meant “crude oil and gas condencate”

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