ASIA: Uzbek and Tajik energy

In the Soviet Union, many commodities were subsidized for Soviet consumers, including energy, which was provided either free or at costs far below world prices. The practice still continues in most post-Soviet states, with Russian consumers receiving natural gas and electricity at rates far below world prices, while in Turkmenistan, citizens receive free natural gas and electricity and it costs only about $1 to fill up a car's gas tank.

ASIA: Uzbek and Tajik energyBut if post-Soviet governments are maintaining subsidies to maintain social stability, all post-Soviet energy exporters are in the process of raising prices to their regional and Western consumers, most notably Gazprom. The Russian gas monopolist has played pipeline politics over the years over pricing by reducing or even cutting off energy exports to Belarus, Ukraine and Georgia, while steadily pursuing rising prices with its post-Soviet neighbors.

A similar pattern is emerging in the relations between Tajikistan and Uzbekistan. While Tajikistan is rich in hydropower resources, it has no significant exploitable hydrocarbon resources to speak of. Uzbekistan, on the other hand, has immense reserves of natural gas, but its efforts to reach the global market are stymied by its isolated, doubly landlocked position. The two are involved in discussions that, if initialed, will see the price of Uzbek gas exports to Tajikistan rise sharply. Adding to the complexity of the discussions is the fact that since the 1991 Soviet collapse the two countries have had an unsettled relationship.

Tajikistan was the poorest country in the Soviet Union as well as in Central Asia. After declaring its independence in 1991 the country slid into a six-year civil war that saw up to 50,000 people killed and more than one-tenth of the population flee the country and cause billions of dollars in damages before a 1997 U.N.-brokered peace agreement ended the carnage. One of the legacies of the conflict is that a 2004 estimate concluded that 64 percent of the population lives below the poverty line. Only 7 percent of Tajikistan's land is arable, and a 2004 estimate put the country's oil production at a paltry 252 barrels per day. The situation is equally lopsided in natural gas, as in 2005 it produced only 39.32 million cubic meters as it imported 1.333 billion cubic meters.

One thing the country does have in abundance is hydropower; in 2005, its numerous dams generated 16.89 billion kWh, of which 4.257 billion kWh was exported.

In contrast, in 2006 Uzbekistan generated 49 billion kWh, of which 6.8 billion kWh was exported. It is Uzbekistan's burgeoning natural gas industry that is at the core of Uzbek-Tajik energy relations, as in 2006 the country produced 62.5 billion cubic meters, of which 12.5 billion cubic meters was exported. It is these natural gas exports that Dushanbe is anxious to tap, but if recent negotiations are any indication, the price will be steep.

Negotiations on Uzbek gas exports to Tajikistan began Dec. 11 in Tashkent between Uzbek gas transportation company Uztransgaz and Tajikistan's Tojikgaz, following up on the previous week's discussions in Tashkent between the two concerns, which produced an agreement that in 2008 Tajikistan will buy 1 billion cubic meters of Uzbek gas. On Dec. 25, the Russian media announced that Tashkent intends in 2008 to raise its natural gas prices for Tajikistan from their current level of $100 per thousand cubic meters to $180. Tojikgaz Director General Tojikgaz Fatkhiddin Muskhiddinov said, "The price demanded by Uzbekistan is too high and may trigger a new round of inflation." In an understatement, Muskhiddinov added, "One should not rule out that this may lead to an increase in the price of natural gas for domestic consumers in the country."

Last-minute negotiations concluded in Dushanbe produced a breakthrough agreement under which Tajikistan will pay $145 per thousand cubic meters of Uzbek gas, an agreement that both sides can claim as a victory.

Tajikistan had originally planned to increase purchase of the Uzbek gas from its 2007 level of 650 million cubic meters to 950 million cubic meters in 2008. Uzbekistan has the upper hand in the negotiations, as it remains Tajikistan's key gas supplier.

One lamentable byproduct of Tajikistan's ruinous civil war was that it precluded the exploration and development of the country's own natural gas reserves, which are believed to be significant. Dushanbe is now moving to correct the problem, with Russia's Gazprom exploring two oil and gas deposits in Tajikistan, while on Dec. 24 Canada's Tethys Petroleum Ltd.'s subsidiary Tethys Tajikistan Limited announced it had signed a $10 million production-sharing agreement with Dushanbe to begin exploration and development on two wells in the Kulob region and begin rehabilitation activities on old fields there. Kulob is an extension of the massive Amu Darya basin, which contains giant and super giant gas fields in Turkmenistan and Uzbekistan. For the immediate future, however, Tajik businesses and consumers will have to dig much deeper in their wallets if they are not to shiver through the winter.

Via: Washington/UPI | by John C.K. Daly

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