Uzbekistan's energy sector
Fuel and energy complex and power systems
Energy resources, energy carriers and energy sources are part of the economic complex — energy. In other words, energy can be defined as a system of processes of reproduction, primary delivery, transformation, distribution and consumption of energy resources. These processes represent the stages of a single process of energy supply to the economy and society[1]. In addition to the concept of energy, other terms such as fuel and energy complex (fuel and energy complex) are used to denote the sphere of energy production. This term is understood as a set of energy industries — oil, gas, coal, shale industry and electric power industry. In some cases, nuclear power systems are designated separately as the nuclear industry, sometimes together with the fuel and energy complex.
The importance of the fuel and energy complex for the country's economy cannot be overestimated, because on its basis, depending on its condition, the main economic proportions of the country are formed; industrially advanced countries spend about 30% of all capital investments on its development (for the entire period of independence of Uzbekistan, the share of the fuel and energy complex in attracted external investments averaged 50-55%, and the share of the share of the entire industry in capital investments reached 40%). This complex usually employs an average of 15-20% of all economic workers by country.
The fuel and energy sector is the basic branch of the economy and in most cases is located at the initial point of the value chain. The fuel and energy complex itself, as an independent subject of economic relations, can be a party to external trade relations (an exporter of oil and gas products, as in OPEC countries), can also serve as the basic branch of the entire industry, providing energy components for the production of goods and services. The energy sector is also a supplier of energy to the population and budget organizations as an integral part of the entire economic complex of the country. There should be an energy balance in the country's energy system (production - consumption, import - export) where the difference in domestic consumption should be covered by imports, or vice versa, the surplus should be exported. Own provision with energy resources (or their stable provision) forms the degree of stability of the economy and industry in the medium and long term.
The formation of the fuel and energy complex of Uzbekistan.
In the context of global energy and environmental challenges, countries around the world face challenges to ensure energy security, diversify energy sources, as well as transition to more sustainable and environmentally friendly ways of its production and consumption. The Republic of Uzbekistan, possessing significant natural resources, including large reserves of natural gas, has been actively developing and implementing strategies aimed at modernizing and increasing its energy sector over the past decades.
Since gaining independence in 1991, the country has undergone significant transformations, not only in the political and economic spheres, but also in the energy infrastructure. Based on the desire for energy independence and increasing the efficiency of using its own energy resources, Uzbekistan has taken steps to develop domestic energy sources, improve the technological base for the extraction and processing of hydrocarbons, as well as to introduce alternative and renewable energy sources. These efforts cover a wide range of areas, from the construction of new and modernization of existing energy facilities to the development of a legal and regulatory framework that helps attract domestic and external investments in the industry[2].
With the acquisition of independence, Uzbekistan's energy policy has become one of the priorities of the country's economic reforms. The collapse in the economic sphere that accompanied the country in the early years of independence was largely due to the role of Uzbekistan in the resource allocation system of the former USSR, where Uzbekistan was assigned the role of a supplier of agricultural goods and gas. In return, oil products from Russia and Kazakhstan were supplied in large volumes. The energy complex of Uzbekistan was part of a large Soviet economy and there was no urgent need to ensure the republic's self-sufficiency in petroleum products, which would require large investments. At the same time, due to the lack of significant oil reserves, the import of petroleum products from other regions of the country to the republic was more financially profitable.
In the context of the formation of new economic relations during the period of independence, in order to stabilize the macroeconomic situation and the subsequent development of industries, the state provided tremendous support (in the form of state participation in attracting foreign loans under its own guarantee, as well as allocating capital investments from the budget) to basic industries. In particular, the strategic management of the fuel and energy sector was carried out and coordinated by the Cabinet of Ministers (Department for Fuel and Energy Development) through Government decisions, where the state policy was aimed at implementing the priorities of the energy strategy, providing for ensuring fuel independence by increasing oil and gas condensate production, as well as creating a reliable raw material base for the energy industry.
To achieve these goals, a number of large energy projects were implemented: the Kokdumalak oil and gas condensate field was built, the Bukhara oil Refinery was built, sulfur-containing gas purification facilities at the Mubarek gas processing plant, and a power unit at the Novoangren thermal power plant.
New oil pipelines and main gas pipelines, power transmission lines and other industrial and social facilities in the energy sector were put into operation. Gasification of settlements was carried out at a high rate (by 2016, the level of gasification in the republic reached more than 95%[1], whereas in 1991 this indicator was at the level of 45%). As a result of the measures taken in the fuel and energy sector, by the mid-90s, the strategic goals of energy policy outlined in the first years of independence were achieved: ensuring energy independence (mainly due to gas production) and solving social problems. At the same time, such dynamic measures to achieve energy independence were organized on the basis of already existing geological studies. During the entire period of independence, no significant reserves/deposits of gas and oil have been explored or discovered that could significantly affect the total reserves.
The energy (resource) potential of the country
Despite all the difficult stages of its development, modern Uzbekistan has a developed energy sector. In terms of natural gas production, Uzbekistan ranks 22nd in the world[1], and the volume of production of primary fuel and energy resources exceeds 55 million tons.
The main source of primary energy in the Republic of Uzbekistan is natural gas, which accounts for almost 85% of total energy production. The share of oil and gas condensate accounts for about 13% of primary energy production. The rest is accounted for by electricity produced at hydroelectric power plants, and coal, which is mainly used at the Angren and Novoangren thermal power plants (TPP), is consumed in boilers, as well as by the population of the country.
Measures to ensure fuel independence carried out in the early years of Uzbekistan's independence have significantly increased the production of natural gas, oil and gas condensate. If in 1992 gas production amounted to 42.8 billion m3, and oil (including gas condensate) 3.3 million tons, then in 2000 56.1 billion tons were produced. m3 of gas and 7.6 million tons of oil. By 1996, Uzbekistan had stopped importing fuel resources, which was a big and important event in the industry. Despite a significant reduction in coal production, an increase in the supply of liquid and gaseous hydrocarbons has made it possible to ensure sustainable energy supply to the national economy and the population. According to NHK Uzbekneftegaz for 2022, 90% of the natural gas produced in the republic is supplied to consumers of the republic, and the rest is exported, whereas until 2019 the share of gas exports was 15%. However, due to the deterioration of existing oil fields and the lack of new fields, starting in 2003, the volume of oil and gas condensate production began to fall catastrophically to the level of 0.8 million tons of oil and 1.2 million tons of gas condensate
Thus, at the initial stage of the reforms, the main focus was on the development and expansion of oil and gas production. Fuel and energy stations have shifted to gas. And the coal industry remained without sufficient attention from investors, due to its unprofitability and worn-out equipment in the industry. By the year 2000, the physical deterioration rate of equipment in the industry reached up to 90%.
Over the past 20 years, the ownership structure of gas-bearing areas has changed. If before that there was a monopoly on gas production in Uzbekistan, then since 2002 several foreign companies have entered the local market, thanks to the opportunities created by the PSA Law (Production Sharing Agreement) of December 7, 2001.
At the same time, when choosing a foreign partner, the priority was to carry out their own geological exploration, the use of new production and production technologies, work in complex and capital-intensive zones and fields. There are three oil refineries in the country (Bukhara, Ferghana, Altyaryk refineries), which, according to design capacities, can process up to 11.2 million tons of oil and gas condensate per year and produce petroleum products. Oil and gas condensate produced in Uzbekistan were planned as raw materials for these plants. To date, the maximum load of these plants is up to 6.0 million tons with imported raw materials, since own raw materials account for only 18% of the capacity of the plants (according to data from 2022).
In 2010-2022, the energy intensity of Uzbekistan decreased by 39.3%, or from 0.335 to 0.203 tons of oil equivalent (tons n.e.) per thousand dollars of GDP by PPP[1]. Despite a significant decrease, this figure remained almost three times higher than in the EU
As can be seen from Figure 6, work on increasing power generation capacity began in 2012 through the implementation of more than 20 major projects for the reconstruction of thermal power plants and the construction of new capacities. By this time, the existing potential of the energy system had been exhausted, and the economy's demand for electricity had increased significantly, despite stable economic growth since 1995. In response to these challenges, the Ministry of Energy of Uzbekistan has developed a roadmap for the creation of a carbon-neutral electricity generation sector by 2050 by 2020.
The roadmap defines the policies, technologies and investments needed to achieve carbon neutrality in the electricity generation sector by 2050. At the same time, the calculations provide for the launch of power capacities of planned (although temporarily suspended) nuclear power plants by the early 2030s (the launch of the 1st power unit in 2030, and the 2nd unit by the year 33). Taking into account the suspended project stages, the implementation schedule is likely to be shifted by 2-3 years.
At the same time, the Strategy "Uzbekistan - 2030" from 2023 includes, among other things, energy issues: increasing electricity generation to 118 GW, gas 62 billion m3, reducing the energy intensity of the economy by 2 times, increasing the installed capacities of VEI (renewable energy sources) to 25 thousand MW[1]. To achieve these indicators, the industry will need to invest an additional 52.3 billion US dollars.
With a significant decrease in oil production (a 4-fold reduction) and gas production (a 20-25% reduction), which are the main fuel sources of power plants, the energy capacity of power plants is growing (1) and there is a stable growth in the country's GDP (2). At the same time, during the years of independence (from 1991 to 2023), population growth amounted to 80%, and electricity consumption has increased 4 times, and consumption by commercial enterprises has also increased 4 times. The dynamic growth of energy consumption on the part of the population was offset by the active involvement of coal-fired facilities in the energy complex (modernization of which began in 2 stages: in 2010 and 2017[2]), as the primary fuel of thermal power plants.
In the early years, huge investments (by the standards of the 90s) were directed to the fuel and energy sector in order to achieve energy independence. In the first 25 years, up to 30.7 billion US dollars were invested in total[3]. And at the same time, sustainability in the industry has not been achieved and the resource base aimed at long-term development has not been significantly expanded. Unfortunately, the residual regime of financing exploration work in those years led the industry to a negative line. A significant, chronic shortage of funds for the exploration of deposits and areas makes it difficult to prepare large-scale strategic plans for the future of the fuel and energy sector. The resource potential of the industry has decreased significantly. To date, in terms of discovered reserves and the production of minerals (mainly gas), we have long left the ranking of the world twenty[4].
Conclusion
Uzbekistan is demonstrating determination in modernizing its energy infrastructure, striving not only to ensure energy independence, but also to reach a new level of sustainable development. The country is actively working to improve energy efficiency, reduce carbon emissions into the atmosphere and transition to cleaner and more sustainable energy sources. The introduction of modern technologies such as smart grids, energy management systems and energy-saving solutions is becoming a key priority of the national energy strategy. The development of renewable energy sources, primarily solar and wind energy, receives significant attention and financial support. This not only helps to reduce dependence on energy imports, but also opens up new opportunities for economic growth, creating new jobs and increasing the country's competitiveness at the global level. Further steps towards diversifying the energy mix, improving its environmental sustainability and introducing innovative technologies will help Uzbekistan continue its path to sustainable development. The country's energy policy is becoming an important element of its sustainable development strategy, contributing to modern industrialization, improving the quality of life of citizens and achieving global goals in the field of climate change. Uzbekistan is demonstrating its willingness to take responsibility for creating a more sustainable and environmentally friendly energy future, contributing to solving global climate change problems and striving for a more prosperous future for its citizens.
List of sources used
1. https://stat.uz
2. https://cerr.uz
3. https://ung.uz
4. https://minenergy.uz/ru/lists/view/27
5. www.rbasia.uz
6. https://www.undp.org/sites/g/files/zskgke326/files/migration/uz/uzb_un_rus_1_The_Outlook_for_the_Development_of_Renewable_Energy_in_Uzbekistan.pdf
7. http://www.lomonosov-fund.ru/enc/ru/encyclopedia:0132495
[1] “Uzbekiston – 2030” strategy of the Kyrgyz Republic (gov.uz )
[2] https://www.cdu.ru/tek_russia/articles/5/1180/#
[3] https://www.gazeta.uz/ru/2017/05/17/oil-gas/
[4]https://ru.wikipedia.org/wiki/%D0%9C%D0%B8%D1%80%D0%BE%D0%B2%D1%8B%D0%B5_
[1] In-depth review of the energy efficiency policy of the Republic of Uzbekistan | 2022, Energy Charter Secretariat
[1] https://www.gazeta.uz/ru/2022/12/05/gas-export/
