Gazprom replaced Berlin with Tashkent

The transit of Russian gas to Uzbekistan through Kazakhstan can be increased fourfold from 2026, to 11 billion cubic meters. So far, the countries of Central Asia remain the only new direction for Gazprom (MOEX: GAZP) after the collapse of supplies to Europe in the last two years. At the same time, the cost of supplies to Uzbekistan in 2023 was about $160 per 1 thousand cubic meters, which is much lower than the sales price to Turkey or China.

The transit of Russian gas through Kazakhstan to Uzbekistan is planned to increase from the current 3 billion cubic meters to 11 billion cubic meters per year from 2026, the head of the Ministry of Energy of Kazakhstan Almasadam Satkaliev said on March 5.

Since October 2023, Gazprom began supplying gas to Uzbekistan via the Central Asia-Center (CAC) gas pipeline system in reverse mode. The countries agreed to export up to 3 billion cubic meters per year (or about 9 million cubic meters per day) over two years. According to Kommersant, in 2023 the price of supplies to Uzbekistan was about $160 per 1 thousand cubic meters.

Gazprom turned its attention to the countries of Central Asia after a decline in supplies to the EU, which fell sevenfold due to the consequences of military operations in Ukraine. The Russian authorities stated that they are working on creating a gas union with Kazakhstan and Uzbekistan to supply fuel to these countries and transit to China.

As the head of Gazprom, Alexey Miller, reported in November 2023, the company intends to strengthen its presence in Kazakhstan, Uzbekistan and Kyrgyzstan through the conclusion of new 15-year contracts, the creation of new routes, the expansion of existing gas transportation capacities and gasification. The contractual basis for these contracts should be ready by mid-2024, the top manager said. Uzbekistan stated that it is ready to invest up to $500 million in 2024–2030 in expanding the gas transportation infrastructure to a capacity of 32 million cubic meters per day.

Previously, Gazprom paid little attention to these markets due to their lower margins compared to Europe. Until now, supplies to the region have been insignificant: in 2023, the company supplied about 7.25 billion cubic meters to Kazakhstan (this is gas from the Karachaganak field processed at the Orenburg GPP), about 1.22 billion cubic meters to Uzbekistan, and 0.39 billion to Kyrgyzstan cubic meters

Uzbekistan’s own gas production is declining due to the depletion of fields. In winter, at peak loads, the country lacked up to 20 million cubic meters per day, which led to massive power outages, interruptions in heat supply and gas supply. According to preliminary data, gas production in the country in 2023 decreased by another 9.6%, to 46.7 billion cubic meters. At the same time, Uzbekistan has an export contract to China for 10 billion cubic meters of gas per year, which is not being fulfilled in full.

Gazprom did not provide any comments.

The price of supplies to Uzbekistan is significantly lower than the average sales prices both to Turkey (about $270–280 per 1 thousand cubic meters) and to China ($260–270 per 1 thousand cubic meters). Nevertheless, the current price allows Gazprom to make a profit of $20–22 per 1 thousand cubic meters, notes Sergei Kondratyev from the Institute of Energy and Finance. In his opinion, the abolition of export duties on supplies to Uzbekistan, as well as the company’s entry into gas processing projects in Uzbekistan, can increase the profitability of supplies.

Given the fact that production in Uzbekistan continues to fall, there is no confidence that 11 billion cubic meters will be enough for subsequent transit or swap to China, he believes. “In my opinion, in order for Uzbekistan to export 5–6 billion cubic meters to China by 2030, it will have to increase imports to 15–18 billion cubic meters,” believes Mr. Kondratyev. “Of course, in this case we are talking not only about supplies from Russia, but also increasing imports from Turkmenistan.”

Tatiana Dyatel