Is Central Asia ready for new energy crisis?

The Diplomatic Courier has published an article on the way the global energy crisis has affected Central Asian states, a region traditionally rich in their own natural resources yet with strong economic and trade ties to Russia. Caliber.Az reprints this article.

"Despite being rich in natural resources—including oil and natural gas—and investing millions of dollars in energy and power grid, last winter several Central Asian countries experienced historic gas and electricity shortages. In an attempt to increase their energy efficiency, nations all over the region have started taking measures that could help them avoid a potential new energy crisis.

On 15 July 2023, Kyrgyzstan declared an emergency situation in its energy sector due to low water inflow in the Naryn River basin, as well as shortages of generating capacities amid rapidly increasing energy consumption. Such a measure, according to the country’s authorities, was taken to maintain a sustainable energy system in the future. In response to the crisis, the country of around 7 million people will also seek to modernize its energy sector. However, this could be easier said than done, given that Kyrgyzstan’s energy market faces significant challenges, including aging infrastructure, limited investment, and a heavy reliance on imported fossil fuels for heating and transportation.

Indeed, compared to 2021, the former Soviet republic has significantly increased the imports of natural gas from Russia—Kyrgyzstan’s second largest trading partner. According to the official statistics, Russian exports of petroleum products to Kyrgyzstan amounted to $445.2 million from January through November 2022, which is an increase of 57.3% over the same period in 2021. Moreover, Bishkek—following a January 2022 blackout that hit Kyrgyzstan and other Central Asian states—decided to ramp up electricity imports from Russia, as well as from Kazakhstan, Uzbekistan, and Turkmenistan.

In the long-term, Kyrgyzstan may also start importing [Russian-language link] liquefied natural gas (LNG), which could, at least to a certain extent, help the country ensure its energy stability. But unlike the Kyrgyz Republic, some neighboring states have already built their LNG infrastructure.

For example, Tajikistan has long been importing liquefied natural gas mainly from Kazakhstan and Russia, and has recently started purchasing LNG from energy-rich Turkmenistan. But the demand for liquefied natural gas in the global market is rising, and Pakistan is also seeking to reach a long-term deal with Ashgabat on the import of Turkmen LNG. It is, therefore, not surprising that both Pakistani and Tajik energy officials will attend the Gastech 2023 energy conference in Singapore on 5-8 September 2023, where they will gather with other top officials to discuss the situation in Central Asia’s LNG market.

Kazakhstan, being a liquefied natural gas producer itself, plans to significantly increase LNG production and exports by 2025. Meanwhile, it will likely seek to protect its own market and avoid any new blackouts. This could prove difficult given that, according to reports, since last winter the Central Asian nation appears to have experienced power shortages on a systematic basis. Kazakhstan also struggled with fuel shortages, explaining why authorities repeatedly extend the ban on the over-the-road export of oil products, aiming to 'ensure the stability and sustainability of the development of the national economy and to prevent a shortage of petroleum products in the country’s domestic market'.

But if electricity and fuel shortages in Kazakhstan continue, Kyrgyzstan’s economy, heavily dependent on energy imports, will undoubtedly be seriously hit. That is why both nations are actively developing their renewable energy sectors, hoping that such a strategy will help them increase their energy efficiency and security. Kazakhstan seeks to become a leading global exporter of clean energy, and Kyrgyzstan relies on Chinese investments in four cascaded hydropower plants along the Naryn River.

However, the process of transition to low-carbon energy can often be too expensive and unpredictable. Quite aware of this, Kyrgyzstani policy makers aim to secure additional fossil fuel supplies to their country. That is why Akylbek Japarov, chairman of the Cabinet of Ministers of Kyrgyzstan, traveled to Russia in early July 2023 to meet with Alexey Miller, head of the Russian state-owned energy giant Gazprom, which plans to invest $341 million in modernization of the Kyrgyz gas industry. Other Central Asian states are also looking to expand their energy cooperation with Gazprom. According to Kazakhstan Energy Minister Almasadam Satkaliyev, Astana expects the Russian corporation to build cross-border pipelines to bring Russian natural gas to the Central Asian country. Such an outcome would allow Kazakhstan to supply its northern regions with relatively cheap Russian gas, while enabling the export of its own natural gas to China.

Neighboring Uzbekistan, another gas supplier to the People’s Republic, seems to have adopted the same approach. As part of a broader effort to prevent winter-time shortages, Tashkent signed a deal with Gazprom to buy 2.8 billion cubic meters of natural gas annually over the coming two years. More importantly, gas will be pumped via Kazakhstan through the Central Asia-Center pipeline, signaling the potential for continued cooperation between the three nations under the form of a 'trilateral gas union'.

In the meantime, Central Asian states—be they fossil fuel-rich, or heavily dependent on hydro-power—will likely continue seeking external support—be it from Moscow, Beijing, or the European Union—to address the approaching energy crisis".