OREANDA-NEWS. BMI View: RnR Market Research expect Uzbekistan to remain a major producer and exporter of natural gas in the region thanks to its vast reserves and continuous exploration and development activities. Our outlook for the country's oil sector is much bleaker as faltering production levels and backward refining sector will leave the country increasingly dependent on refined products imports, posing substantial risk of fuel shortages.

Latest Updates And Key Forecasts

- In late April 2016, South Korea-based Hyundai Engineering Company started building the USD2.66bn Kandym gas processing plant at the Kandym gas field. Construction of the processing plant is expected to be completed in H119, reports World Construction Network. The facility will have capacity to produce 8.2bcm of natural gas annually.

- In May 2016, Uzbekneftegaz and Azerbaijan's state-owned energy company Socar signed a memorandum for cooperation and joint activity to work together in the fields of oil and gas exploration and development as well as seek other opportunities in the energy markets.

- This quarter we have kept our previous forecast for Uzbekistan's oil reserves, which we expect to decline at an annual average rate of 2.0% over the coming decade, shrinking from an estimated 600mn bbl in 2015 to 490mn bbl in 2025. Although at a slower pace, gas reserves will also continue on a downward path, registering 0.6% annual decline per annum between 2016 and 2025.

- Uzbekistan's oil production will continue to decline at an accelerating pace over the coming decade, shrinking from 83,470b/d in 2015 to 73,960b/d in 2025. The decline in crude oil production will be somewhat counter-balanced by gradually increasing natural gas liquids output.

- After recording a strong 7.8% production growth in 2015, we project Uzbekistan's gas production to sustain positive momentum in 2016, expanding by additional 2.3% and reaching 71.6bcm. Over the longer-term, the new Kandym gas plant will support continued growth in the country's gas production levels from 2019 onwards, lifting the output to around 72.8bcm in 2025.