The Central Asian pipeline network, launched in 2009, runs nearly 2,000 km (1,250 miles) from Turkmenistan through the former Soviet neighbours of Uzbekistan and Kazakhstan before reaching China’s northwestern Xinjiang region.

Turkmenistan, which holds the world’s joint fourth-largest natural gas reserves, is to date the sole supplier to the China-bound pipeline, although both Uzbekistan and Kazakhstan have plans to send gas via this route.

“We can start shipping our gas right now, but there are some legal issues which need to be settled,” Tulagan Zhurayev, head of Uzbek state-controlled gas transportation firm Uzbektransgas, said on the sidelines of an industry conference.

“We haven’t started shipping gas yet,” he said. “We plan this year to supply between 2 billion cubic metres (bcm) and 4 bcm. We have the gas and everything is ready.”

Uzbekistan, a mainly Muslim nation of about 30 million, is seeking a place in the lucrative gas trade with fast-growing China and some Uzbek officials have said eastward shipments of the country’s gas are set to reach 10 bcm in 2013.

Zhurayev declined to comment on this figure. “Supplies are definitely set to expand next year,” he said, “but so far more realistic talk is of between about 2 bcm and 4 bcm this year.”

‘IDEAL LOCATION’

Ulrich Benterbusch, director of the Global Energy Dialogue at the International Energy Agency, told the conference Central Asian gas producers were “ideally located” to supply pipeline gas to China, India and the European Union.

In 2010, China became the fourth-largest natural gas user in the world, and its demand for the fuel last year – estimated at 130 bcm – could double by 2020 and even by 2015, he said.

“There’s no doubt that China will absorb imports from Central Asia at a level of about 80 bcm to 200 bcm by 2025, even if Russia exports gas to China by 2020,” Benterbusch said.

“We thus welcome very much Central Asia’s growing supply commitments to China, because it’s not only important for China’s energy security, but also for global energy security.”

The China-bound pipeline had originally been expected to reach annual capacity of 30 bcm in 2012. State-run China National Petroleum Corp (CNPC) has said it plans to increase the capacity of the pipeline to around 60 bcm by 2015.

Nurbol Sultan, head of Kazakh state gas transportation company KazTransGas, said in April that Turkmenistan was set to supply 9 bcm of gas to China this year, rising to 10 bcm in 2013 and 15 bcm annually starting from 2014.

Like its neighhbour Turkmenistan, reaching China’s market is an opportunity for Uzbekistan to diversify its gas exports away from its traditional market, Russia.

Russia buys up the bulk of Uzbek natural gas, which is exported via a Soviet-era pipeline network. Small volumes are shipped to Kazakhstan, Kyrgyzstan and Tajikistan.

Official data show Uzbekistan produced 63.04 bcm of natural gas last year, or 4.4 percent less than in 2010.

Zhurayev told Reuters Uzbek gas exports were expected to rise to 15 bcm this year from 12 bcm in 2011.

IEA’s Benterbusch said the depletion of older gas deposits in Turkmenistan and Uzbekistan meant the countries would need to attract large investment to develop new and complex fields.

He also said much more gas from Central Asia would become available for export when these former Soviet economies became more efficient in their energy use.

“The high energy intensity and inefficiency of gas consumption in Central Asia is a strategic challenge,” he said. “Energy consumption in Central Asia could be cut by more than half.”

Source: Reuters

Rating Action
On May 17, 2012, Standard & Poor’s Ratings Services assigned its ‘B-’ long-term and ‘C’ short-term counterparty credit ratings to Turkiston Bank. The outlook is stable.

Rationale
The ratings on Uzbekistan-based Turkiston Bank reflect its ‘b+’ anchor, as well as our view of the bank’s “weak” business position, “strong” capital and earnings, “weak” risk position, “average” funding, and “adequate” liquidity,
as our criteria define these terms. The stand-alone credit profile is ‘b-’.

Under our bank criteria, we use the Banking Industry Country Risk Assessment (BICRA) economic risk and industry risk scores to determine a bank’s anchor,
the starting point in assigning an issuer credit rating (ICR). Our anchor for a commercial bank operating only in Uzbekistan is ‘b+’. The economic risk score for Uzbekistan is ‘7′. Uzbekistan’s economy is predominantly state-owned, undiversified, and commodity-dependant, with high political risks and an unfavorable investment climate. But a low degree of financial intermediation, relatively low levels of corporate and personal indebtedness in both private and public sectors, and limited cross-border borrowing help
shelter the country’s small banking industry somewhat from global external shocks. The industry risk score for Uzbekistan is ‘9′. The Uzbek banking industry is undermined by very weak institutional and legal frameworks,
limited transparency and disclosure, a lack of business and funding diversification, and dominance of state-owned banks, which distort domestic competition.

Our assessment of Turkiston Bank’s business position as “weak” reflects its very small and narrow franchise and a lack of product and customer diversity. Although the bank has been operating since 1997, its market share has remained
insignificant at about 0.2% of banking system assets. Compared with some other small Uzbek banks, Turkiston has a reasonable performance track record and can
no longer be considered a start-up operation. As of Dec. 31, 2011, the bank’s assets under International Financial Reporting Standards (IFRS) totaled Uzbek sum (UZS) 50 billion (about $28 million). Currently, it focuses on
small-and-midsize enterprises in specific districts of Uzbekistan’s capital , Tashkent. Its customer base includes mobile operators, transport companies, trade enterprises, and some public authorities, which is not typical for small
privately owned banks. Turkiston Bank’s franchise benefits from its top management’s personal and business connections. Given that the Uzbek banking system is highly concentrated and dominated by state-owned banks, Turkiston Bank has limited opportunities to achieve significant business diversification over the medium term, in our view. At the same time, we anticipate that the bank will expand its assets by 30% annually over 2012-2013, which would be in line with the sector average.

Our assessment of Turkiston Bank’s capital and earnings as “strong” mainly reflects the bank’s projected risk-adjusted capital (RAC) ratio before adjustments for diversification and concentrations of 13%-15% over the next 12-18 months, although we also consider the low absolute amount of the capital base could make the bank more vulnerable in a stress situation. In our view, the bank does not currently have sufficient earnings capacity to support internal capital generation, taking into consideration its planned asset
growth. At the same time, we note that Turkiston Bank’s profitability significantly improved in 2011. Its return on equity increased from 5% in 2010 to 16.7% in 2011. This was mainly due to:
— Lower provisioning expenses, as the bank started to work out problem loans; and
— Higher fee and commission income, as a number of new large clients came to the bank.

However, the bank lacks a license for foreign currency operations, which is important for fees and commission revenue growth; this constrains the bank’s profitability. At the same time, Turkiston Bank has enjoyed a stable, high net interest margin of about 10% for the past five years.

We consider Turkiston Bank’s risk position to be “weak,” mainly due to its very high lending concentrations, particularly in its corporate loan portfolio. The top 20 borrowers accounted for about 90% of the total loan
portfolio or twice the total equity at year-end 2011. At the same date, however, the bank reportedly had no loans overdue by more than one day. This is highly unusual, but reflective of the small number of mainly relationship-driven borrowers. We expect the bank’s asset quality metrics to
deteriorate to levels closer to those of its domestic peers–i.e., nonperforming loans to total loans in the range of 2%-5%–as the loan portfolio matures.

We assess Turkiston Bank’s funding as “average” and liquidity as “adequate.” The bank has a relatively low loan-to-deposit ratio (84% as of Dec. 31, 2011) and limited dependence on interbank borrowing. Of total assets, 27% were funded by equity as of Dec. 31, 2011. However, we consider the bank’s funding base to be undiversified and limited. The top 20 depositors accounted for 62% of the total deposits at year-end 2011. The bank maintains a sizable liquidity cushion, which it needs because a high proportion of its corporate deposits are demand accounts. Cash and cash equivalents, together with short-term
interbank placements, comprised 34% of total assets at year-end 2011.

The bank is owned by a number of enterprises and private individuals. We consider the ability of the shareholders to provide support in times of stress as uncertain and do not include any notches of uplift for parental support into the ratings. We deem Turkiston Bank to be of “low” systemic importance for the Uzbek banking system due to its low market share in retail deposits, and accordingly do not incorporate any uplift for extraordinary government
support.

Outlook
The stable outlook balances our expectation that the bank will maintain strong capitalization and adequate liquidity metrics despite the likelihood of continuing high levels of asset growth against our expectation that asset quality will deteriorate closer to industry-average levels.

Even though we currently consider the possibility to be remote, we would consider a positive rating action if Turkiston Bank were to significantly improve the diversity of its loan portfolio, decrease single-name concentrations, and widen its product range and customer base. This could help
lift our assessment of its risk or business position to “moderate.”

We could lower the ratings, if the bank were to suffer material deterioration of its capital base such that the RAC ratio before adjustments fell below 10%. A significant liquidity shortage might also lead to negative rating actions.

Ratings Score Snapshot
Issuer Credit Rating B-/Stable/C

SACP b-
Anchor b+
Business Position Weak (-2)
Capital and Earnings Strong (+2)
Risk Position Weak (-2)
Funding and Liquidity Average and Adequate (0)

Support 0
GRE Support 0
Group Support 0
Sovereign Support 0
Additional Factors 0

Related Criteria And Research
All articles listed below are available on RatingsDirect on the Global Credit
Portal.

— Banks: Rating Methodology And Assumptions, Nov. 9, 2011
— Banking Industry Country Risk Assessment Methodology And Assumptions,
Nov. 9, 2011
— BICRA On Uzbekistan Revised To Group ‘8′ From Group ‘9′, Nov. 9, 2011
— Bank Capital Methodology And Assumptions, Dec. 6, 2010

Turkiston Bank
Counterparty Credit Rating B-/Stable/C

(Caryn Trokie, New York Ratings Unit)

Source: Reuters

The report said Lukoil has prepared a proposal to build a 100MWsolar power plant and create a national institute of solar energy near the city of Navoi on the proposal of the government of Uzbekistan.

A draft memorandum of understanding between the Lukoil and the Government of Uzbekistan has been prepared. Proposals for adjustment of Uzbek legislation relating to alternative energy have been developed with the assistance of external consultants (Spanish Mercados).

‘If these proposals are accepted by the Uzbek side, we will begin detailed development of this promising project’, the report says.

It was previously reported that the concept of development of renewable energy sources (RES), the basic idea of which should be the widespread adoption of alternative sources of energy in everyday life and their development on the basis of foreign experience is being developed in Uzbekistan

In particular, Uzbekistan plans to create an institute of solar energy with the assistance of the Asian Development Bank (ADB), which will combine the functions of scientific, technical and project organisation.

According to the Centre for Economic Research (CER) of Uzbekistan, the potential of renewable energy in the country is about 51 billion tons of oil equivalent with technical capacity at 179 82.3 million tons of oil equivalent. It includes the potential of solar energy in the country where there are 300 days of sunshine a year and is about 50.973 million tons of oil equivalent.

Currently oil and gas accounts for 97 per cent of primary energy resources, 2.3 per cent — coal, 0.7 per cent — hydropower. The share of renewables in Uzbekistan does not exceed one per cent.

It is estimated that the total additional annual benefits through the development of renewable energy sources are estimated at about $5 billion.

Source: renewablesbiz

Media in Uzbekistan cited Uzbek state property committee deputy chairman Saifitdlin Gafarov as saying Tuesday that assets in the oil, gas, energy, metals, agriculture, electronics and pharmaceuticals industries sectors will be made available for purchase.

Uzbekistan, a Central Asian nation north of Afghanistan, has pursued a strict policy of economic self-reliance since gaining independence in 1991, but it has recently shown increasing openness to international financial support.

The government in April announced it was seeking to attract investors with new tax concessions and rules limiting government interference in foreign-owned companies.

Economic growth driven by high prices for the country’s commodity exports has been healthy, reaching more than 8 percent in 2011.

The International Monetary Fund in late March urged Uzbekistan to further develop its private sector and promote economic diversification.

Source: Washington Post

Key Points:

New 25-year Production Enhancement Contract on oil field

Existing producing oil wells

Significant upside in undrilled areas – additional geophysical data to be acquired

MOU for potential Exploration Agreement on an exploration block in North Ustyurt Basin

Dr David Robson, Chairman, President and Chief Executive Officer of Tethys, added:

“We are delighted that we have been awarded this new oil field in Uzbekistan. I would like to thank our partners, Uzbekneftegaz, Uzneftegazdobycha and Uznefteproduct, for their support and hard work in negotiating this new contract. We believe the Chegara Group of Fields has good potential through increasing production in existing wells and also large upside in undrilled areas. It has only had minimal, initial drilling work carried out on it and we believe with additional geophysical data we will be able to develop this field more efficiently and increase production substantially. In addition the newly signed MOU now sets out a clear timetable to potentially signing an exploration agreement for a block in the Ustyurt basin which we believe has very similar geological characteristics to the Akkulka block where we have our Doris oil discovery.”

The Chegara Group is an underdeveloped group of fields located 14 kilometers south-west of the existing Tethys asset of North Urtabulak, and contiguous to the prolific Urtabulak gas condensate Field, within the world-class Amu Darya Basin. The reservoirs comprise Upper Jurassic age carbonates at an approximate depth of 2,650 meters, trapped below a regionally prevalent salt and anhydrite seal. The oil is of moderate gravity and at present there are 3 producing wells all flowing naturally under reservoir pressure. This currently has limited existing oil production, and will form the baseline production under the new Chegara PEC with Uzbekneftegaz. Tethys believes there is substantial additional production potential in the field.

Tethys has collected and interpreted a significant volume of historic seismic, drilling, geological and production data relating to the Chegara Group of fields, and plans to initially work over the existing well stock using technologies and techniques that have been successfully implemented to increase production on the North Urtabulak Field over the previous 12 years under a very similar contractual arrangement. Furthermore, it is intended that additional geophysical data will be acquired on the field to identify undrilled areas that provide high potential upside. Currently there are only State reserves assigned to the field and no figures yet under NI 51-101 reporting procedures.

The contract will become effective following standard regulatory approvals, which include the issuance of a Presidential Decree and the completion of a Feasibility Study. The PEC has a term of twenty-five (25) years and under the new PEC CPL is allocated refined products for the crude oil it produces and sells these outside Uzbekistan. Furthermore Tethys has been granted exclusive rights to carry out operations with liquid hydrocarbons on Chegara.

The MOU signed with NHC Uzbekneftegaz sets out a fixed timetable to potentially sign an Exploration Agreement for a large Exploration block in the North Usyturt basin in Uzbekistan. TPL will submit a proposal for an exploration program for the block by the end of June 2012. After approval by NHC Uzbekneftegaz and the Government of the Republic of Uzbekistan an Exploration Agreement will be negotiated.

Notes to Editors

Tethys is focused on oil and gas exploration and production activities in Central Asia with activities currently in the Republics of Kazakhstan, Tajikistan and Uzbekistan. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.

Source: Tethys Petroleum

The starting price has been set at $57.3m. Based on the terms of the tender, the winner must design and install turnkey equipment for the reconstruction of the third and fourth power units at Syr-Darya, with a capacity of 300 MW each.

During reconstruction, there are plans to boost the CHPP’s capacity by 50 MW. The power units are slated for commissioning in October-December 2013.

Tender proposals are being accepted until June 12, with the results to be summed up in the third quarter of this year.

A loan from the Fund for the Reconstruction and Development of Uzbekistan and Uzbekenergo’s own funds will be used to finance the project.

Source: Cogeneration Magazine

He said a working group that develops the technology and strategy of the project’s implementation has been formed.

“We expect preparation of the necessary documents and serious progress in project implementation in the remaining half of the year,” he said.

As reported earlier, the project worth more than $2.5 billion provides for construction of a GCC with a capacity of 500,000 tons of polyethylene a year. The construction period is four years.

The project will be financed by Uzbekneftegaz, loans from the Uzbek Reconstruction and Development Fund, and investments by the Singaporean company.

In 2010, Uzbekneftegaz and Indorama signed a memorandum of cooperation, providing for technological and financial participation of Singapore company to establish production of diversified products (polymers and polyethylene) on the basis of the Mubarek Gas Processing Plant.

Mubarek Gas Processing Plant was commissioned in 1971. At present, its capacity is about 30 billion cubic meters of natural gas and production of more than 570,000 tons of gas condensate per year.

In 2001, Uzbekneftegaz put into operation Shurtan GCC on the basis of Shurtan gas-condensate field in Kashkadarya worth $985 million. The design capacity of the complex during processing 3.9 billion cubic meters of natural gas is 125,000 tons of polyethylene, 100,000 tons of liquefied gas and 100,000 tons of unstable condensate per year.

Currently, the Uzbekneftegaz together with a consortium of Korean companies led by Kogas implements a project for the construction of Ustyurt GCC on the basis of the Surgil field in the north-west of the country. Its capacity will allow to process four billion cubic meters of natural gas per year and produce 400,000 tons of polyethylene and 100,000 tons of polypropylene. Total project cost is $ 4.2 billion.

Source: Downstreamtoday

In Uzbekistan young families will receive mortgages on apartments under construction at the Central Bank refinancing rate. The special commission will deal with the selection of those who are in need of housing. The cost of a mortgage loan will be 12% per annum with a 3-year grace period after the introduction of the applicants to a special account in the amount of the initial payment of at least 25% of the cost of the housing.

Source: Caspionet.kz

According to the audited balance sheet, the bank’s assets decreased by 0.7 per cent in 2011, up to 539.1 billion soum, including funds from other banks increased by 3.4 per cent up to 529.6 billion soum.

Liabilities of RBS NB Uzbekistan decreased by 1.7 per cent last year to 498.04 billion soum, whilst equity increased by 12.3 per cent to 41.04 billion soum.

As previously reported, in October 2007 a consortium of banks RBS, Fortis and Santander acquired Dutch bank ABN AMRO for $114, including the assets of ABN AMRO in ABN Amro Bank NB Uzbekistan A.O, the largest by assets in the joint bank of Uzbekistan. The bank was renamed as RBS NB Uzbekistan in November 2008.

Korea Development Bank (KDB) signed an agreement with RBS in December 2010 to acquire an 82.35 per cent stake in RBS NB Uzbekistan. The cost of the purchased package was not announced.

According to KDB, a South Korean bank has paid an amount approximately equal to the residual value of fixed capital of RBS Uz. The joining of KDB in the register of shareholders was approved at an extraordinary general meeting of RBS NB Uzbekistan in November of 2011.

The authorised capital of the bank is now formed at a rate of $8.5 million. KDB acquired 82.35 per cent of shares and the National Bank of Uzbekistan holds 17.6 per cent stake in the bank.

More than 500 corporate customers are clients of the bank, most of whom are the international companies that trade with Uzbekistan.

Earlier a KDB representative said it is planned to complete the merger of two cooperative banks — RBS NB Uzbekistan and the Uzbek-Korean bank UzKDBbank, in which KDB owns 61 per cent of the shares before the end of 2012.

The largest foreign bank in Uzbekistan is expected to be created due to the merger.

In accordance with the agreement of the parties of the transaction, RBS NB Uzbekistan will work regardless of UzKDBbank prior to the merger. The name of the bank will be saved for the period of the agreement on its trademark until the end of 2012.

The banking system of Uzbekistan today is represented by 30 banks, five of which are created with the participation of foreign capital.

Official exchange rate on May 10 is 1862.03 soum / $1

Source: Quote.com

The loan term is for 12 years including a two-year grace period. Interest rate is three per cent per annum.

As reported earlier by Trend, in early April 2012 one of the largest hotel operators Hyatt International, the administration of Tashkent and the FRDU signed an agreement to build a luxury hotel with 294 rooms in 2012-2013.

Under the agreement, Hyatt International will provide technical advisory services during the design, construction and equipment of hotel management services to the hotel, the right to use Hyatt Regency hotel brand, as well as granting $5 million after commissioning the hotel.

The state unitary enterprise ‘Construction and Maintenance of capital’ will be established in Tashkent in order to implement the project

Financing of the project will be implemented through the funds of the budget amounting to $71 million and credit of the Fund for Reconstruction and Development of Uzbekistan in the amount of $42 million.

Construction of the hotel is provided under the decree of the President of Uzbekistan Islam Karimov ‘On measures on organisation of construction of international class hotels in the city of Tashkent’.

Currently there is only one, five star hotel, managed by the British Intercontinental chain.

Source: Hotel-online