Uzbekistan has vast resources of oil and natural gas. The country also ranks among the world's largest natural gas producers. The primary partner of Gazprom Group in Uzbekistan is National Holding Company (NHC) Uzbekneftegaz.
Zarubezhneftegaz (new name: Gazprom International) opened a representative office in Tashkent in 2003. Zarubezhneftegaz is part of the Gazprom Group specializing in the implementation of Gazprom exploration and production projects outside the Russian Federation.
Currently, Gazprom International is undertaking the Shakhpakhty oil and gas project and negotiating a PSA for Dzhel field discovered by Gazprom Group following an exploration campaign on the Ustyurt Plateau.
Close collaboration between Gazprom Group and Uzbekistan began in December 2002, when the Group and NHC Uzbekneftegaz signed a Strategic Gas Industry Partnership Agreement. In particular, the Agreement involves the long-term purchase of Uzbek gas, Gazprom participation in gas production projects in Uzbekistan on the basis of production sharing agreements (PSA's), and also the joint development of Uzbekistan gas transmission infrastructure and transportation of Central Asia gas via Uzbekistan. In fact, Gazprom is one of the first Russian companies to have commenced investing in Uzbek petroleum sector.
The expansion of the scope of works under the Agreement, together with the need to secure multilateral support for Gazprom International operations requires a full-scale company representation office to be set up in Uzbekistan. The key mission of the representative office established in 2003 has been to promote Gazprom interests in Uzbekistan, coordinate operators, liaise with government agencies and NHC Uzbekneftegaz management, as well as all interested ministries, agencies and departments.
In 2003, Gazprom Group began buying gas in Uzbekistan on the basis of short-term contracts between Gazprom export and Uztransgaz.
Uzbekistan has plans to enhance explored hydrocarbon reserves at a greater pace. Gazprom Group is seeking opportunities to bid for licenses to use subsoil petroleum blocks in Uzbekistan and expand its operations in the region.
Further Development of Shakhpakhty Gas Condensate Field
The Shakhpakhty gas condensate field is situated in the southwestern part of the Ustyurt Plateau, within Kungrad District, Republic of Karakalpakstan in Uzbekistan. The field was discovered as early as in 1962. According to exploration data collected by 1968, the approved initial commercial gas reserves were equivalent to 46.5 BCM. Production in the field began in 1971. Commercial production in Shakhpakhty began in 1974, and reached 2.5 BCM per year. The Shakhpakhty Booster Station (BS) was commissioned in 1983. The BS was shut down in February 2002, due to a lack of power to supply the produced gas at the required pressure. At the same time, the operator decided to shut down production and suspend the wells. Cumulative production throughout the whole production history reached 36.5 BCM, or about 78.5% of the approved initial reserves. 48 wells were drilled in Shakhpakhty after the field went on stream.
The Shakhpakhty reconstruction and further development project is a pilot project undertaken by Gazprom International in the Republic of Uzbekistan. It is based on a production sharing agreement (PSA) signed in 2004 for a 15-year period.
The Cabinet of Ministers of Uzbekistan appointed Uzbekneftegaz an authorized project implementation entity. The project was funded by a consortium comprised of Zarubezhneftegaz and the Swiss company, Gas Project Development Central Asia AG. Considering the strategic nature of collaboration with Gazprom, the field was awarded to the investor without public bidding.
The project operator – LLC Operating Company Zarubezhneftegaz - GPD Central Asia – was established in the same year for the purpose of project implementation. According to the PSA terms and conditions, 90% of the operating company staff are Uzbekistan citizens. Gas production in the field resumed in August 2004 and industrial output was achieved in 10 wells. Workover and production operations commenced in 2004 under a production license covering four intervals. In 2010, the operator acquired a production license for three underlying intervals on the Shakhpakhty field.
Currently, a further development campaign is aimed at recovering residual reserves from seven gas beds. In 2005, an office of Zarubezhneftegaz - GPD Central Asia Operating Company was opened in the capital city of Karakalpakstan, Nukus. In 2006, the operating company completed a new Shakhpakhty BS and a gas treatment plant. In addition, a modern rotational camp was built in the field.
Today, the recoverable reserves of natural gas in the Shakhpakhty field are estimated at about 8 BCM. Annual gas production exceeds 350 MCM. The active well inventory consists of 24 wells, while average daily production rate is over 1 MCM. The gas produced in the Shakhpakhty field is sent to the Karakalpak Booster Station, then via the Central Asia – Center gas line to consumers.
Based on 2016 YTD data, cumulative gas production since 2004 will exceed 3.5 BCM.
Exploration of Ustyurt Plateau. Dzhel Field.
In January 2006, Gazprom and NHC Uzbekneftegaz signed an Agreement on Basic Principles of Subsoil Exploration on Investment Blocks in Republic of Uzbekistan Ustyurt Region. The ultimate С1+С2 reserves in the region amount to approximately 120 BCM of gas and about 7 MMT of condensate. Gazprom International (then named Gazprom zarubezhneftegaz) was appointed as project operator. It was envisaged that Gazprom would invest in exploration up to $400M during five years, including $260M during first three years from the license issue date.
According to the terms and conditions of the Agreement, Gazprom VNIIGAZ completed a feasibility study for seven investment blocks - Aktumsuk, Kuanysh, Agyin, Nasambek, West-Urgin, Akchalak and Shakhpakhty. This covered the total area of over 38,000 sq.km, and led to the drawing up of a multistage exploration plan to be implemented in 2006-2011. The program included exploration drilling, 3D seismic acquisition (1,200 sq.km), 2D seismic acquisition (13,700 ln km), preparing 25-30 leads for drilling, high-resolution gravity surveys in the areas inaccessible to heavy equipment (3,000 sq.km). An important consideration was that the Central Asia – Center gas pipeline system would cross investment block boundaries.
A subsidiary company, Ustyurt-Zarubezhneftegaz, tax resident of the Republic of Uzbekistan, was established in Ustyurt to carry out exploration. In December 2006, exploration licenses were granted to Gazprom for exploration operations on seven blocks. Field geophysical surveys commenced in 2007, followed by an exploration drilling campaign.
The Dzhel gas condensate field was discovered in May 2009 within the Dzhel area within the Shakhpakhty investment block on the Ustyurt Plateau. In 2012, Gazprom International completed the $400M multistage exploration program on the Ustyurt Region investment blocks.
After completing the exploration program (the subsoil licenses were issued for five years) Gazprom acquired the exclusive right to negotiate with the Republic of Uzbekistan to develop the fields discovered, based on a Production Sharing Agreement.
Following the completion of the exploration drilling campaign, a Production Sharing Agreement is currently being drafted to stipulate the conditions for developing the Dzhel field. The field is situated near Shakhpakhty (15 km southwest), and this will reduce process costs associated with gas treatment and market delivery.
The Dzhel field С1+С2 reserves are as follows: 6.4 BCM gas, 83,000/76,000 tons (in-place/recoverable) condensate (as per Record No. 40 dated August 8, 2012, State Reserves Committee of the Republic of Uzbekistan Cabinet of Ministers).
Gazprom International continues to look for potential oil and gas targets in different regions of Uzbekistan, as well as unallocated investment blocks offered to foreign companies, which may also be of interest to Gazprom. The Republic has great opportunities for expanding Company operations. The foreign investment policy pursued by the Uzbekistan leadership provides Gazprom International with a lot of room to maneuver. More specifically, besides choosing the investment blocks out of the list blocks set out by the Uzbek side, foreign companies are offered the change of setting their own block boundary delineation where they would like to explore and produce. Uzbekistan still has underexplored regions with great petroleum potential.
"Uzbekistan is our reliable partner in the gas sector, and we intend to further develop our mutually beneficial cooperation", says Gazprom Chairman Alexey Miller.
Archeological evidence confirms that the territory of modern-day Uzbekistan has been inhabited since ancient times. The first states to emerge here were Sogdiana and Khoresm. In the IV century B.C. Sogdiana was conquered by Alexander the Great. Central Asia remained the core of the Tamerlane's empire throughout the entire second half of the XIV century. Uzbekistan carefully preserves relics of those times when science and commerce flourished in the country. The pearls of modern day Uzbekistan – Samarkand, Bokhara, Khiva, Shahrisabs, Tashkent – fire our imagination with symbols of oriental beauty and mystery. Many cities of the modern Uzbek state in the ancient times lay along the Great Silk Road; the link between the East and West which connected such strikingly different parts of human civilization.
The Uzbek Soviet Socialist Republic became part of the Soviet Union in 1924. Then, the Republic of Uzbekistan was established from part of the area covered by former Turkestan, which comprised almost all modern-day Central Asia countries.
The head of modern Uzbekistan is the President. According to the 1998 Presidential Decree, the country has revived the mahalla committees and councils, which are people's self-government bodies. Their main function is to provide social security to the poorest population strata.
Uzbekistan is located in the center of Eurasia, between the Amu-Darya and Syr-Darya rivers. Uzbekistan borders with Kazakhstan, Turkmenistan, Tajikistan, Kyrgyzstan, Afghanistan. It occupies an area of 447,400 sq.km. The length of borders is over 6,620 km. The highest elevation above sea level is 4643 m (Gissar Range). The climate is strongly continental: from +4°C to −8°C in January and from +22°C to +42°C in July. There are quite vast areas in the country that are not suitable for life, such as deserts, steppes and mountains. The cities where human activities are concentrated are situated in river valleys.
The population is about 30 million, with 52% urban and 48% rural residents. Uzbekistan is ranked third among the CIS countries in terms of population, after the Russian Federation and Ukraine. There is a natural growth of population in Uzbekistan. 93% are Sunni Muslims; 4% - are Orthodox Christians. There are also Korean Christians, Catholics, Baptists, etc.
Uzbekistan created a mineral resource base, which is now one of the main sources of currency revenue into the state budget. It is comprised of over 1,800 fields and about 1,000 potential raw material reserve sites. There are 118 types of mineral resources, of which 65 are currently in production. The value of Uzbekistan's mineral resources is estimated at about $3.5 trillion, and the country is among the world's top ten gas producing countries.
The current hydrocarbon production volumes in Uzbekistan are up by one-third in comparison with 1991. After the collapse of the Soviet Union, 18 new fields were discovered, 9 of which are located in very promising Ustyurt Region.
The National Holding Company Uzbekneftegaz holds 11th place in the world in terms of natural gas production (60-70 BCMPA). There are 194 hydrocarbon fields, including 98 gas and gas condensate fields and 96 oil/gas, oil, oil/gas condensate fields. In-place oil resources amount to 5 billion tons, and proven reserves are 530 million tons. Natural gas resources exceed 5 TCM, and proven reserves are 3.4 TCM. The current gas production makes the greatest contribution in the form of fuel for electricity power generation.
The Republic of Uzbekistan is 4th in the world in terms of gold reserves and 7th place in terms of gold production (about 80 tons per year). It is also in 10-11th place in terms of copper reserves, 11-12th place in terms of uranium reserves and 7-8th place in terms of uranium production. There are about 40 explored uranium fields in the country. All of the low-enriched uranium produced in the country is exported.
Uzbekistan has a mature cotton market. There are production capacities for agricultural machines and the only aircraft building plant in the Central Asia. Asaka has a large GM Uzbekistan automotive plant making UZ-Daewoo and Chevrolet.
Agriculture accounts for a large percentage of GDP - 38%. Industry accounts for 26% while the service sector - 36%.