The coronavirus pandemic brought difficult times for the world economy forcing people to self-isolate and abandon transportation. The demand for oil in the world has fallen sharply, which led to a fall in prices for it. According to some estimates, energy consumption in Uzbekistan has decreased by 18%, and the demand for fuel has also fallen. Before the coronacrisis, the needs of the economy and population of Uzbekistan for energy resources only grew and were covered by the use of non-renewable energy sources, mainly hydrocarbons – the resorce which is limited, as we know.
SULTANOV Alisher Saidabbasovich, Minister of Energy of the Republic of Uzbekistan spoke about the post-crisis prospects of the energy market of our country, the future of hydrocarbons and renewable energy sources in an interview with the Editor-in-Chief of the journal “Economic Bulletin of Uzbekistan”.
– Alisher Saidabbasovich, my first question is related to the fall in oil prices. In your opinion, what is the future of black gold? Is this just yet another drop in prices, which has happened many times previously, or are we on the threshold of the end of hydrocarbons?
– This is a good question and the answer could be a lengthy one. There are several views about substitutability of hydrocarbons and how soon this can happen. The debate has been going on for decades and even thirty years ago, it was said the next generation would be left without oil and gas. I do not believe this will happen any time soon. Experts forecast that in the next 30 years, RES (renewable energy sources) will become the fastest growing segment of the world energy sector. Nevertheless, it is too early to discuss the end of the era of hydrocarbons. I believe over 50% of necessary energy will continue to be generated from fossil fuels for another 20-30 years.
As hydrocarbon prices are subject to volatility, investing in renewable energy is sustainable option, but it comes with challenges. Wind parks or solar parks should ideally be located close to the consumer, which is not always possible or is associated with additional large costs. As well as being produced, energy needs to reach the consumer.
There is still a future for hydrocarbons, especially natural gas, which Uzbekistan has an abundance of, and which we try to handle carefully and rationally. It is also interesting that when oil prices fall, and the world economy slows down, the price of gold rises. Uzbekistan has good gold reserves too, which mitigates any negatives of falling oil prices.
– By a Decree of the President of the Republic of Uzbekistan the Ministry of Energy was established more than a year ago, which implements the unified energy policy. How will this decision contribute to the development of the country’s fuel and energy sector, and what is the difference between the new management approach and the old one?
– You are correct — the Ministry of Energy in its current form was created more than a year ago. The main reason for the transformation was inefficiency and the inflexible nature of previous structures. Some did not meet modern challenges, such as coordinating the development of the fuel and energy sector, introducing innovative management principles, building a healthy competitive environment, and creating an attractive investment climate in our country.
Currently, the Ministry of Energy coordinates the development of the entire fuel and energy sector of Uzbekistan. The Ministry of Energy and its affiliates carry out state regulation of the processes of production, transmission, distribution and consumption of electric and thermal energy, coal, as well as production, processing, transportation, distribution, sale and use of oil, gas and their products. These fundamental changes in the fuel and energy sector required a radical reform of the entire structure. Thus, in the energy sector in early 2019, a radical restructuring of JSC “Uzbekenergo” was made, following which three joint-stock companies were organized: “Thermal Power Stations”, “National Electric Grid of Uzbekistan” and “Regional Electric Grid”. The purpose is to switch to modern methods of organizing the production, transportation, distribution and sale of electric energy.
In mid-2019, the process of reforming the oil and gas industry began with the first stage completed by the end of 2019. A new organizational structure of “Uzbekneftegaz” JSC has been formed, which includes joint-stock companies “Uzburneftegaz”, “Uzneftegazdobycha”, “Uznefteproduct”, and “Uzneftegazmash”. Excessive intermediate links in the management system of JSC “Uzbekneftegaz” have been removed. Oil and gas producing and processing organizations have also been transformed into structural divisions of JSC “Uzbekneftegaz” (management, plant).
“Uztransgaz” JSC was removed from the structure of “Uzbekneftegaz” JSC, and is now defined as a single operator for purchasing natural gas from gas producing organizations for further transportation, including export and import, as well as sales to consumers connected to main gas pipelines. JSC “Khududgaztaminot” was created under the territorial gas supply branches of the JSC “Uztransgaz”, to operate gas distribution networks and supply natural and liquefied gas to the population and social facilities.
Some public administration bodies previously under the Cabinet of Ministers were transferred to the Ministry of Energy: the Agency for Nuclear Energy Development – “Uzatom”, the Inspectorate for Control of the Use of Oil and Gas Products (formerly State Inspection for Control Over the Use of Petroleum Products and Gas), and the Inspectorate for Control in the Electricity Sector (previously State Inspectorate for Supervision in the Power Industry).
Since the formation of the Ministry of Energy, some fundamental changes have taken place. Priority was given to renewable energy generation, via adoption of the Law of the Republic of Uzbekistan “On Renewable Energy” in May 2019, and development by the Ministry of Energy of the concept of renewable energy in the country for the period 2019-2023.
By the end of April 2020, the Government approved the “Concept of Providing the Republic of Uzbekistan with Electric Energy for 2020-2030”, developed by the Ministry of Energy together with the relevant ministries, agencies, and international consultants.
Our main task is to provide the country with energy; to create conditions where the population and the economy are supplied with electricity and fuel without interruption. This means increasing generating capacity, upgrading the electrical grid, improving the accounting and control of consumption. These tasks are complex, but doable.
– For Uzbekistan, which has gas as its primary energy source, investments are primarily needed to develop and modernize the gas supply system. Is it planned to introduce market principles in the country’s gas industry, taking into account the current practice in the world when consumers freely buy gas from competing suppliers?