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Tashkent, Uzbekistan, July 24, 2020: The Ministry of Energy of Uzbekistan is pleased to announce that a new legal mechanism – a new type of service contract where contractors are offered tax allowances and payment deferments – is being introduced to increase crude hydrocarbons extraction, following a resolution by the Cabinet of Ministers.

The mechanism is part of a long-term strategy to develop Uzbekistan’s fuel and power sector and attract international specialist companies to undertake projects in the country.

External contractors – selected on a competitive basis – will be able to perform work to increase hydrocarbon production at their own expense and risk. Contractors can then either:

  • Sell their share of oil/gas condensate, in raw material form, into the domestic market; or
  • Process it within Uzbekistan for sale either domestically or internationally

These sales and processing options do not apply to natural gas which is sold on a contractual basis to the domestic market, although natural gas can be partially used for the contractor’s own needs.

Following international best practice to minimise geological and financial risk, the new mechanism will be used in fields with hard-to-recover and small hydrocarbon reserves and apply where a 50% share is currently held by the Uzbek state or Uzbek government entity.

The list of fields where contracts will be applicable will be compiled by the Ministry of Energy based on proposals from subsoil users and confirmed by the Cabinet of Uzbekistan.

Jurabek Mirzamakhmudov, First Deputy Minister of Energy of Uzbekistan said:

“The introduction of these new service contracts will positively contribute to the development of Uzbekistan’s oil and gas industry and encourage increased hydrocarbons production on mutually beneficial terms.

“We have a long-term strategy to develop our fuel and power sectors. This measure will focus efforts on fields with opportunities for exploration and extraction.”

On July 9, 2019, Uzbekistan President Shavkat Mirziyoyev signed Resolution PP-4388, which outlined measures to improve the oil and gas sector, including a future act to define the legal basis for crude hydrocarbon extraction based on a new form of service contracts involving international specialists and experts.

This legal act was formally adopted by the Cabinet of Ministers in Resolution PKM-448, signed on July 21, 2020.

The Resolution notes conditions for holding competitive tenders, minimum contractual requirements and the framework for concluding contracts. Contracts signed are valid for up to ten years, with five-year extensions available by mutual agreement of subsoil user and contractors.

Further information

Sabina Sagadeeva, [email protected]

The Resolution of the Cabinet of Ministers can be found here: https://lex.uz/pdfs/4906232 (Uzbek)

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