Uzbekistan contains significant oil and gas reserves, and currently ranks as the world's eighth largest natural gas producer.

GENERAL BACKGROUND

BACKGROUND
Soon after declaring independence, Uzbekistan established economic policies that differed from more market-oriented approaches taken by several other former Soviet republics. State subsidies, price controls, and gradual wage increases were used to shield consumers from inflation. However, mounting economic problems by 1994 resulted in an economic reform program including: stricter fiscal policies: removing price controls: cooperating with international financial institutions: introducing the Soum as the new national currency: privatizing state assets: and liberalizing prices. The fiscal restraint shown by Uzbekistan attracted considerable support from the International Monetary Fund, the World Bank, and other lenders such as the European Bank for Reconstruction and Development (EBRD). In 1996, real economic output growth exceeded 1 percent (after declining by 60 percent from 1991-1995). Inflation in 1996 has been estimated at 64 percent in 1996 after years of hyperinflation.

In addition, Uzbekistan has passed several laws promoting foreign investment, and has made some efforts towards privatization. The EBRD has estimated that the private sector accounted for 40 percent of Uzbekistan's gross domestic product (GDP) in 1996, with 96 percent of small-scale businesses privatized. Progress has been slower for medium and large enterprises and for the agricultural sector. Other economic and economic reforms remain to be undertaken. Taxes are not transparent because there are no reliable tax codes and taxes have been treated on a case-by-case basis. In addition, Uzbekistan has not allowed investors full convertibility of the Soum into foreign currency.

To help diversify its economic and political options away from Russia, Uzbekistan has moved to strengthen relations with other Central Asian states as well as with countries outside the region. The Presidents of Kazakhstan, Kyrgyzstan, and Uzbekistan have signed an agreement setting up a special economic zone on their border areas as part of a larger effort to open up a unified economic development area. The European Community and Uzbekistan have also signed an Interim Agreement aimed at enhancing trade and other ties between the parties. In addition, Uzbekistan and Kyrgyzstan have signed a treaty on "eternal" friendship between the two countries.

Uzbekistan's political concerns include an Islamic revival in Central Asia, as well as religious and ethnic fighting in nearby states. Uzbekistan has responded to the rise in Islam by emphasizing that there can only be one power - the state - during Uzbekistan's emergence from its Soviet past. Fighting in Afghanistan between forces of the Muslim Taliban and several opposition factions, including ethnic Uzbeks, has raised concerns in the former Soviet Central Asian republics, including Uzbekistan. Ethnic Uzbek warlord Abdul Rashid Dostam has received financial support from Uzbekistan, which hopes to halt the advance of the Taliban and prevent the Afghan turmoil from spilling over into its territory. Northern Afghanistan is home to millions of ethnic Uzbeks, as well as Tajiks and Turkmen. Neighboring Tajikistan has been for several years the target of its own Islamic insurgency launched from bases across its border with Afghanistan.

OIL
Uzbekistan is the only former Soviet republic to have substantially increased its oil production since becoming independent, with total oil production (including natural gas liquids) increasing from 66,000 barrels/day in 1992 to an estimated 183,000 barrels/day in 1996. As a result, Uzbekistan is no longer a net importer of petroleum, although it has had to import some refined products because its oil has tended to be too sour (high in sulfur content) for its refineries.

Uzbekistan's long-term goals include becoming a net exporter of oil and gas and attracting foreign investors to help develop its resources and increase production via joint ventures and production sharing agreements. Kayim Khakkulov, the president of state oil and gas company Uzkbeneftegaz, estimated that 63 percent of the country sits on hydrocarbon deposits. Uzbekistan has identified 32 new oil and gas fields to be developed, an additional 18 for rehabilitation, and 9 more blocks for exploration. Uzbeneftegaz has been negotiating with Agip (Italy), Mobil (United States), Japan National Oil Corporation, Unocal (United States), and others on developing oil and gas projects. One promising region is the Fergana basin that Uzbekistan shares with Tajikistan and Kyrgyzstan. This basin is estimated to contain 4 billion barrels of discovered and undiscovered oil, as well as several trillion cubic feet of natural gas.

In November 1996, Uzbekistan signed a series of agreements with Unocal Corporation to evaluate the country's potential crude oil and natural gas resources, as well as to determine the feasibility of using part of Uzbekistan's pipeline network to tie into Unocal's proposed Central Asia Oil Pipeline (CAOP). If constructed, the CAOP would link Central Asian oil producers to a proposed new deepwater port on Pakistan's Arabian Sea coast. Completion of projects such as the CAOP would bolster Uzbekistan's ability to attract foreign investment and increase production. Uzbekistan shares many of the problems of other countries in the Caspian Sea Region , including a remoteness from markets. Uzbekistan is one of the two landlocked countries in the world that are surrounded entirely by other landlocked countries, and the lack of export pipelines means that it has been unable to sell its oil on world markets. In addition to the CAOP, Uzbekistan could also tie into the proposed 1,800 mile pipeline from Kazakhstan to China .

Foreign investment in Uzbekistan's energy sector totaled $385 million in 1995 and $545 million in 1996, and Uzbekistan wants to increase this to $1.1 billion in 1998. Although Uzbekistan has lifted a ban on privatization, foreign investors have asked for further reforms. The U.S. ombudsman for CIS (Commonwealth of Independent States) energy relations has noted that Uzbekistan needs to pass new laws to make taxes transparent, remove all restrictions on currency convertibility and foreign investment, and formalize PSAs (production sharing agreements).

Refining
Refinery modernization is crucial to Uzbekistan's goal of self-sufficiency in oil. Refinery upgrades will enable it to process increased oil production levels in order to avoid imports of costly oil products. In November 1997, Technip (France) commissioned the initial phase of the new $400 million, 50,000 barrels/day Bukhara refinery, the first new refinery to be built in any former Soviet republic since its independence. In addition, Japan's Mitsui signed a contract for a $200 million upgrade, to be financed by the European Bank for Reconstruction and Development (EBRD) and Japan's Exim Bank, to expand desulphurization capacity at the Fergana refinery by late 1999.

NATURAL GAS
Uzbekistan is also the only former Soviet republic to have substantially increased its natural gas production since becoming independent, with gas production increasing from 1.5 trillion cubic feet in 1992 to an estimated 1.7 trillion cubic feet in 1996, making Uzbekistan the eighth largest producer in the world . Most gas production is concentrated in southeast Uzbekistan in older fields such as Shurtan and Kokdumalak. Uzbekistan has taken short-term measures to increase gas production by upgrading facilities at existing fields. Longer-term measures involve finding new reserves with foreign help; Uzbekistan has negotiated with Enron (United States) and Gazprom (Russia), among others.

As part of an effort to become self-sufficient in energy, Uzbekistan has been developing domestic uses for its plentiful gas, such as converting cars and trucks to run on compressed gas instead of gasoline, and using the gas for feedstock at a new $1 billion gas chemicals plant at the Shurtan gas field. Rising domestic gas consumption has reduced the amount of gas Uzbekistan has to export. Exports have also been discouraged by the lack of export pipeline alternatives to the Central Asia-Central Russia pipeline that connected Uzbekistan to Russia and the other republics of the former Soviet Union, as well as frequent non-payment by these republics. had also agreed to import some gas from Uzbekistan. Uzbekistan exported 92 billion cubic feet of gas to southern Kazakhstan, Kyrgyzstan , and Tajikistan in 1996. Exports to Kazakhstan were cut off for non-payment in 1996. As a result, some gas originally contracted by Kazakhstan was instead exported to Ukraine , and Kazakhstan agreed to pay off its debt with Kazakh goods and with services such as transporting Uzbek products through Kazakhstan to other markets.

Uzbekistan has made efforts to develop alternative export routes. One proposal calls for the expansion of the existing Central Asia - Central Russia pipeline system that would enable the Central Asian republics to export gas to European markets. Another alternative is to find new markets in Asia; Uzbekistan has signed a memorandum of understanding with Turkmenistan, Afghanistan , and Pakistan to participate in a pipeline project to export gas to Pakistan. Uzbekistan is also being considered for a proposed 3,800 mile-pipeline to bring gas from Turkmenistan , Uzbekistan, and Kazakhstan east to China.

COAL
Uzbekistan's coal reserves are concentrated primarily in the Angren, Baisun, and Shargun deposits. Production at Angren, which contains mostly brown coal (lignite), accounted for 2.4 million metric tons - over 80 percent of the country's total production in 1996. Modernization of production facilities could significantly increase output, and Krupp Hoesch Stahlexport (Germany) signed an agreement at the end of 1996 to provide new equipment and upgrade the mining operation there. The first contract is projected to increase production by more than 300,000 metric tons annually. The Angren mine also has underground coal gasification technology in place to produce 18 billion cubic feet of gas for the Angren power station.

Uzbekistan also plans to upgrade mining operations at its other deposits as well. Additional investment at the Shargun deposit is expected to double or triple production of high-quality coal from current levels of 200,000 metric tons/year. Completion of a second mine at Baisun could quintuple the mine's production of 100,000 metric tons/year. Other planned investment projects include upgrading of mines, recovery of kaolin and other by-products, and development of coal-gasification projects. Foreign investment is expected to help Uzbekistan increase its coal exports from the 1996 level of 100,000 metric tons.

ELECTRICITY
Uzbekistan was the third largest exporter of electricity of the former Soviet republics in 1996 after Russia and Kyrgyzstan, exporting 5.6 billion killowatt-hours to Kyrgyzstan, Tajikistan, and Kazakhstan. However, Uzbekistan was an overall net importer of electricity in 1996, as its exports were exceeded by imports of 6.7 billion kilowatt-hours from Turkmenistan, Kyrgyzstan, and Tajikistan.

Uzbekistan's electricity is generated mainly from natural gas-powered thermal plants, with smaller portions coming from coal and hydroelectric facilities. Overall, Uzbekistan contains 11.8 gigawatts of electric generating capacity, with plans for an additional 4 gigawatts through rehabilitation of existing plants or construction of new facilities. The largest gas-fired plants are the Syr Darya and Navoi plants, which together account for about a third of all generating capacity in the country. Coal-powered facilities consist primarily of 2 plants located near the Angren open pit mine near Tashkent . In addition, 25 hydroelectric plants supply almost 15 percent of the country's electricity.

Uzbekistan's Energy Ministry hopes to increase the country's electric generating capacity through several projects, including an $81 million renovation of the Syr Darya plant using funds from the European Bank for Reconstruction and Development (EBRD). In addition, the Ministry has plans for renovation of the Angren and Tashkent coal plants, for construction of a thermal plant near Termez, and for construction of a 400-megawatt hydroelectric plant near Pskent.

COUNTRY OVERVIEW
President: Islam Karimov
Prime Minister: Uktur Sultanov
Independence: August 31, 1991 (from Soviet Union); National holiday for Independence Day is September 1
Population (7/96E): 23.4 million
Location/Size: Central Asia/ 172,700 sq. miles, slightly larger than California
Major Cities: Tashkent (capital), Samarkand, Namangan
Languages: Uzbek (74.3%), Russian (14.2%), Tajik (4.4%), other (7.1%)
Ethnic Groups: Uzbek (71.4%), Russian (8.3%), Tajik (4.7%), Kazak (4.1%), Tatar (2.4%), Karakalpak (2.1%), other (7%)
Religions: Muslim (mostly Sunni) (88%), Eastern Orthodox (9%), other (3%)
Defense: Army, Air and Air Defense, Security Forces (internal and border troops), National Guard

ECONOMIC OVERVIEW
Currency: Soum
Exchange Rate (9/23/97): $1 U.S.=75.34 soum (central bank rate)
Gross National Product (1996E, at Purchasing Power Parity exchange rates): $55.6 billion
Real GDP Growth Rate (1996E): 1.6 percent
Exports (1996E): $4.2 billion
Imports (1996E): $4.7 billion
Inflation Rate (Change in Consumer prices, 1996E): 64%
Major Exports: Cotton, gold, natural gas, mineral fertilizers, ferrous metals, textiles, food products
Major Imports: Grain, machinery and parts, consumer durables, other foods
Major Trading Partners: Russia, Ukraine, Czech Republic, Eastern Europe, United States, South Korea, Germany, Turkey, United Kingdom

ENERGY OVERVIEW
Minister of Energy and Electricity: Valeriy Otayev
Proven Oil Reserves (1996E): 0.2-0.3 billion barrels
Oil Production (1996E): 183,000 barrels per day (b/d)
Oil Consumption (1996E): 179,000 b/d
Crude Oil Refining Capacity (1/1/97): 175,000 b/d; Bukhara refinery (50,000 b/d) commissioned November 1997.
Natural Gas Reserves (1996E): 74-88 trillion cubic feet (tcf)
Natural Gas Production (1996E): 1.7 tcf
Natural Gas Consumption (1996E): 1.6 tcf
Coal Reserves (1993): 4.6 billion short tons
Coal Production (1996E): 2.8 million short tons (mmst)
Coal Consumption (1996E): 2.6 mmst
Electric Generating Capacity (1996E): 11.8 gigawatts
Electricity Generation (1996E): 45.4 billion kilowatt hours (kWh)
Electricity Consumption (1996E): 46.5 billion kWh

ENVIRONMENT OVERVIEW
Total Energy Consumption (1995E): 1.82 quadrillion British thermal units (Btu)
Energy Consumption per Capita (1995E): 79.7 million Btu (vs. 345.9 million Btu in U.S.)
Energy-Related Carbon Emissions (1995E): 27.9 million metric tons (0.5% of world total)
Carbon Emissions per Capita (1995E): 1.22 metric tons (vs. 5.4 metric tons in U.S.)
Major Environmental Issues: drying up of the Aral Sea is resulting in growing concentrations of chemical pesticides and natural salts; these substances are then blown from the increasingly exposed lake bed and contribute to desertification; water pollution from industrial wastes and the heavy use of fertilizers and pesticides is the cause of many human health disorders; increasing soil salinization; soil contamination from agricultural chemicals, including DDT.

ENERGY INDUSTRIES
Organization: Uzbekneftegaz National Corporation state oil and gas company
Major Oil Fields: Mingbulok, Kokdumalok
Major Oil Refineries (1/1/97 capacity): Fergana (108,444 b/d); Altyaryk (66,271 b/d). Bukhara refinery (50,000 b/d) commissioned November 1997.
Major Gas Fields: Gazli, Shurtan, Kokdumalak, Kandym
Major Power Plants (capacity): Syr Darya (3,000 megawatts or MW), Tashkent (1,920 MW), Angren (1,800 MW), Navoi (1,250 MW)

Links to other sites:
EIA - Country Information on Uzbekistan
EIA - Oil and Gas Resources of the Fergana Basin (Uzbekistan, Tadzhikistan, and Kyrgysztan) in pdf format
CIA 1997 World Factbook - Uzbekistan
BISNIS - The U.S. Department of Commerce's Business Information Service for the Newly Independent States
U.S. State Department Consular Information Sheet - Uzbekistan

The following links are provided solely as a service to our customers, and therefore should not be construed as advocating or reflecting any position of the Energy Information Administration (EIA) or the United States Government. In addition, EIA does not guarantee the content or accuracy of any information presented in linked sites.

Embassy of the Republic of Uzbekistan
Interactive Central Asia Resource Project - Uzbekistan
Cyber Uzbekistan

If you liked this Country Analysis Brief or any of our many other Country Analysis Briefs, you can be automatically notified via e-mail of updates. Simply click here, put in your e-mail address, and check the box labeled "Country Analysis Briefs" on the list of products. You will then be notified within an hour of any updates to our Country Analysis Briefs.

Return to Country Analysis Briefs home page

File last modified: December 1997

Contact:

Erik Kreil
ekreil@eia.doe.gov
Phone: (202) 586-6573
Fax: (202) 586-9753

URL: http://www.eia.doe.gov/emeu/cabs/uzbek.htm