Russian lenders mull $1.5bn in loans to Uzbek gas projects
Russian lenders are looking to arrange over $1.5bn in loans for gas projects in Uzbekistan, Russian state development bank VEB.RF said last week.
VEB.RF and another Russian lender Gazprombank have agreed preliminary financial terms to support the exploration and development of the 25 Years of Independence gas field in Uzbekistan's southern Surkhandarya region. The overall project's cost is estimated at $1.75bn, and Russian financial institutions are expected to contribute $900mn, helping to cover the cost of exports of Russian services and equipment.
First announced in 2017, the 25 Years of Independence development is supported by a group of Russian and Uzbek investors including Russia's Gazprom and Uzbekistan's Uzbekneftegaz. According to VEB.RF, an independent assessment places its proven and probable reserves at 150bn m3. The project will involve the construction of a 5bn m3/yr gas processing complex.
VEB.RF, Gazprombank and the Russian Agency for Export Credit and Investment Insurance (EXIAR) have also agreed to co-operate on upgrading Uzbekistan's aged gas transmission system. The group "will consider the possibility" of arranging a syndicated loan for Uzbek gas system operator Uztransgaz of up to $618mn, involving both Russian and Uzbek lenders. At least half of this loan will be used to pay for exports of Russian products and services.
Uztransgaz operates around 13,000 km of trunk gas pipelines, many of which were built more than 50 years ago. The poor state of the network means that even though Uzbekistan produces more gas than it consumes, supply disruptions are routine especially in remote areas.
The Asian Development Bank, which is helping support the upgrade, estimates that most of the pipelines have not been inspected for 25 years, causing technical losses of up to 15% of total supply. Compressor stations are also in disrepair, operating at less than 35% capacity.
Russia dominates Uzbekistan's energy sector alongside China. Russian oil producer Lukoil is the central Asian state's biggest foreign investor, operating its two largest gas projects, Kandym-Khauzak-Shady and South-West Gissar. Russian atomic energy group Rosatom is also looking to build a nuclear power plant in Uzbekistan.