Uzbekistan And Russia Ink Crucial Gas Deal

• Uzbekistan has agreed to purchase 2.8 billion cubic meters of natural gas annually from Russia's Gazprom to mitigate potential winter shortages; the gas will be transported via Kazakhstan through the Central Asia-Center pipeline.
• As part of the deal, a new gas metering station will be constructed by September, three gas-pumping stations will be modernized, and an additional 22 kilometers of pipelines will be added to the existing network.
• Critics argue that Uzbekistan should develop its own gas resources rather than rely on Russian gas, but severe power outages and public discontent have led to a shift in policy; the deal also paves the way for other Central Asian nations to consider importing Gazprom fuel.

Uzbekistan has reached a deal with Russia’s Gazprom to buy 2.8 billion cubic meters of natural gas annually over the coming two years as part of a broader effort to prevent winter-time shortages.

The Energy Ministry said in a statement on June 19 that daily deliveries of 9 million cubic meters of gas will start from October 1.

The ministry said in its statement that the tariff will be based on market rates and prices within Uzbekistan.

While short of the 6 billion cubic meters per year deal that the Russian media had forecast earlier this month, this agreement marks a breakthrough in Moscow’s fraught efforts to negotiate the sale of gas to buyers in Central Asia.

For the gas to be sent from Russia to Uzbekistan, it will need to be pumped via Kazakhstan through the Central Asia-Center, or CAC, pipeline, which has historically been used to carry gas from south to north. 

Opponents of this trade have argued that Uzbekistan should avoid developing a dependence on Russian gas for its domestic needs. They also bemoan this turn of events as a consequence of the government’s failure to properly develop the country’s own resources. As recently as last year, Tashkent earned money selling gas to China. But those exports were halted amid mounting public anger over a nationwide wave of power outages.

Russia spotted an opportunity in this crisis. In November, President Vladimir Putin spoke during a meeting in Moscow with Kazakhstan’s President Kassym-Jomart Tokayev about the idea of setting up a “trilateral [gas trading] union” – a so-called “gas troika” – that would also include Uzbekistan.

While the Uzbek reaction was initially wary, officials soon warmed to the idea. When Uzbekistan reached an agreement with Russia in late January to explore the possibility of reversing the flow of gas in the CAC pipeline, it appeared as though the start of deliveries would be imminent. 

Devising a technical framework for the agreement has held things up, however.

A new gas metering station will need to be built by September to accommodate this set-up, the Uzbek Energy Ministry said. Under the same sales deal, three gas-pumping stations will be modernized, and 22 kilometers of pipelines will be added to the network.

In related news from last week, Gazprom agreed on terms with Kazakhstan’s QazaqGaz on the transit of the gas to Uzbekistan. Kommersant business daily cited its sources as saying the agreement envisioned the transit of 6 billion cubic meters annually – a figure that implies that Central Asian buyers other than Uzbekistan are looking to import Gazprom fuel.

The most likely candidates are Kazakhstan and Kyrgyzstan. 

This arrangement is setting the stage for Russia both exporting and importing gas to and from Central Asia. The CAC pipeline has until now been used to dispatch gas northward from Turkmenistan.

And at least one strand of the route will need to be kept for that purpose as things stand.

According to Russia’s former ambassador in Ashgabat, Gazprom imported around 5 billion cubic meters of gas from Turkmenistan in 2022 under an agreement that is supposed to last until 2024. 

The question that arises is why Uzbekistan does not simply itself buy the gas it needs from Turkmenistan, its immediate neighbor. A supply arrangement was in place until mid-January, when Turkmenistan ceased making deliveries amid technical complications caused by the intensely cold weather. 

Uzbekistan could, as long as there is not an unanticipated surge in demand, make do with what it gets from Russia. 

When quizzed by Kommersant newspaper, Sergey Kondratiev, an energy market expert at the Moscow-based Institute for Energy and Finance, said that he anticipates domestic demand for gas in Uzbekistan to rise to 51-52 billion cubic meters in 2023, up from 48.4 billion cubic meters in 2022.

By Eurasianet.org

More Top Reads From Oilprice.com:

• Venezuela Defies Expectations As Economy Rebounds
• China Close To Signing 27-Year LNG Supply Deal With Qatar
• Modi Heads To Washington To Talk Oil, Arms, And India’s Sovereignty