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Conventional gas deposits should enable the country to boost its output and exports, with some surplus gas apparently destined for a Sasol-operated GTL scheme. Oil volumes may depend, however, on the utilisation of shale deposits and in this area the outlook is far less certain.
The main trends and developments we highlight for Uzbekistan's Oil & Gas sector are:
- Uzbekistan has an estimated 340bn barrels (bbl) of oil shale deposits and Uzbekneftegaz, plans to establish a US$600mn joint venture (JV) project that will convert the oil shale into petroleum products. Production is predicted to start by 2013, with an annual capacity of 1mn tonnes of liquid hydrocarbons. (20,000b/d).
- Without early success in enhanced recovery, shale-based production and/or new field development, we believe crude oil supply will decline to 34,000 barrels per day (b/d) by 2014/15. However, the delivery of additional gas liquids volumes, thanks to the country's higher gas output, should more than compensate for this, pushing total liquids output back up to 71,000b/d by 2016.
- Sasol has signed an investment agreement with Petronas, Uzbekneftegaz and the Uzbek government for the development and implementation of a 30,000b/d gas-to-liquids (GTL) project in Uzbekistan. It is estimated that the total cost of the scheme will be around US$2.5bn.
- Our forecasts assume that gas output will increase from an estimated 65bn cubic metres (bcm) in 2011 to around 86bcm by 2016, with growth continuing beyond that point as the new fields enter production. Domestic demand is expected to rise from 48bcm to 55bcm during the period, so exports could reach almost 32bcm by 2016. Risk appears to be to the upside in terms of output forecasts, thanks to the combined efforts of domestic and international companies, plus infrastructure expansion and rising regional demand for Uzbek gas.
- Rising oil import costs are of increasing concern. Uzbekistan will have paid an estimated US$3.75bn in 2011 for net imports, but could be spending nearly US$5.0bn by 2016. The potential gas export revenues generated in 2016 are, however, forecasted at around US$14.62bn. For combined oil and gas revenues, the 2016 total could be US$9.67bn, against an estimated US$5.27bn in 2011.
Uzbekistan's dependence on energy prices leads to high volatility in the country's export revenues. Our assumptions of a slower growth in China, a faltering recovery in the US and a worsening Eurozone debt crisis, clearly pose a threat to global demand. As a result, we assume OPEC basket oil prices to fall from US$107.52 per barrel (bbl) in 2011 to US$99.38/bbl in 2012, thus creating a downside risk for the Uzbek macroeconomic outlook.
Click for Report details:Uzbekistan Oil and Gas Report Q2 2012