Mokhinur Sultanova
Central Asia, a region rich in natural resources, has long relied on its vast reserves of fossil fuels to drive economic growth and development. However, the energy landscape is rapidly evolving, with new challenges emerging due to climate change, economic shifts, and the global transition towards renewable energy sources. With its rich history of fossil fuel dependency, can Central Asia reinvent itself for a sustainable future?
Energy Landscape in Central Asia
Central Asia is home to some of the world’s largest reserves of natural gas, oil, and coal, particularly in Kazakhstan, Turkmenistan, and Uzbekistan. These countries have built their economies on the export of these resources, which account for a significant portion of their GDP.
For instance, Kazakhstan alone possesses approximately 3% of the world’s crude oil reserves with proven reserves of 30bn barrels and is the largest oil producer in the region. This large, landlocked country ranks second in Eurasia and twelfth globally in terms of reserves, just behind the United States.
Karazhanbas, with 230mn barrels in reserves, is not Kazakhstan’s largest oil field. The nearby offshore Kashagan field is estimated to contain between 7bn and 13bn barrels of recoverable crude oil, while the Tengiz field, also near the Caspian Sea, holds reserves of 6bn to 9bn barrels.
As a landlocked nation, Kazakhstan relies on pipelines to transport its oil. The Karazhanbas field is situated near the Uzen-Atyrau-Samara pipeline, which channels oil north and east toward Russia.
Turkmenistan, on the other hand, holds the world’s fourth-largest natural gas reserves, positioning it as a significant player in the global energy market with approximately 10% of the world’s total reserves. The country contains extensive hydrocarbon reserves, with Turkmengaz estimating the total at over 71bn tons of oil equivalent. This includes more than 20bn tons of oil and around 50 trillion cubic meters of natural gas.
Meanwhile, Uzbekistan is a resource-rich country, ranking 17th in global natural gas production and holding the distinction of being the world’s second-largest gold producer from a single mine. Extensive government reforms have sparked economic revitalization, leading to a tenfold rise in international investment over the last six years.
As Central Asia gains global attention, investors and companies are increasingly exploring opportunities in various sectors, including energy. For example, Condor Energies, a Canadian energy transition company. In the second quarter of 2024, the company’s production in Uzbekistan averaged 10,052 barrels of oil equivalent per day, including 59,033 Mcf/d of natural gas and 213 barrels of condensate. This output generated $18.95mn in revenue from gas and condensate sales. A multi-well workover campaign in June 2024 increased production from their eight gas-condensate fields.
In July 2024, Condor signed its first LNG Framework Agreement to supply liquefied natural gas (LNG) for Kazakhstan’s rail locomotives. The company also secured a natural gas allocation for its modular LNG production facility in Kazakhstan. Additionally, Condor issued convertible debentures worth $4.8mn with a 9% annual interest rate, convertible into common shares.
CEO Don Streu noted the stabilization of production decline rates and technological improvements in Uzbekistan. Condor is advancing its LNG projects in Kazakhstan, aiming to provide cleaner fuel alternatives. The company is developing its first LNG facility in Kazakhstan, expected to begin production in mid-2026 with a capacity of 120,000 metric tons. Condor is also progressing with lithium exploration and Direct Lithium Extraction (DLE) technologies.
However, the region’s heavy reliance on fossil fuels presents both opportunities and risks. While these resources have fueled economic growth, they also expose the region to fluctuations in global energy prices and environmental challenges. Additionally, aging infrastructure and inefficient energy use are persistent issues that need to be addressed to ensure long-term energy security and sustainability.
Climate Change and Environmental Impacts
The impacts of climate change are becoming increasingly evident in Central Asia, with rising temperatures, changing precipitation patterns, and more frequent extreme weather events. These changes have implications for the region’s energy sector, particularly for hydropower, which is a critical energy source for countries like Kyrgyzstan and Tajikistan.
Hydropower, which relies on river flow and water reservoirs, is highly susceptible to climate variability. In recent years, reduced snowmelt and shifting precipitation patterns have led to lower water levels in key reservoirs, threatening the reliability of hydropower generation. This not only affects energy production but also has broader implications for water availability in a region where water resources are already scarce.
Moreover, the region’s reliance on fossil fuels contributes to air pollution and greenhouse gas emissions, exacerbating the effects of climate change. In cities like Almaty and Tashkent, air quality is often compromised by emissions from power plants and industrial facilities, posing significant public health risks.
In fact, at the fourth traditional Samarkand Forum on Human Rights, President Shavkat Mirziyoyev of Uzbekistan highlighted the ecological challenges facing our planet.
“Due to global climate change, an acute ecological situation has arisen on our planet,” Mirziyoyev shared. “The environmental crisis has become the main obstacle and threat to the achievement of the Sustainable Development Goals.”
President Mirziyoyev outlined several key issues including drinking water shortages, pollution, soil erosion, dust and sandstorms, loss of biodiversity, and reduced agricultural productivity. These problems are affecting Central Asia more intensely, with temperatures rising at twice the global average, further worsening the Aral Sea crisis.
Economic Implications
The energy sector is a cornerstone of the Central Asian economies, but it also presents challenges as the region grapples with the global shift towards decarbonization. As major energy importers such as the European Union move towards cleaner energy sources, Central Asian countries face the risk of declining demand for their fossil fuel exports. This could lead to economic instability, particularly in countries like Turkmenistan and Kazakhstan, where energy exports are a primary source of revenue.
To mitigate these risks, Central Asian governments are increasingly exploring opportunities to diversify their energy mix and invest in renewable energy. Kazakhstan, for example, has set targets to increase the share of renewables in its energy mix to 50% by 2050. Uzbekistan has also made strides in this direction, with plans to develop significant solar and wind energy capacity over the next decade.
Currently, solar, wind, and hydropower plants account for 25%-30% of Uzbekistan’s electricity generation. The country aims to boost this proportion, targeting over 40% of total electricity production from renewable sources by 2030.
In the first half of 2024 alone, solar and wind power plants produced 1.6bn kWh, up by 1.2bn kWh or 507%. Hydropower plants contributed 4.1bn kWh, resulting in a total of 5.7bn kWh of electricity from renewable sources.
However, the transition to renewable energy presents its own set of challenges, including the need for substantial investment in new infrastructure, the development of regulatory frameworks, and the enhancement of technical expertise in the region.
In fact, recently a $1.7mn memorandum of understanding was signed between Uzbekistan’s Technical Regulatory Agency and Saudi Arabian company ACWA Power to improve calibration services for measuring instruments in renewable energy projects, particularly wind and solar power plants, in the Republic of Karakalpakstan. In addition, ACWA Power has officially started building the Beruniy Wind Independent Power Plant (IPP) and a Battery Energy Storage System (BESS) in Karakalpakstan.
Policy Responses and Regional Cooperation
Recognizing the need to address these challenges, Central Asian countries have begun to implement a range of policy measures aimed at modernizing their energy sectors and enhancing sustainability. These policies include initiatives to improve energy efficiency, reduce greenhouse gas emissions, and promote the development of renewable energy sources.
For instance, Uzbekistan has introduced a comprehensive energy reform agenda that focuses on increasing the efficiency of its energy production and distribution systems, reducing energy losses, and encouraging private investment in the energy sector. The country is also working to enhance its regulatory framework to support the integration of renewable energy into the national grid.
Regional cooperation is also playing a crucial role in addressing energy challenges in Central Asia. The Central Asia Regional Economic Cooperation (CAREC) Program, for example, facilitates collaboration among member countries to promote energy trade, enhance energy security, and develop sustainable energy solutions. Through CAREC, countries in the region are working together to develop cross-border energy projects, such as electricity transmission lines and natural gas pipelines, that improve energy connectivity and stability.
Future Outlook
The future of the energy sector in Central Asia will depend on the region’s ability to adapt to changing global energy dynamics and address the environmental challenges posed by climate change. While the transition to renewable energy is a complex and costly endeavor, it also presents an opportunity for Central Asian countries to diversify their economies, reduce their environmental footprint, and enhance their energy security.
In the coming years, we can expect to see increased investment in renewable energy projects, greater emphasis on energy efficiency, and more robust regional cooperation to address common energy challenges. However, success will require sustained political will, the mobilization of financial resources, and the active participation of both the public and private sectors. /// nCa, 30 August 2024 (originally published by Daryo.uz, 28 August 2024)