Uzbekistan President Shavkat Mirziyoyev has ordered regulators to do more to facilitate investment in oil and gas exploration projects in the country.
Authorities in Tashkent are setting out plans to commercialise more hydrocarbon resources, contradicting recent statements about a supposed shift toward renewables.
According to the decree, signed by Mirziyoyev earlier this week, investors will be freed from paying any commercial discovery bonus on successful hydrocarbons finds.
Additionally, Mirziyoyev has ordered a waiver of the signature bonuses levied on exploration and production contracts offered through competitive bidding processes.
The decree also simplifies the tax regime for exploration projects, with property and other minor taxes being replaced by a single “annual licence payment”.
Explorers will also be freed from paying customs duties on imported drilling rigs and other specialised equipment required in exploration and not available in Uzbekistan. They can also qualify for a refund of value added taxes paid during their operations.
Some additional incentives have also been granted to gas producers, with the government removing a 20% customs tax, levied on gas exports from Uzbekistan, and a 5% tax on gas imports to the country.
Additionally, the decree orders relevant ministries to work on amendments to tax laws to permit producers to offset oil and gas transportation and refining expenses against their subsurface-use tax payments and encompass other proposed changes.
Despite recently declaring new ambitions in wind and solar power generation, Uzbekistan authorities are aiming to triple gas production to 150 billion cubic metres by 2030 against levels of about 50 Bcm per year, seen recently.
Most of this gas is aimed for export to markets in China, as domestic energy needs are expected to be answered by renewable sources of energy.
However, some gas will also be required for eight new gas-fired power stations, with the total generating capacity of about 4.4 Gigawatts, that authorities have already contracted to build.
According to country’s Energy Ministry, ongoing projects to build solar and wind farms will give it access to 4.3GW of renewable power by 2025, with its availability to double to 8GW to 2030.
Together with hydropower, renewable sources are set to answer 25% of the country's anticipated energy requirements by 2030.
Authorities have so far inked 10 agreements with international investors, mostly from the Middle East, for about 2.9GW of solar and wind generation, according to the ministry.
Tenders for three contracts for another 500 megawatts of solar power are ongoing, the ministry said.
Jizzakh is a joint venture between Uzbekneftegaz which holds a 30% interest and Cyprus-registered firm Belvor Holding with a 68% stake.
Although the ministry has not answered a request for information about Belvor’s stakeholders, independent reports suggest that the firm is controlled by Uzbekistan’s most powerful businessman, Bakhtiyar Fazylov.
Fazylov is a founder and chief shareholder in country’s largest oilfield service provider, Eriell, and Uzbek leading building contractor, Enter Engineering.
Uzbekistan is promising better control over approved levels of greenhouse gas emissions and environmental footprint for industry players, but is yet to create a system for assessing carbon dioxide emissions across the economy.
According to the ministry, authorities are pushing forward upgrades at refineries to produce Euro-4 and Euro-5 motor fuels and otherwise bring the fossil-fuel industry and transportation networks to modern standards to reduce levels of environmental pollution.
Work is ongoing on a technical and feasibility study of a project to upgrade the country’s gas trunkline network that is operated by state run Uztransgaz.
The cost of the update has been estimated at over $400 million of which $300 million is expected to be raised from international credit agencies.
The modernisation of the gas pipeline network is anticipated to reduce emissions of methane during the transportation of natural gas that were estimated at about 124 million cubic metres in 2020.
Such issues as carbon capture and storage and hydrogen production, are still in their infancy, with research into introducing these solutions in Uzbekistan starting only this year following an earlier president’s decree to create a Scientific Research Institute of Renewable Energy Sources in Tashkent.