Uzbekistan is rich in oil and natural gas, standing among the world’s major gas producers. The Gazprom Group’s main partner in Uzbekistan is Uzbekneftegaz that ranks 11th worldwide in natural gas production (60 to 70 billion cubic meters per year). Out of 194 hydrocarbon fields, 98 are gas/condensate and 96 are oil/gas and oil/condensate. With 5 billion tons of OIIP, its proven reserves amount to 530 million tons. While GIIP exceeds 5 trillion cubic meters, the proven reserves amount to 3.4 trillion cubic meters. Current gas production makes a decisive contribution to power generation.
The launch of the close cooperation between the Gazprom Group and Uzbekistan dates back to December 2002, the month that saw the signing of an Agreement on Strategic Cooperation in the Gas Industry with Uzbekneftegaz. In particular, it provided for long-term procurement of Uzbek gas, Gazprom’s participation in gas production projects developed in the republic under a production sharing agreement (PSA), as well as cooperation in improving Uzbekistan’s gas transport infrastructure. In fact, Gazprom was one of the first companies from Russia that started investing in the oil and gas sector of that country.
In 2003, a representative office of Zarubezhneftegaz (today known as Gazprom EP International) opened in Tashkent. Its primary goal was promoting Gazprom’s interests in Uzbekistan, coordinating project operators, maintaining liaison with public authorities, the Uzbekneftegaz management and all agencies concerned.
Gazprom and Uzbekneftegaz have been moving towards a better and deeper partnership. In April 2017, the companies signed an Agreement on Joint Exploration and Engineering and Innovation Management. The Agreement envisages a study of prospective investment blocks, proposals on exploration in the Republic of Uzbekistan and an engineering and innovation center affiliated with a sectoral institute at O'ZLITINEFTGAZ.
In June 2017, on the sidelines of the Saint Petersburg International Economic Forum, the companies inked an Agreement on Strategic Cooperation. The Agreement became the basis for the long-term development of mutually beneficial relationship between Gazprom and Uzbekneftegaz on a wide range of focus areas, including:
- joint prospecting, evaluation and implementation of new projects on hydrocarbon exploration, production, processing and storage in the Republic of Uzbekistan;
- reconstruction, construction and operation of main gas pipelines, compressor stations and other gas infrastructure facilities of the Republic of Uzbekistan;
- development of projects on using CNG and LNG as motor fuel and for the needs of autonomous gas supply;
- deepening of bilateral cooperation in exchange of best practices and personnel training and development;
- development of scientific and technological cooperation, including joint research, development, and engineering activities.
In 2004, Gazprom commenced implementing its projects in Uzbekistan under a 15-year Production Sharing Agreement (PSA) on Reconstruction and Additional Development of the Shakhpakhty Gas and Condensate Field signed between Gazprom and Uzbekneftegaz.
The Shakhpakhty gas and condensate field is located in the south-east of the Ustyurt Plateau in the Qo‘ng‘irot District of the Republic of Karakalpakstan in Uzbekistan. It was discovered as far back as 1962. Completed in 1968, exploration confirmed that commercial GIIP was 46.5 billion cubic meters. In 1971, the filed was brought into production. In 1974, the commercial production with a volume of 2.5 billion cubic meters per year was commenced in the Shakhpakhty field. The Shakhpakhty booster compressor station (BCS) was put into operation in 1983. However, it was shut down in 2002 due to insufficient capacity for boosting the produced gas under the required inlet pressure. At the same time, the operating company adopted a resolution to suspend the wells and shut down the field production. During the production period, 36.5 billion cubic meters of gas have been recovered from the field that amounts to ca. 78.5% of the confirmed GIIP. Since putting into production, 48 wells have been drilled in the Shakhpakhty field.
Additional development of the Shakhpakhty field aims to recover the remaining reserves from 7 gas-bearing horizons.
In 2004, LLC Operating Company Zarubezhneftegaz - GPD Central Asia, the field development operator, was established to manage the project. The company immediately commenced its activities under the development licenses for four producing formations of the field. It carried out workover operations and 10 wells produced commercial gas.
In 2005, an office of LLC Operating Company Zarubezhneftegaz - GPD Central Asia was opened in Nukus, the capital city of Karakalpakstan.
In 2006, the operating company completed construction of a new Shakhpakhty booster compressor station and a preliminary gas processing terminal. A modern field camp was built at the field.
In 2010, the Operator obtained a development license for three additional lower producing formations of the Shakhpakhty field that contributed to stability of the production and increased the recovery factor.
In May 2018, at the Saint Petersburg International Economic Forum, Addendum No. 2 to the PSA on Additional Development of the Shakhpakhty field was signed. The Shakhpakhty PSA was extended until 2024 under the same terms and conditions.
In August 2018, President of Uzbekistan Shavkat Mirziyoyev signed Decree No. PP-3911 on Additional Measures for Further Implementation of the Production Sharing Agreement on Additional Development of the Shakhpakhty field in the Ustyurt Region of the Republic of Uzbekistan.
Today the active well stock of the field consists of 22 wells, the current average daily production exceeds 600 thousand cubic meters of gas. Produced gas is delivered to the Karakalpakia Compressor Station and then to consumers via the Central Asia – Center gas pipeline. As of 30 June 2019, the total cumulative production from the Shakhpakhty field has exceeded 4.2 billion cubic meters of gas since the additional development.
Exploration of the Ustyurt Plateau. Dzhel Field
In 2006, Gazprom and Uzbekneftegaz entered into an Agreement on the Basic Principles for Exploration of the Investment Blocks in the Ustyurt Region of the Republic of Uzbekistan. The total C1+C2 resources were estimated at ca. 120 billion cubic meters of gas and ca. 7 million tons of condensate within the region. Gazprom EP International (then - Gazprom zarubezhneftegaz) was the operator for its implementation. It was planned that in the course of five years Gazprom would invest up to USD 400 million in the exploration including USD 260 million during the first three years after the license acquisition.
Gazprom VNIIGAZ performed the feasibility study of seven investment blocks (Aktumsuksky, Kuanyshsky, Agyinsky, Nasambeksky, West Urginsky, Akchalaksky and Shakhpakhtinsky) with total area of over 38 thousand square kilometers and developed a phased exploration program for 2006-2011. The program provided for 3D seismic survey (1,200 square km), 2D seismic survey (13,700 linear km), pre-drilling study of 25-30 prospects and high-precision gravity survey in the areas not accessible for heavy equipment (3,000 square km). It was very important that the Central Asia - Center gas pipeline system passes through the investment blocks.
LLC Ustyurt-Zarubezhneftegaz, a subsidiary and a tax resident of the Republic of Uzbekistan, was established to conduct the exploration of the Ustyurt.
In December 2006, the Government of Uzbekistan awarded Gazprom with subsurface use licenses to conduct the exploration within seven blocks. The works started in 2007 and, as planned, were fully completed by 2012.
In May 2009, during the exploration of the Dzhel area in the Shakhpakhtinsky investment block at the Ustyrt Plateau, a gas and condensate field of the same name was discovered.
The Dzhel field is located in the vicinity of the Shakhpakhty field (15 km to the south-west) that allows to cut the process costs of gas treatment and delivery to the market. C1+C2 reserves of the Dzhel field amounted to 6.4 billion cubic meters of gas and 83/76 thousand tons of condensate (in-place/recoverable).
Upon completion of the exploration works (subsurface use licenses were granted for five years), Gazprom will have an exclusive right to participate in negotiations with the Republic of Uzbekistan on development of the discovered fields under a Production Sharing Agreement.
In October 2018, Gazprom EP International and the Republic of Uzbekistan entered into the Production Sharing Agreement for the Dzhel field.
In addition to commercial profit from the Dzhel project implementation, Uzbekistan will benefit from the mineral resources base development and new jobs. The project will ensure further development of the modern technologies as well. Moreover, this project will provide a training ground to develop highly qualified specialists in the Republic. The PSA duration period was set to 25 years.
At present, Gazprom EP International is actively studying the promising oil and gas regions of Uzbekistan and available investment blocks that are offered to foreign companies and may be of interest to Gazprom. The company has great opportunities of expanding its activities in the Republic. The policy of engaging foreign investors maintained by the Uzbekistan authorities provides Gazprom EP International with the vast room for manoeuvre. In particular, in addition to a possibility to select investment blocks from the list made by the Uzbek side, foreign companies are offered an option to delineate at their own discretion the areas for exploration and development. The Republic still has promising oil and gas regions that are underexplored.
“Uzbekistan is our reliable partner in the gas sector, and we intend to further develop our mutually beneficial cooperation”, said Alexey Miller, Chairman of the Gazprom Management Committee.
Uzbekistan is located in the center of Eurasia between the Amudarya and Syrdarya Rivers. It borders on Kazakhstan, Turkmenistan, Tajikistan, Kyrgyzstan and Afghanistan. Its territory covers 447.4 thousand square kilometers. The border is more than 6,221 kilometers long.
Uzbekistan is a democratic state based on the rule of law. The head of state is a president.
The country’s population is over 33 million people.
Uzbekistan has a strong mineral resources base that is a main source of currency earnings of the country. This base consists of more than 1,800 fields and ca. 1,644 promising occurrences of minerals, 118 types of mineral resources out of which 65 are under development. Experts estimate the mineral resources of Uzbekistan at ca. USD 11 trillion.
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