Uzbekistan's state-owned company Uzbekneftegaz and the Russian Lukoil are discussing the possible impact of US sanctions on their joint projects in Uzbekistan, the chairman of Uzbekneftegaz, Bakhodir Sidikov said today at a press briefing.
On October 22, the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury added Lukoil in the sanctions list, imposing blocking restrictions. The sanctions provide for a one-month period (until November 21) to wind down operations with the company and its subsidiaries where Lukoil's share stands at over 50%.
US citizens and financial institutions, as well as those in other countries, are prohibited from assisting these companies and their subsidiaries after November 21, otherwise they will also face sanctions.
Against this backdrop, Lukoil announced the sale of its international assets on October 27. The company holds also operations in Uzbekistan, including in joint projects with Uzbekneftegaz.
"I don't think the question of a buyout is on the table right now, in my opinion. We will also hear Lukoil's position. I believe that it is unrealistic to buy out any asset within such a short period, for any other country as well. To negotiate a price before November 21... For example, I wouldn't sell in such a situation," he said.
Lukoil previously also stated that, if necessary, it pondered on applying for an extension of the license to ensure the uninterrupted operation of its international assets.
"There is a platform, there is a possibility of extending the timelines of some sanctions. But that matter as well –we will need to talk with the US authorities as well. This is a long process," he noted. Sidikov acknowledged that the sanctions would inevitably affect Lukoil's operations and joint projects in Uzbekistan.
“In any case, this will somehow affect both their activities and ours. It will be impossible to have financial relations with them. Today we will discuss all options,” said the head of Uzbekneftegaz.
Lukoil's projects in Uzbekistan
Lukoil is one of the largest foreign investors in Uzbekistan's oil and gas sector. The company's total investments in 2024 surpasses $10 billion.
In 2004, the government signed a production sharing agreement (PSA) with the Russian company for the Kandym-Khauzak-Shady projects (for a period of 35 years, extended in 2014 for another 7 years – until 2046) in the Bukhara region and the South-West Gissar project in Kashkadarya (entered into force in 2007 and is valid for 36 years, until 2043).
Lukoil's largest project in Uzbekistan is the Kandym gas processing complex with annual 8.1 BCM gas throughput capacity and total investments of $3.5 billion. The Kandym complex has become one of the largest gas processing enterprises with new technologies in Central Asia.
Lukoil is the second largest gas producer in Uzbekistan after Uzbekneftegaz. As of June 1, 2024, the company's total gas production volume had already reached 134.4 BCM. In 2023, it operated in 13 gas fields in the country. Uzbekneftegaz acts as the state partner in the projects.
Meanwhile, as of January 1, 2021, the largest confirmed reserves were under the control of Uzbekneftegaz – 934.1 BCM of gas (50% of current reserves). Lukoil operated fields with gas reserves of 413.1 BCM (22.1%), Uz-Kor Gas Chemical – 109.6 BCM (5.9%), Surhan Gas Chemical – 106.6 billion (5.8%), and Jizzakh Petroleum (now Saneg) – 84.9 BCM (4.5%).
The Russian company also launched a network of gas stations in Uzbekistan. The company's first gas station in Tashkent was opened in 2018. In April 2024, two more stations opened in the suburbs of Tashkent.
Lukoil has not yet specified exactly which assets it plans to sell and how the sanctions will affect current projects in Uzbekistan.
