New Market Report: Uzbekistan Oil & Gas Report Q2 2016

Our outlook for Uzbekistan's gas sector remains stable as we expect gas production and export figures to remain relatively strong across our forecast period to 2025. However, the country's oil sector will continue on a downward slope leaving the country increasingly more dependent on refined fuels imports and subjecting it to potential fuel shortages.

Latest Updates And Key Forecasts

Uzbekistan's gas exports to Russia could rise in 2016, as Gazprom has recently suspended gas purchases from Turkmenistan, according to Turkmengaz. At the same time, Gazprom said that it would increase purchases of Uzbek gas. According to recent media reports citing unidentified Gazprom official, Russia could import around 3.1bcm of gas from Uzbekistan in 2016.

In late 2015, Uzbekneftegaz postponed the start of the project to build a plant for oil shale processing at a later date, according to news agency Trend sources cited by Bloomberg. Rescheduling is related to the recent decline in oil prices, as well as the fact that the company has not chosen a licensor of shale processing technology.

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In October 2015, Japan Oil, Gas and Metals National Corporation (JOGMEC) finalised four consensus documents for technical cooperation related to oil and gas with Uzbekneftegaz. JOGMEC is expected to study unidentified oil and gas sites in the country in early 2016.

We expect Uzbekistan's oil and gas reserves to continue declining at a modest, but stable pace across our review period. Between 2016 and 2025, we forecast oil reserves to shrink by an average annual rate of 2.0% and reach 490mn bbl. In terms of gas, the reserves' decline is expected to average 0.6% per annum over the same period. Nonetheless, with total gas reserves forecast at 1,726bcm in 2025, Uzbekistan will remain a heavyweight in this respect.

Due to the start-up of a number of new fields, 2015 gas production volumes are estimated to have grown by 7.8% y-o-y, reaching 70bcm. We forecast gas production to increase by another 2.3% in 2016 to around 71.6bcm. We maintain our positive longer term gas production outlook and expect the country's gas production volumes to reach 72.8bcm by 2025.

While we forecast Uzbekistan's refined products consumption to increase by annual average rate of 0.5% over the coming decade and reach 73,260b/d by 2025, the recent tax hikes on diesel and motor fuels pose a downside risk to our projections.

Contractual obligations to China boosted Uzbekistan's 2015 gas exports by 31.4% y-o-y to an estimated 16.9bcm. We expect the country's net gas exports to peak at 17.4bcm in 2016, before gradually declining until the end of our forecast period to around 12.9bcm in 2025.

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