Deputy minister avoids commenting on hidden concession on gas exports 

On November 16, the Ministry of Energy held a press conference on interruptions in electricity and gas supply.

According to Deputy Minister Sherzod Khodjayev, the reason for 90% of outages is the lack of fuel that is, natural gas for electricity generation.

“I can honestly say that 90% of power outages today are not caused by outdated or underpowered power grids, but by a lack of fuel to generate electricity in our power plants.

Of course, a question arises here: you can say that we don’t care what technology you use, we have the right to demand continuity of electricity supply from you. We are just reporting it. 90% of electricity in Uzbekistan is produced in thermal power stations,” Sherzod Khodjayev said.

According to reliable information in Kun.uz, the private company “Industrial Energy Group” (“Sanoat energetika guruhu”) LLC was granted exclusive privileges for gas export based on a closed decision made this year. Moreover, except for 2021, gas production has only been decreasing for the last 6 years.

Kun.uz correspondent talked about this at the press conference and asked a question about the lack of gas, which is the main reason for power outages: “Isn’t it time to return the underground wealth to the control of the state of Uzbekistan?”

In response to the question, the deputy minister talked neither about concessions, nor about the return of natural resources to the state. Instead, he emphasized that the private company is on track with its gas production plan.

I will give a clear answer to the question whether the transfer of mines to the “Industrial Energy Group” led to the deterioration of the gas supply. The implementation of the daily gas production plan is 131% in the “Industrial Energy Group” system. That is, the company fulfills its obligations to extract gas and direct it to the domestic market. We cannot blame this company for not fulfilling the plan or for not making enough investments,” Khodjayev said.

When the Kun.uz correspondent said that he was not asking about the company’s production volumes, but about exclusive export privileges, Sherzod Khodjayev said that he could not reveal all the terms of the “agreement”.

“From the point of view of export, I will answer your question in a different way. Regardless of who the producer is, the natural gas export operator is Uztransgaz. Today, exports are almost completely closed. If it is planned to export 10 million cubic meters of natural gas in the 1-day forecast, today’s export is less than 1 million cubic meters,” the ministerial official said.

After the question about the country’s natural resources, why the terms of the contract should be closed, the deputy minister remained silent. The moderator of the press conference encouraged the participants to move on to the next question.

During the conference, the Gazeta.uz reporter also asked a question about the “Industrial Energy Group”. “Why are mines being handed over for free with a closed decision?” (Kun.uz does not have specific information on what grounds (free or not) the mines at SANEG’s disposal were given to the company).

The deputy minister did not answer this question either; he reacted to another issue mentioned by the reporter – the transfer of a number of mines in the Uzbekneftgaz system to the “Industrial Energy Group” and the decrease in the Uzbekneftgaz indicators.

“Regarding the issue of oil production, the sharp decrease in indicators in the Uzbekneftgaz system can be explained by the transfer of fields to Jizzakh Petroleum (former name of SANEG), but if we look at the total production volume, today it is being implemented almost within the framework of the balance indicators. That is, the fact that these mines were transferred from the Uzbekneftgaz system to another company does not mean that the mine has stopped or is not being used,” the deputy minister said.

In response to a repeated question about the non-disclosure of the transfer of mines, he emphasized that “contracts concluded between the state and the investor are not always disclosed”.

“There are also secret parts of the contract here. I think that these contracts are all based on the legislation of Uzbekistan. If there were any conflicting aspects of the legislation, the Ministry of Justice would not have transferred it, it would not have been registered, and the enterprise would not have been able to operate,” Sherzod Khodjayev said.

To the journalist’s question whether the terms of the contract are a state secret, the deputy minister answered: “no, it is a commercial secret”.

The question of whether Uzbekistan’s natural resources will fall under a commercial secret remained open.

For information, “Industrial Energy Group” LLC has become one of the largest energy companies in Uzbekistan in recent years.

According to the official information of May 2022, the company owns 103 mines in Uzbekistan with the right to use the ground. About 80% of the country’s oil production and about 22% of the proven gas reserves are accounted for by SANEG.

It is not known how such large assets belonging to the Uzbekneftgaz state company ended up in the hands of a private company. Uzbek authorities have not disclosed this.

This process dates back to Jizzakh Petroleum, which was established in 2017. At that time, 60% of the new JV belonged to Uzbekneftgaz, and 40% indirectly to Gazprom.

These two founders wanted to build an oil refinery in Jizzakh. After this project failed, 98% of the enterprise was gradually transferred to Belvor Holding in 2020-2021. After that, the name of Jizzakh Petroleum was changed to “Industrial Energy Group”.

Belvor Holding is registered in Cyprus, an offshore zone, and belongs to the Uzbek businessman Bakhtiyor Fozilov. Fozilov also owns Eriell Oilfield Services, a major drilling contractor in Uzbekistan.

In addition to oil and gas extraction, SANEG also produces gasoline, diesel, oil, aviation kerosene. In the spring of this year, the Fergana Oil Refinery was also sold to this company.

Earlier, Kun.uz wrote about the fact that private companies are given huge benefits for the extraction of underground resources.