Astana has promised to save Kyrgyzstan from near-certain energy crisis this winter, committing to supply over a billion kilowatt-hours of electricity and releasing several Kyrgyzstan-bound oil tankers stuck on the border between the two countries since April. But questions remain about the terms of the deal signed by Kazakhstan’s Nursultan Nazarbayev and Kyrgyzstan’s Almazbek Atambayev on November 7.
Chiefly, how will Kyrgyzstan finance the difference between the cost of the electricity it is buying from Kazakhstan and the low rates its own citizens expect to pay—lower, according to energy officials, than the cost of production?
In other words, Kyrgyzstan has agreed to pay Kazakhstan far more than it charges its citizens per kilowatt-hour. Most of the energy will be subsidized by the impoverished government, Nurbek Elebaev, director of Kyrgyzstan’s State Department for the Regulation of the Fuel and Energy Complex, told Vechernii Bishkek on October 31. (Note: $1 is about 58 soms at current rates.) He said:
It is worth noting that the cost of the imported energy is 5.13 soms for a kilowatt-hour. Accordingly, every kilowatt-hour will be subsidized [by Kyrgyzstan] by around 3 soms. Moreover, 5.13 soms is the cost of electricity up to the Kazakh border. The cost of transit from the border to the consumer will be borne by [Kyrgyzstan’s] energy company. How the company will cover the financial deficit will be decided by the government. The cabinet will need to borrow money. This tariff will apply to 1 billion kilowatt-hours of electricity. A further 400 million kilowatt-hours will be determined by an exchange in kind.
With a cold, dark winter inching closer each day in Kyrgyzstan, the government is desperately trying to strike bilateral energy-import agreements with anyone and everyone. But as policymakers go hunting around Central Asia to plug an estimated deficit of over 2 billion kilowatt-hours, prices and political differences are potent sticking points.
Any bilateral deal would require the differential in electricity costs be borne either by the insolvent government, or by ordinary Kyrgyzstanis, who are accustomed to paying $0.015 per kilowatt-hour. That’s far below the cost of production and substantially less than citizens pay in any other Central Asian country.
So Kazakh electricity, which costs around four times as much for Kazakhs, is expensive to most Kyrgyz, although that didn’t stop Astana and Bishkek agreeing to an import deal in principle last week. Tajik electricity is over one-and-a-half times as expensive as the Kyrgyz version and it is doubtful whether a country whose own rural residents spend a lot of time in the dark has any power to spare.
The perfect cure to a Kyrgyz winter of misery, then, could come from gas-rich Turkmenistan.
For the second time in two months, a company behind a foreign-operated hydropower dam in Tajikistan has said the state-controlled electricity distributor is not paying its bills. And despite the annual winter electricity shortage, this time the company – in this case Iranian rather than Russian – has shut operations until it gets its money, Radio Ozodi reports.
A source at the Iranian Embassy in Dushanbe told Radio Ozodi that the company behind Sangtuda-2, Sangob, has stopped the dam’s output until Barqi Tojik, the chronically broke state-run energy distributor, begins paying its $28 million debt (which is growing by $2 million a month). Ozodi says the company’s offices in Dushanbe are empty.
Barqi Tojik didn’t clearly answer Asia-Plus’s questions about what’s happening at the dam on the Vakhsh River. Yet whether or not it is operating, Barqi Tojik’s ongoing failure to pay its bills underscores systematic problems in Tajikistan’s troubled energy sector.
The conflict is eerily similar to an episode last month, when Tajikistan’s second-largest hydropower plant, Russian-controlled Sangtuda-1, threatened to shut down for similar reasons. That dispute was resolved when the two sides agreed on a payment installment plan.
Just as Tajikistan’s annual winter energy crisis begins, the country’s second-largest hydropower dam may be forced to shut operations due to what the Russian-controlled company that owns the dam calls unfair treatment by authorities.
Tajikistan’s state electricity-distributing monopoly, Barqi Tojik, has been refusing to pay the company, Sangtuda-1, for its power. This seems to have left Sangtuda-1 short on cash to pay its taxes, so the state tax committee has frozen the company’s accounts in Tajikistan, the company says.
Authorities in Uzbekistan’s capital, Tashkent, have ordered local eateries to switch to alternative sources of fuel, such as coal and wood, in a bid to ease energy shortages this winter.
The measure was prompted by a surge in the consumption of gas for heating, Uzmetronom.com reported this month, and marks the start of Uzbekistan’s annual energy crisis.
Uzmetronom, which is believed to have ties to the security services, said cafes and restaurants in Tashkent would most likely use condensed natural gas sourced privately in bottles, rather than from government-run mainlines, for cooking. Others will burn wood. The Moscow-based Fergana News website reported on November 21 that "an increasing crisis in gas supplies and deliveries" had led to “skyrocketing” wood prices.
Drivers in Uzbekistan have long complained about gasoline shortages. With little explanation, it seems the secretive government is trying to address mounting domestic gasoline shortages and panic at local petrol stations.
Tashkent intends to increase imports of oil from neighboring Turkmenistan, Moscow-based Fergana News reported on November 11, citing Uznefteprodukt, the state-run refining company.
It’s unclear how large the increase will be, however. Repeated calls to Uznefteprodukt went unanswered on November 12. The company’s website confirms the plans for imports, but does not name figures.
Oil output in Uzbekistan fell from 78,000 barrels per day (bpd) in 2010 to 68,000 bpd in 2012, according to the BP Statistical Review of World Energy for 2013, largely due to aging infrastructure and limited investments. Over the same period, consumption increased from 75,000 bpd to 82,000 bpd, BP said.
Neither Uzbekistan nor Turkmenistan disclose energy import or export figures. Uzbekistan also imports oil and petroleum products from Russia and Kazakhstan.
Uznefteprodukt has dismissed reports of hours-long queues at gas stations in Tashkent, blaming “rumors” for fears that petrol prices, which are strictly controlled by the state, would soon rise. But EurasiaNet.org has seen queues, which are ongoing.
China’s president clinched another round of multi-billion-dollar oil and gas deals in Uzbekistan on September 9 as he continued vacuuming up the region’s energy resources on his tour of Central Asia.
Xi Jinping and his Uzbek counterpart Islam Karimov signed agreements worth $15 billion in Tashkent, AFP reported.
Details were not immediately released, but the report said the deals included contracts in the oil and gas industry, where Sino-Uzbek economic cooperation has been expanding since Uzbekistan started exporting gas to China in September 2012, and also agreements in the uranium sector, which Tashkent is eager to develop.
Other deals covering trade, energy, investment and financing were also signed, a report on the People’s Daily website added. Uzbek media, which are notoriously slow to react to events, had not reported the deals by late evening on September 9; neither had the presidential or Foreign Ministry websites.
During his visit Xi called for China and Uzbekistan to boost bilateral trade, which stood at $3.4 billion last year, to $5 billion by 2017. Xi suggested opening negotiations to set up a Sino-Uzbek free trade zone, and looking at measures to promote infrastructure connectivity between the two countries, which do not share a direct border but are linked via Kazakhstan or Kyrgyzstan.
As Chinese President Xi Jinping continued his tour of Central Asia in Kazakhstan on September 7, Beijing and Astana were set to sign a raft of lucrative business deals that will further boost China’s presence in its hydrocarbon-rich neighbor’s energy sector.
Key among them was a deal giving China’s state energy company, CNPC, a stake in the super-giant Kashagan oilfield, which is about to start commercial production. The agreement, announced in July, is a coup for CNPC, which usurped India’s ONGC Videsh to acquire a stake put up for sale by Houston-based ConocoPhillips.
Under the deal, CNPC will pay approximately $5 billion for an 8.33 percent share in the consortium developing the field, which also includes Kazakhstan’s state energy company KazMunayGaz (KMG); oil majors ExxonMobil, Shell, Total, and Eni; and Japan’s INPEX.
The agreement cements China’s grip on oil and gas resources in Kazakhstan (where it already controls around a quarter of oil output) just as Kashagan is about to come on stream after years of delays. On September 7 KMG head Sauat Mynbayev said commercial production would start in three to four weeks.
Mynbayev also unveiled what Kazakhstan stands to gain: CNPC will dig deep to finance half of KMG’s investment obligations in Kashagan, and it will also build a pipeline plant and an industrial center to produce equipment for the oil industry.
Russian hydrocarbons giant Lukoil is upping gas production in Uzbekistan. But as that gas is shipped abroad, local shortages are prompting Uzbek consumers to double their intake of dirty coal.
The private Uzdaily.uz website reported this week that Lukoil boosted gas production to about 4.3 billion cubic meters (bcm) in 2012, up from 2.6 bcm the year before. Output at the Khauzak-Shady-Kandym-Kungrad field jumped by 24.2 percent and production at Gissar, which started operating in late 2011, reached almost 1 bcm.
Uzdaily.uz said Lukoil plans to extract 4.4 bcm this year, 5.2 bcm next year and 8.2 bcm in 2015. Uzbekistan's total gas production stayed roughly level at 62.9 bcm in 2012, according to government stats cited by RIA Novosti.
One might think all this gas would help ease Uzbekistan’s chronic energy shortfalls. But growing gas exports seem to be contributing to widespread shortages and an increasing reliance on coal.
Citing a source at the state-run Uzbek Coal company, Tashkent’s mildly critical independent Novyy Vek weekly reports that, across the country, residents doubled coal consumption last year. Uzbek Coal projects consumption to jump by almost 300 percent to 2.4 million metric tons by 2020. Uzbekistan produced about 3.9 million metric tons of coal in 2012.
Energy exports from Uzbekistan jumped in value by 81 percent last year, new figures show, thanks in part to a new pipeline to China. But as Tashkent enjoys the windfall, the vast majority of Uzbeks continue to face gas, electricity and heat shortages.
According to the State Statistics Committee, gas and other energy exports were worth $5.03 billion in 2012. That’s an increase of 81 percent over 2011, when the country exported $2.78 billion worth of energy products, mostly hydrocarbons. Citing government statistics, Uzdaily.uz reports that energy accounted for 35.3 percent of Uzbekistan’s total exports in 2012, up from 18.5 percent in 2011.
Last year, Uzbekistan joined a Turkmenistan-to-China pipeline that had opened in 2010 and, in August, started pumping China-bound gas for the first time. The pipeline was expected to export up to 4 billion cubic meters (bcm) of Uzbek gas to China by the end 2012 and 10 bcm this year.
The exports are sparking some resentment in Uzbekistan, however, as they negatively impact domestic supplies. Net output from Uzbekistan’s aging wells also appears to be falling. Local reports suggest output of oil and gas condensate in 2012 decreased by 11.6 percent year-on-year to 3.2 million metric tons and gas production by 0.2 percent year-on-year to 62.9 bcm.