Increase in petrol prices stipulated by several economic factors in Uzbekistan

Baku, Azerbaijan, Jan. 16
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The recent 20 percent rise in petrol and diesel fuel prices in Uzbekistan was caused by declining oil production volumes in Uzbekistan and the need to purchase huge volumes of crude oil to overcome the petrol shortage, according to the independent experts, analyzing the trends in the energy market.

The production of liquid hydrocarbons decreased by 2.2 times from 7.24 million tons in 2002 to 3.17 million tons in 2012 in Uzbekistan, according to the official statistics. The crude oil production decreased to 1.56 million tons (2.6-fold) with the total domestic consumption of 4.4 million tons. The internal demand will continue increasing taking into account the annual increase in the number of cars in the country, the experts say.

The Uzbek fields depleted on average by almost half. Their remaining recoverable reserves amount to more than 50 million tons, according to the experts.

More than 1,500 new wells must be drilled and commissioned to improve oil recovery of the fields at least 5-10 percent for the next 10 years, according to Uzbekneftegaz's geological estimates.

This will ensure an increase in the annual oil production to two million tons based on the minimum value of productivity at the level of five tons per day, as well as an increase in the amount of up to three million tons with a production rate of wells up to 10 tons per day.

Such a program will cost nearly $3 billion, according to estimates.

Under the conditions of reducing oil production, the Uzbekistan government has intensified the process of starting the production of oil products from alternative sources of raw materials - synthetic fuel (GTL - gas to liquid process), processing of shale ore and the use of methanol, as well as by transferring the significant part of the country's car fleet to liquefied and compressed gas.

Nevertheless, this requires significant investments. One GTL-plant will be constructed by Uzbekneftegas jointly with South African Sasol and Malaysian Petronas at an estimated cost of $4 billion.

In order to increase the supply of motor fuel to the domestic market, the government of Uzbekistan allowed UzGazOil LLC, owners of the largest network of gas stations, to process imported raw materials in local refineries on a tolling basis this year and sell it in the domestic market at commercial prices, which is by 1.5 -2 times higher than the officially set prices. However, this didn't solve, only slightly mitigated the problem.

Uznefteproduct JSC, which includes hydrocarbon processing plants in the country, said in July 2013 that in order to maintain stability in the oil market, Uzbekistan is forced to increase imports of raw materials from neighboring countries for processing at its own refineries.

"To stabilize the situation Uznefteproduct JSC takes strong measures to increase the production of gasoline at refineries, including through import of additional volumes of raw hydrocarbons," the statement stressed.

Import volumes of oil and contract value of procurement were not disclosed. According to some sources, the volume of purchases of raw hydrocarbons from Turkmenistan alone amounted to 50,000 tons per month.

Based on this, it is easy to assume that the state costs on oil imports are quite high. Even when the state invested so heavily in increasing the capacity of production of hydrocarbons and petroleum products from alternative sources of raw materials, the government failed to find another way out but to raise the price of motor fuel for the first time in 2.5 years.

As previously reported, the previous increase in gasoline prices occurred in Uzbekistan in August 2011, when prices rose by about 10 percent.

The official exchange rate on January 10 is 2203.29 soums / $ 1.

Translated by N.H., L.Z., M.L.

Edited by C.N.

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