Uzbekistan close to signing three upstream gas deals

Uzbekistan plans to sign at least three deals with large foreign energy companies this year and five more next year as it aims to boost its natural gas output, Reuters quotes chief executive of state energy firm Uzbekneftegaz as saying.

The list of potential partners in exploration and development agreements includes BP, Total, Azerbaijan’s SOCAR, Russia’s Rosneft and Novatek, Bakhodir Sidikov said on the sidelines of an energy conference in Tashkent.

Potential investors are seeking guarantees that they would be able to export whatever they produce, Sidikov said, but Tashkent is instead offering them guaranteed offtake at prices “at which the project makes economic sense.”

“We have some projects where if you use the international price you can get 60% IRR (internal rate of return),” he said. “Nobody expects 60% IRR.”

Asked what profitability levels he considered acceptable, Sidikov said: “Between 11 and 15-16%.”

Next year, Sidikov noted, Tashkent plans to sign five more agreements.

Sidikov states Uzbekneftegaz, which produces 42 billion cubic meters (bcm) of gas - out of Uzbekistan’s total output of 63 bcm, aimed to add 4-5 bcm to the figure next year to ensure it can fully meet domestic demand.

He said the company was pressing ahead with plans to issue a debut $1 billion Eurobond next year and expand the pipeline through which it pumps gas to China by 2022-23.

“We do have available natural gas to export additionally to China,” he said, adding that the volumes and pricing were still being discussed.