New decree puts focus on natural gas market reforms in Uzbekistan

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With a view to establishing a centralized procedure for the purchase and sale of natural gas, Presidential Decree No. PP-280 (Decree) was adopted on June 15 this year.

The document establishes a new legal entity—“UzGasTrade” JSC (UGT)—a company that has been charged with carrying out the following, beginning from August 1, 2022:

  • To purchase gas from producers according to set tariffs, including through imports from external sources; 
  • To sell gas to “Hududgaztaminot” JSC (HGT) and consumers connected to the main gas pipelines based on direct contracts, including for export.

In addition, the Decree designates “Uztransgaz” JSC (UTG) as the sole operator of the main gas pipelines for gas transportation, storage and transit.

At the same time, a transfer of agreements and contracts from UTG to UGT must be completed by August 1, 2022.

The Decree instructs the Ministry of Finance, jointly with the Ministry of Economic Development and Poverty Reduction, to submit the following to the Cabinet of Ministers:

  • An action plan to settle all debts of UTG, rehabilitation of its financial condition, revision of its corporate governance structure, introduction of a modern financial reporting system, new procurement principles, as well as obtaining an international credit rating for UTG by the end of 2024;
  • Proposals for the redistribution of gas distribution facilities with a joint inventory check by UTG and HGT;
  • Terms of Reference for the strategy to 2040 for the development and modernization of the gas transportation system of Uzbekistan, including underground storage.

As part of the modernization of the gas transmission system, it is planned to approve by August 2022 a procedure for online monitoring of the gas meters installed at all entry and exit points on UTG’s main gas transmission system.

In addition, UGT is instructed to import natural gas based on a tender, competition, and government decree through direct negotiations. New tariffs for the services of UTG should account for the repayment of its existing accounts payable.

UGT’s supervisory board and management should attract foreign tax specialists within two months who will develop proposals to improve the taxation of energy resources sold on the domestic market.

The Ministry of Economic Development is authorized to conclude a direct contract with an international consultancy firm to set up and support the separation of UTG and UGT, organize their separate activities, develop their operational, economic and financial models, separate the natural gas supplier and buyer contract base, as well as other transformation processes.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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