BMI View: Conventional gas deposits would be supporting Uzbekistan's hydrocarbons industry, though we project a continued decline in oil production. Consumption growth in both oil and gas will be curtailed by the diversion of gas to external markets to meet its export obligations, a failure to meet its domestic refined products demand and restrictions on fuel imports.
The main trends and developments in Uzbekistan's oil & gas sector are:
- We are predicting a very gradual decline in oil reserves, with 495mn barrels (bbl) forecast to remain by 2022, down from 594mn bbl in 2012, according to the EIA. However, exploration activity and a reasonable discovery rate leads us to believe that it could see a rise in its gas reserves, from an estimated 1.82trn cubic metres (tcm) to 1.91tcm by 2022.
- Uzbekistan has an estimated 340bn bbl of oil shale deposits and Uzbekneftegaz plans to establish a US $600mn joint venture (JV) project that will convert the oil shale into crude oil to be then processed into petroleum products. Production is due to start by 2013, with an annual capacity of 1mn tonnes, or 20,000 barrels per day (b/d) of liquid hydrocarbons.
- Without early success in enhanced recovery, shale-based production and/or new field development, we believe crude oil supply - including lease condensate but excluding natural gas liquids - will decline to 44,150b/d by 2017. However, additional natural gas liquids (NGL) volume - thanks to our forecast for higher gas output from Uzbekistan - should help stem a rapid fall, and see total liquids output fall to a lesser extent to 93,550b/d in 2017. By 2022, increase in NGL production could see total liquids output lift slightly to 94,400b/d.
- We are forecasting a relatively slow growth in oil consumption from an estimate of 98,500b/d in 2012 to 101,380b/d in 2017, rising gradually to 104,980b/d by 2022. Nonetheless, slower liquids output growth in face of this demand rise will see net import requirement rise from an estimate of 700b/d in 2012 to 10,600b/d by 2022. If the Uzbek government persists with fuel import restrictions without upgrading the country's state-owned refineries or attract private downstream investment, demand could be suppressed further.
- Official Uzbek figures highlighted a 0.2% decrease in output in 2012, which has led to our estimate of 62.2bcm for gas production in 2012. We expect this fall to be reversed in 2013, however, and to rise to 68.7bcm by 2017 as new fields enter production. By 2022, output is expected to hit 75.8bcm. Risk appears to be to the upside in terms of output, thanks to the combined efforts of domestic and international companies, plus infrastructure expansion and rising regional demand for Uzbek gas.
- Domestic demand is expected to rise from an estimated 51.0bcm in 2012 to 53.2bcm in 2017, allowing for 15.5bcm of export capacity by 2017. This is a modest increase that also accounts for the lack of domestic gas transport infrastructure that will prevent a faster rise in demand. We warn that a long-term increase in domestic gas demand will be constrained by Uzbekistan's export obligations, particularly those with China.
- A gas-to-liquids (GTL) plant planned by Sasol, Petronas and Uzbekneftegaz may soon be developed if a final investment decision (FID) is made by the second half of 2013 as expected. It is estimated that the total cost of the scheme will be around US$2.74bn.
Uzbekistan's dependence on oil prices leads to high volatility in the country's oil and gas export revenues. At the time of writing we assumed an OPEC basket oil price for 2013 of US$104.40 per barrel (bbl), falling to US$101/bbl in 2014. Global GDP in 2013 is forecast at 2.9%, up from an assumed 2.5% in 2012, reflecting some recovery in the US and China, though uncertainty with regard to the eurozone debt situation will continue to hamper growth. For 2014, growth is estimated at 3.4%.