Uzbekistan is not a major exporter of energy resources, unlike neighbouring Kazakhstan and Turkmenistan, though it is home to quite substantial hydrocarbon resources.

The oil and gas industry accounts for about 16% national GDP and more than 20% of budget revenues; however, oil production is low, at just over 770,000 tonnes (15,500 barrels per day) in 2023, and is far outstripped by natural gas output, which came to 46.7bn cubic metres. But extraction of both commodities continues to decline, despite government efforts in recent years to reverse the decline by encouraging more foreign investment.

Despite ranking as the 15th largest gas producer in the world, Uzbekistan consumes almost all of this gas at home, selling only small amounts to China that are expected to drop to zero within the next few years. The country ranks 10th in the world in terms of natural gas consumption, with the fuel used extensively in industry and power generation. The government also uses cheap gas as a subsidy for local industry and the population. But a lot of gas is also wasted, because of an ageing and inefficient transport network. 

Uzbekistan’s resources could support higher production if the conditions were right, if the ratio is compared with that of other oil and gas producers. Proven oil reserves amount to about 100mn tonnes (730mn barrels), and those for natural gas 1.2 trillion cubic metres, according to government data. But historically there was underinvestment and excessive state control over the sector under the government of former ruler Islam Karimov. The current administration of President Shavkat Mirziyoyev has sought to improve hydrocarbon policy since assuming power in 2016, but as noted, this is yet to reverse the decline in production.

Uzbekistan’s main oilfields are located in the Andijan, Bukhara, Fergana, Karakalpak, Kashkadarya, Namangan and Surkhandarya regions. Their oil is transported for processing at the 50,000 bpd Bukhara and 110,000 bpd Fergana oilfields, while the main centre for gas processing is at the Mubarek plant, which has a capacity of 30 bcm per year.

The upstream market in Uzbekistan is fairly consolidated under the control of several key players. Of the 294 oil and gas fields in the country, 176 are operated by foreign companies. The main local companies are national oil company Uzbekneftegaz and Saneg, formerly known as Jizzakh Petroleum, which have 118 and 105 fields respectively. Among the main foreign players are China’s CNPC, with 13 fields, Russia’s Gazprom and Lukoil with two and 13 respectively, Epsilon Development with 18 and Natural Gas Stream with 10. While Russian and Chinese companies are the main foreign investors, there are also some from Korea, the US and Malaysia.

Uzbekneftegaz alone controls 934 bcm of confirmed gas reserves, while Lukoil has 413 bcm and Saneg 98 bcm. The national oil company was also responsible for 32.2 bcm of natural gas production in 2022, along with 1.43mn tonnes of condensate, 100,200 tonnes of oil and almost 700,000 tonnes of liquefied hydrocarbon gases. That year it increased its natural gas and gas condensate reserves by 35.1 bcm and 1.2mn tonnes respectively, after drilling 84 wells, carrying out major repairs at a further 711, and undertaking 27 technological measures. It also shot 1.84 square km of 3D seismic data. During the year it discovered three new fields – Yangi Olot, Yangi Tegirmon and Niyoz – in the Ustyurt and Bukhara-Khiva regions.

Uzbekneftegaz produces 72% of Uzbekistan’s motor gasoline, 46% of its diesel and 83% of its jet fuel. Because of the shortfall in domestic oil supply, it imports supplies from Russia and Kazakhstan to increase utilisation at the Bukhara and Fergana refineries.

Established in 2017 as Jizzakh Petroleum and then renamed in 2021, Saneg has licences and subsoil rights for developing 106 oil and gas fields, home to 696 oil and 74 gas wells, in seven regions. The largest privately-owned oil and gas operator in the country, Saneg is responsible for about four-fifths of oil production. 

In 2023 it produced 594,600 tonnes of liquid hydrocarbons and 1.2 bcm of gas. Between 2021 and 2022, it managed to expand gas production by three and a half times from 389mn cubic metres to 1.4 bcm. It increased oil production from 546,000 to 563,600 tonnes in 2023. Last year it put into operation 59 wells that were previously abandoned, after doing the same with 29 in 2022. Its exploration drilling amounted to 57,516 linear metres in 2023, and its investments in geological exploration and seismic surveys amounted to more than $88mn.

While China has a strong upstream presence in Uzbekistan and receives some of the country’s gas, Russia has the more dominant role. Lukoil is, after all, the second-largest gas producer in the country after Uzbekneftegaz, and Gazprom was put in charge of the first stage of Uzbekistan’s state programme for raising hydrocarbon production between 2017 and 2021. Many contracts for drilling services and equipment also go to Russian companies.

In an effort to encourage investment, Uzbekistan has cut the tax rates for natural gas extraction by three times and for oil and gas condensate by two times, resulting in the state budget being stuck with a UZS538.1bn (about $43mn) shortfall in tax for subsoil use in 2022.

While recent policy reform has improved the country’s investment climate, the average annual growth rate of the oil and gas market in Uzbekistan is projected to be less than 2.8% during the forecast period 2023-2028.