The University of World Economy and Diplomacy Analytical research INVESTMENTS INTO UZBEKISTAN: PROSPECTS OF OIL AND GAS INDUSTRY DEVELOPMENT Abdujabar RASULOV 17.05.2011 г.

CONTENTS OF RESEARCH 1. Investment opportunities of Uzbekistan in oil and gas industry 2. The main strategic locations of industrial production (in sample of Navoi, Shurtan, Angren and Almalyk) 3. Cooperation of Uzbekistan with other Asian countries in oil and gas production.

ESSENCE OF ENERGY COMPLEX 3 ESSENCE OF ENERGY COMPLEX «…the oil and gas industry of Uzbekistan is presently one of the most dynamic ones in Central Asia. Recent developments are shaping new opportunities for large, medium and small oil and gas players that could profit from taking an proactive position in the oil and gas sector of the country» Islam Karimov The President of the Republic of Uzbekistan

INVESTMENTS INTO UZBEKISTAN 4 INVESTMENTS INTO UZBEKISTAN Uzbekistan has been a net exporter of energy since 1996, mainly of natural gas, electricity, petroleum products and uranium. Exports of natural gas and electricity can be increased to 15-18% of annual production.

5 OIL AND GAS RESOURCES Uzbekistan takes respectively the fourth and third places by proven reserves of oil (599 million barrels) and gas (1.85 tcm). Since 2004 Uzbekistan has successfully distributed 18 oil and gas investment blocks, mostly to Russian and Chinese companies. The country strives to ensure sustainable production growth by attracting more international investors and easing tax burdens for them.

6 FDI directed mainly to the mining, tobacco, automotive and oil and gas sectors Table. Foreign investments in 2003-2010 (USD million) Foreign investments FDI 2003 823.9 96.5 2004 516.5 80.1 2005 602.1 166.7 2006 754.6 333.8 2007 746.6 545.5 2008 895.7 683.8 2009 1,285.9 1,013.6 2010 1,415 975.3

7 The biggest share of foreign investments is directed to oil and gas industry Foreign investments FDI Oil and gas 574.3 565.4 IT and telecommunications 217.5 206.3 Light industry 95.33 95.3 Electrical engineering 94.7 Transport 87.5 - Agricultural sector 76.6 31.8 Education 31.5 Public health services 24.1 1 Ferrous and non-ferrous metallurgy 7.0 Construction materials industry 6.9 Chemical industry 1.4 Others 68.9 17.7 Total 1,285.9 1,013.6

INVESTMENT PROGRAMMES 8 INVESTMENT PROGRAMMES 2009-2014 yy. Period large-scale investment modernization and technical renovation of basic industries budget worth $24.2 billion

INVESTMENTS 9 LUKOIL Gazprom Chinese CNPC 5 investment blocks in the country and extracted around 10 bcm of natural gas in 2010. acquired exploration and production licenses for 7 investment blocks at the Shakhpakhty field with expected volumes of 500 million cubic meters by 2012. Gazprom Chinese CNPC is currently conducting geologic exploration at 4 investment blocks with scheduled annual production of up to 6 bcm of natural gas.

should reach 220,000 meters from the current 10,000. At the same time Uzbekistan plans to maximize investment in exploration and production. Annual exploration drilling volumes set by 2012 should reach 220,000 meters from the current 10,000. Expected growth of drilling activities opens exciting opportunities for oilfield service providers and equipment producers.

Uzbekistan is becoming an increasingly important gas exporter. 11 Uzbekistan is becoming an increasingly important gas exporter. Exports of natural gas from the country increased 9 times in the period of 2002-2006 from 1.4 bcm to 12.65 bcm annually. The volumes are expected to grow further and reach 18 bcm by 2010. Downstream developments in Uzbekistan are also on the rise. By 2011 production of LPG will increase to 615,000 tons per year, almost triple of the current figure.

2010 2015 Oil and gas forecasts 12 6.05mn b/d 6.89mn b/d 13.82mn b/d Regional oil use 6.05mn b/d 6.89mn b/d 13.82mn b/d 15.08mn b/d Oil production 8.19mn b/d 7.76mn b/d Oil exports

2010 2015 Oil and gas forecasts 13 636.3 bcm 747.7 bcm 787.9 bcm Regional gas use 636.3 bcm 747.7 bcm Gas production 787.9 bcm 954.2 bcm 206.5 bcm 151.6 bcm Gas exports Uzbekistan’s share of consumption in 2010 was 7.78% and production - 8.25%. By 2015, its share of demand is to be 7.49%, with the country accounting for 9.01% of supply.

BID CITIES: Shurtan Gas and Chemical complex 14 BID CITIES: Shurtan Gas and Chemical complex Petrochemical 4,0 billion cubic meters / year 125000 tons of polyethylene /year

15 SHURTAN Natural gas extracted from Shurtan gas fields is subjected to a ten-time refinement. The extent of refinement reaches 99,99 %. 85 % of 3 billion 564 million cubic meters of gas processed this year is refined from other gas components and supplied to meet customers’ needs. The remaining 15 % is utilized to produce over 100 thousand tons of liquefied gas, 102 thousand tons of gas condensate and 600 tons of sulfur. 

“NAVOI” FREE INDUSTRIAL-ECONOMIC ZONE 16 “NAVOI” FREE INDUSTRIAL-ECONOMIC ZONE The Concept of the Free Industrial-Economic Zone on the base of Navoi airport grounds the forming the innovation-industrial, transport-logistical, social and recreational complex in 3 stages with mastering about 500 hectares of free area on each of them.

17 NAVOI Main operative directions of entities in FIEZ "Navoi" are production of a wide range of highly technological, competitive in world markets, products by introduction of up-to-date, highly efficient equipment and techniques, technological lines and modules, innovative technologies.

NAVOI 18 Distance from FIEZ "Navoi" to the nearest infrastructure : - freight terminal of Navoi airport - 4 km, - railway – 4.5 km (Navoi-Uchkuduk-Nukus railway), - highway "E-40" - 2 km, - electric power substation – 0.8 km, - water distribution unit - 0.3 km, - gas distribution unit - 0.4 km. NAVOI

NAVOI for 7 years 19 from €3 to €10 million from €10 to €30 million The privileges are available depending on the volume of foreign direct investments: from €3 to €10 million for 7 years for 10 years, with reduction of profit and unified tax payment rates by 50 per cent in the next 5 years from €10 to €30 million for 15 years, with reduction of  profit and unified tax payment rates by 50 per cent in the next 10 years. more than €30 million The Zone is located on 564 hectares next to the highway E-40 and the Navoi International Airport, connected to international railway routes towards countries of Europe (via Russia and Turkey), South East Asia (via China), Middle East and the Gulf (via Iran).

Oil & Condensate Refinery Compliance to the international 20 Oil & Condensate Refinery BUKHARA REFINERY 2,5MT/year 10 types of oil products (kerosene, diesel, petrol, lubricants, etc.) Compliance to the international Standards

21 At present day the coal mining is carrying on at 3 deposits: Angren, Shargun and Baysun.

22 COAL RESOURCES Uzbekistan disposes of explored coal reserves at a volume of 1900 mln.tn including brown coal - 1853 mln.tn, black coal – 47 mln.tn. Forecasting coal resources form over 5,7 bln.tn. Large reserves of black coal are concentrated in the south regions of the Republic – Surkhandarya and Kashkadarya regions.

23 ANGREN : KAOLIN Except kaolin on Angren deposit there is a number of other sorts of rock, which also can be used in different branches of industry: limestone, silica clay, quartz sand, loam. Resources of silica clay, being of interest for cement production as active mineral additives, on coal open-pit mine "Angrenskiy" are estimated at more than 12 mln. m3.

export of Uzbekistan - $158.2 mln., import - $1.456 bln. 24 COOPERATION: UZBEKISTAN AND SOUTH KOREA Seoul recognized the Independence of Uzbekistan on 30 December 1991. The diplomatic relations were established on 29 January 1992.  in 2010 the trade turnover increased by 31.5% and accounted for $1.614 bln. export of Uzbekistan - $158.2 mln., import - $1.456 bln. 

COOPERATION: UZBEKISTAN AND CHINA 25 COOPERATION: UZBEKISTAN AND CHINA The People's Republic of China recognized the independence of the Republic of Uzbekistan on 27 December 1991. The diplomatic relations were established on January 2, 1992. in 2010 trade turnover accounted for $2,085 mln. (growth 1.7 %), including export $899,9 mln., import - $1185,4 mln. 

COOPERATION: UZBEKISTAN AND JAPAN 26 COOPERATION: UZBEKISTAN AND JAPAN Japan recognized the independence of Uzbekistan on December 28, 1991. The diplomatic relations were established on January 26, 1992.  10 joint ventures in fields of foreign and domestic trade, transportation services, tourism and healthcare, engineering and metalworking, light industry, including one -with a 100% Japanese capital were set in Uzbekistan. 12 representatives of Japanese companies are accredited in Uzbekistan.  In 1999 «Uzbekistan-Japan» friendship society was established. Its main partners are «Japan-Uzbekistan» Friendship Society and «Fukushima-Uzbekistan» Cultural and Economic Exchange Association. 

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