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    Central Asia

    Central Asia's gas market undergoes major transformation

    Central Asia's gas market undergoes major transformation

    Central Asia is a major global natural gas producer, with industrial extraction starting in the 1950s. Uzbekistan and Turkmenistan were prominent Soviet gas producers, supplying over 75 billion cubic meters. They developed extensive gas transportation infrastructure, infoteck reports.

    Central Asia's gas market undergoes major transformation
    Source: Podrobno.uz

    According to infotech, after the Soviet Union's breakup, production initially dropped but rebounded, with a peak of 147 billion cubic meters by 2008. However, recent years have seen a decline in demand due to structural issues in Uzbekistan and Kazakhstan, such as aging fields and regulatory hurdles. In Turkmenistan, gas production has grown significantly, meeting domestic needs. Kyrgyzstan and Tajikistan have only recently increased gas consumption.

    While Central Asia's gas role is substantial, the situation is uncertain, particularly for Uzbekistan and Kazakhstan, as challenges persist in supplying both domestic and international markets.

    Uzbekistan and Kazakhstan

    Traditionally, Russia's Gazprom has been a major purchaser of Central Asian gas. However, a shift began in the 2020s when gas deliveries to Russia hit a low, excluding gas swaps related to the processing of Kazakh gas at the Orenburg Gas Processing Plant. Turkmenistan emerged as a significant natural gas supplier to regional countries. In 2022, Uzbekistan imported 2 billion cubic meters from Turkmenistan, while Kazakhstan imported 0.4 billion cubic meters. Import volumes for 2023 are expected to increase, with Uzbekistan already procuring 0.95 billion cubic meters in January-August 2023 (compared to 0.56 billion in the first eight months of 2022), and Kazakhstan acquiring 0.17 billion cubic meters. This winter, Uzbekistan plans to purchase up to 2 billion cubic meters, while Kazakhstan will buy up to 1.5 billion cubic meters. Will this import trend continue?

    Tashkent and Astana anticipate a swift change in this pattern by adopting ambitious programs for developing their gas industries. According to Kazakhstan's government plans, gross gas production is set to increase by 30 billion cubic meters by 2030, reaching 87 billion cubic meters. In 2023, President Sh. Mirziyoyev of Uzbekistan challenged the country's gas extraction companies to boost production by 10 billion cubic meters in the next eight years, reaching 62 billion cubic meters. However, these plans might remain on paper, as the major fields are highly depleted and characterized by complex geological conditions, making a significant production increase challenging, even with substantial investment.

    For instance, key Uzbekneftegaz fields are already 75-80% depleted, with proven gas reserves standing at just 388 billion cubic meters (supply sustainability for less than 12 years). The total gas resources are estimated at 1.86 trillion cubic meters, and the profitability of production on some fields (23% of the resources) is only feasible at high natural gas prices (over $100 per 1,000 cubic meters at the wellhead).

    Kazakhstan holds substantial natural gas reserves (2.3 trillion cubic meters), but the primary fields are located in the west of the country, whereas demand is concentrated in the south and central regions. A significant portion of the extracted gas is used for reservoir injection (due to water scarcity in Kazakhstan, gas lift is widely applied), and by 2030, around 41 billion cubic meters may be allocated for these purposes (compared to the current 21 billion cubic meters), while another 9 billion cubic meters will be consumed for the internal needs of gas fields. Therefore, marketable resources are expected to increase by just 8 billion cubic meters, reaching 33.5 billion cubic meters by 2030, assuming all extraction projects are implemented on schedule.

    There is a high likelihood that gas production will lag behind demand. Our estimates suggest that Uzbekistan currently balances its gas supply with a deficit of 1.5-2 billion cubic meters, and by 2030, available resources may fall short of potential demand by 8-10 billion cubic meters. The situation in Kazakhstan is relatively better due to coal-based power generation and lower industrial demand. Currently, the deficit is less than 1 billion cubic meters, but it could rise to 5-7 billion cubic meters by 2028-2030. Of course, these imbalances, like any other, are not immediately visible externally. The system is adjusted through restrictions, forced shutdowns, and refusal to connect new consumers to gas networks.

    However, energy imbalances directly impact the pace and quality of economic growth, the availability and prices of goods and services, and the living standards of ordinary citizens.

     

     

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    31.10.2023, 15:48   Comments (0)   1204
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