Uzbekistan's Minister of Energy, Jurabek Mirzamakhmudov, has refrained from disclosing the cost of gas that Uzbekistan will purchase from Russia, Gazeta.uz has reported.
During the St. Petersburg International Economic Forum on June 16, the Uzbekistan government and Russian "Gazprom" signed an agreement on the supply of Russian gas to the country, along with a roadmap for preparing the gas transportation system for receiving and transporting the fuel. Gas deliveries through Kazakhstan are planned to begin on October 1, 2023. The document is valid for two years, with a delivery volume of 9 mn cubic meters per day and an annual volume of nearly 2.8 bn cubic meters.
"The cost of natural gas has been agreed upon based on market prices in the region, prevailing prices in the country, as well as planned reforms for price formation based on market conditions," the ministry stated.
On July 7, the Minister responded to a question from Kun.uz regarding pricing.
"We provided comments on the price. It has been agreed upon based on national interests and market conditions. We cannot disclose the price because it is a bilateral contract. We have explained this. Overall, if we look at contracts in this sector, the price is not disclosed in any contract. However, I can say that a competitive price has been agreed upon, considering national interests," said Mirzamakhmudov.
The Minister also commented on price liberalization in the energy sector. According to him, work is currently underway on generating and distribution lines, as well as the transportation of energy resources, but "if we do not harmonize prices in terms of consumption, energy efficiency, investors will not come."
"Why do investors come? They need a tariff. Moreover, we need to increase consumption efficiency. Therefore, we are working on this in a mandatory manner, making proposals," said the Minister of Energy.
Mirzamakhmudov also responded to a question about whether the transition to market tariffs for gas and electricity could occur this year. "Discussions are underway. Of course, the sooner, the better for us," he said. It was previously reported that a program for price liberalization is planned to be developed by September.
It is worth noting that gas procurement in Uzbekistan is handled by the state-owned company UzGasTrade. The 2023 state budget includes expenses to cover losses and finance the activities of the company for wholesale procurement and sale of natural gas on the domestic market. In other words, covering the difference between the average purchase price (at market price) and the sale of natural gas on the domestic market (at regulated tariffs) is financed by taxpayers.
During the winter 2023, Uzbekistan faced an energy crisis caused by severe cold weather, gas shortages, and the suspension of gas supplies from Turkmenistan. The country experienced widespread power outages due to a lack of gas at thermal power plants, over 85% of which operate on gas. There were disruptions in heating and gas supply.
Uzbekistan's own gas production is declining due to depleted reserves, with a shortage of up to 20 million cubic meters per day during peak loads in winter. Gas production in 2022 decreased by 4% compared to the previous year, reaching 51.7 bn cubic meters, with gas exports to China exceeding $1 bn in value. Gas production in 2023 is forecasted at 56.3 bn cubic meters; however, production has fallen by 9.5% from January to April compared to the same period 2022.
At the end of November 2022, it was reported that Russia proposed the creation of a "tripartite gas alliance" with Uzbekistan and Kazakhstan. The Russian side stated that the proposal does not involve gas supply in exchange for political conditions, but rather aims to coordinate commercial interests.
In December, amidst the energy crisis in Uzbekistan, Minister of Energy Jurabek Mirzamakhmudov announced that the authorities are negotiating gas imports from neighboring countries through a commercial contract, rather than through "any alliance or union."
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