Uzbekistan Cuts Fuel Subsidies

Uzbekistan will increase electricity and natural gas prices by about a tenth from November 16 as subsidies rose sharply last year, according to a government decree November 2.

This is fifth time since 2014 that the central Asian republic has raised its gas price and a further increase will come in the middle of next year.

According to the government resolution, gas will go up about 10.5% to soms 320/m³ ($39/'000 m³) from November 16 and again to soms 350 by June 1, 2019.

Electricity prices will go up about 9.6% to soms 250/kWh. About three quarters (39 TWh) of Uzbek power generation comes from gas-fired power plants. According to the International Energy Agency, Uzbekistan's subsidies last year totalled $3.8bn for gas (4.9% growth year on year) and electricity subsidies totalled $1.3bn (52% growth year on year), totalling 12% of its GDP.

The country’s natural gas demand was 41.6bn m³ in 2017, or 78% of total production, according to the latest BP Statistical Review. It exports gas to China.

The som has been losing value since 2014, falling from 4,210/$1 to som 7,800/$1 last November; and is now at som 8,200/$1.

The international Monetary Fund said May 2018 that steps are needed to reduce energy subsidies while building adequate safety nets in Uzbekistan. It could cut domestic demand. Uzbekistan’s natural gas exports value were 4% of GDP in 2017.

“Lower terms of trade could worsen the current account, slow growth, and contribute to investment uncertainty,” the IMF said. The country also began preliminary work on a 2.4-GW nuclear power plant with Russia at an estimated cost of $11bn. The project would free up gas for export once it comes on line, which is scheduled roughly for 2028.