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Uzbekistan Oil and Gas Report Q4 2011
Business Monitor International, Oct 2011, Pages: 67
This new Uzbekistan Oil & Gas Report from BMI forecasts that the country will become an increasingly important gas exporter over the coming years, as increasing energy efficiency and the long-term impact of the 2008-2009 global economic downturn restrict consumption growth. Consumption should rise from 47.0bn cubic metres (bcm) in 2010 to 53.1bcm in 2015, only slightly ahead of the pre-crisis level of 52.6bcm in 2008. Gas production on the other hand will continue to grow, rising from 64.4bcm in 2010 to 83.5bcm by 2015, as increased foreign investment helps to unlock Uzbekistan’s evident gas potential.
This should mean that Uzbek gas exports reach 30.4bcm by 2015, up 75% on 2010 levels of 17.4bcm. Oil has long played second fiddle in the Uzbek hydrocarbons industry and this looks set to continue, although a slight uptick in total liquids production should be evident from 2011 to 2015 due to higher volumes of natural gas liquids (NGLs), alongside higher gas output. Although oil production should fall over this period, NGL volumes should ensure that the country is producing 70,000 barrels per day (b/d) by 2015, up 21% on 2010 levels. However, this will still be insufficient to meet oil demand, which should grow from 152,000b/d in 2010 to 202,000b/d by 2015.
Uzbekistan has the potential to produce as much as 100bcm by 2020, although risks are clearly weighted to the downside. A difficult business environment discourages investment, although the involvement of international partners such as Russia’s Lukoil and Malaysia’s Petronas should ensure that Uzbekistan makes progress towards its production targets. The country should be able to increase output by 20% on 2015 levels by 2020, staying ahead of consumption, which will rise 13% to 60.1bcm. This should allow Uzbekistan to export 39.9bcm by 2020.
Long-term liquids output will increasingly depend on NGLs as the country exhausts its apparently slim oil supplies. Uzbek oil production will continue to rise from a low of 58,000b/d in 2010, hitting 74,000b/d by 2020, but the share of NGLs in the total will increase to 59%. Uzbek oil consumption will continue to rise due to a growing population and higher car ownership, rising to 290,000b/d by 2020. This will mean that the country will need to import 216,000b/d by the end of the decade, up as much as 130% on 2010 levels.
Although Russia will continue to dominate oil supply in the region, backed by huge and under-exploited reserves, the Caspian states have an important role to play, with Azerbaijan and Kazakhstan having a significant impact. The growth rate in Russian oil supply has slowed appreciably since the early-2000s but the acceleration of Caspian expansion means that the region will make a growing contribution to world oil production.
Global GDP growth in 2011 is forecast at 3.2%, down from 4.3% in 2010. Growth in the eurozone should be marginally higher than 2010, while US and Chinese economic expansion will slow and Japan’s growth will be negative, reflecting the devastating earthquake and tsunami in March 2011. Our oil price assumption for 2011 is US$101.90/bbl for the OPEC basket, falling to US$97.50/bbl in 2012.
Uzbekistan occupies 14th place – with Turkmenistan – in BMI’s composite Business Environment (BE) ratings table, which combines upstream and downstream scores. It has a share of ninth place with Slovakia in BMI’s updated upstream ratings, ahead of Romania and Hungary. Its gas production growth outlook, gas reserves, and gas asset immaturity work in the country’s favour, but are undermined by an underwhelming risk environment. Uzbekistan is near the bottom of the league table in BMI’s downstream ratings, ranked 10th, the penultimate position ahead of Azerbaijan, with few particularly high scores and progress further up the rankings unlikely over the next few quarters. Gas demand growth prospects represent a strong suit.
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