Kyrgyzstan is a mineral-rich country strategically situated between China and Kazakhstan. Unlike its Central Asian neighbors, Kyrgyzstan has insignificant reserves of petroleum and natural gas, but it has great potential for hydroelectric power generation.
Note: Information contained in this report is the best available as of February 2000 and is subject to change.
Kyrgyzstan, a small, mountainous country with a predominantly agricultural economy, emerged from decades of Soviet rule in 1991. Since that time, Kyrgyzstan has been one of the most progressive countries of the former Soviet Union in carrying out market reforms, yet it remains one of the poorest.
Kyrgyzstan's economy and industrial output contracted sharply following the breakup of the Soviet Union, but by mid-1995 production began to recover and exports began to increase. Following a successful stabilization program, which lowered inflation from 88 percent in 1994 to 15 percent for 1997 and privatized many state-run industries, attention turned toward stimulating growth.
Foreign assistance played a substantial role in the country's economic turnaround in 1996-97, but Russia's 1998 financial crisis had serious adverse effects on the Kyrgyz economy. After gross domestic product (GDP) grew by 9.9 in 1997, growth slowed to a mere 1.8 percent in 1998. Although GDP rebounded in 1999 to increase by 3.6 percent, industrial output fell by 1.7 percent, and the country's inflation rate jumped to 39.9 percent at year's end.
Kyrgyzstan's trade deficit decreased in 1999, but the improvement in the trade balance was mostly due to a fall in imports due to low consumption demand.
The Kyrgyz government has indicated a desire to become self-sufficient in its energy needs.
However, a lack of significant oil or gas reserves has left the country dependent on energy imports and vulnerable to price shocks. Yet, with an abundance of mountain rivers, Kyrgyzstan has significant hydroelectric potential. With sufficient capital investment, Kyrgyzstan can develop this hydroelectric potential to meet more of the country's energy needs.
In February 2000, Kyrgyzstan applied for $40 million International Development Assistance (IDA) credit from the World Bank. The IDA credit is geared to restructure the economy as well as help the government privatize electricity distribution companies, strengthen the financial situation of Kyrgyzgas and Kyrgyzenergo Kyrgyz electric power, the state gas and electricity companies, respectively, and develop a heating supply strategy to insulate the country from the effects of intermittent natural gas supply disruptions.
Kyrgyzstan contains seven developed oil fields and two oil/gas fields. Although the country has estimated reserves of 40 million barrels, difficult geological structures and water encroachment mean that recovery rates are low.
In addition, the lack of oil sector infrastructure and difficulty in luring foreign investment has limited exploration and drilling, hampering further development of Kyrgyzstan's petroleum sector. Thus, with consumption of 11,000 bbl/d and production of only 2,000 bbl/d, the country is reliant on imported oil to meet its consumption needs.
The Kyrgyz government has announced plans to privatize Kyrgyzneft, the national oil company, as well as to allow privately-owned companies to operate in the oil sector. The government also is seeking investors for oil production in the south, and exploration in the eastern part of the country. In 1998, a Netherlands-Kyrgyz joint venture began prospecting for oil and gas.
Kyrgyzstan has one crude oil refinery in Dzhalal-abad, about 150 miles south of Bishkek. The refinery, which was built in 1997 as a joint venture between Trans Hydrocarbon (Canada) and Kyrgyzstan's state oil company, produces 10,000 bbl/d of heavy fuel oil (50 percent), diesel (30 percent), and gasoline (20 percent).
Although Kyrgyzstan has estimated natural gas reserves of 200 billion cubic feet (Bcf), the country is heavily reliant on gas imports to meet domestic consumption requirements. Imports reach the northern region of Kyrgyzstan through the Bukhara-Tashkent-Bishkek-Almaty pipeline, with the southern part of the country receiving gas from Turkmenistan and Uzbekistan.
Natural gas accounts for close to 30 percent of Kyrgyzstan's energy consumption, and the country's dependence on imports has left it vulnerable to supply disruptions. Since Uzbekistan, the country's main supplier of natural gas, began charging world prices for its gas, Kyrgyzstan has constantly been in payment arrears.
As a result, Uzbekistan periodically has terminated gas transmissions to Kyrgyzstan owing to the debt for previous supplies. Although negotiations between the two countries have produced several agreements to exchange gas for partial payment and goods, these deals have often fell through, and Kyrgyzstan's continual inability to make payments has meant that Uzbekistan slashes gas supplies to the country.
Since 1992, coal consumption in Kyrgyzstan has dropped dramatically, from 2.73 million short tons (Mmst), to the 1998 level of 1.31 Mmst. This reduction would be even more dramatic had it not been for a 60% increase in coal consumption between 1997 to 1998. Kyrgyzstan's coal production has dropped even more precipitously, from a 1992 level of 2.37 Mmst to 0.49 Mmst in 1998.
This 79 percent decline means that the country remains a net coal importer.
A recent report for Kyrgyzstan's Ministry of Foreign Trade and Industry suggested that the country could overcome its coal deficit by exploiting the Kara-Keche deposit, one of Kyrgyzstan's 70 coal deposits.
Although reserves at Kara-Keche are of high quality, the coal is easily flammable; therefore, it must be stored indoors, which adds to the production cost. Increased extraction costs and a lack of equipment also have hindered development of the deposit.
The total cost of developing the Kara-Keche deposit is estimated at $52 million, but without financial help from foreign investors the Kyrgyzstani government is unlikely to undertake the project.
Kyrgyzstan's electric power industry is capable of meeting the country's domestic electricity needs while providing surplus electricity for export. Kyrgyzstan has two major electric power plants, a 1.2 gigawatt (GW) hydro plant at Toktogul, and a 0.76 GW thermal plant at Bishkek, with plans for a major 6.8 GW hydropower station to be built by 2010.
In 1998, Kyrgyzstan generated 12.2 billion kilowatt-hours (Bkwh) of electricity--89 percent of which was hydroelectric--while the country consumed only 9.9 Bkwh of electricity. An increased demand for electricity has resulted in occasional system failures, but expansion has been hindered by lack of transmission-related equipment, limited fiscal resources, and inadequate pricing and cost recovery.
Kyrgyzenergo Kyrgyz electric power, the joint-stock company with a monopoly on the country's electric power, reported that in 1999 Kyrgyzstan generated 13.1 Bkwh of electricity. The company exported more than $50 million worth of electricity to Uzbekistan and Kazakhstan, and about 2 Bkwh of electricity was exported overall.
Kyrgyzenergo recently submitted to the Kyrgyz government a proposal to raise electricity tariffs by 50 percent. Although the IDA credit from the World Bank was contingent on Kyrgyzstan raising electricity tariffs, the country's efficiency in electricity production leaves much room for improvement as well.
The cost of producing electricity in Kyrgyzstan has ramped up as out-dated electricity networks and facilities have contributed to a high rate of line losses. However, the country lacks the funds necessary for maintenance and repairs.
Kyrgyzstan's abundant water resources give it significant hydroelectric potential. The energy potential of Kyrgyzstan's mountain rivers is estimated at 163 Bkwh per year, of which only about 10 percent is currently exploited.
Hydroelectric energy meets approximately 20 percent of Kyrgyzstan's primary energy requirements and accounts for nearly 20 percent of its total exports. With rapidly growing energy demand in neighboring Asian countries, Kyrgyzstan's hydroelectric power potential will likely become more attractive to foreign investors.
In conjunction with the Italian Technology and Innovations Group of Companies, the capital city of Bishkek is planning to build Kyrgyzstan's first waste-to-energy plant. Construction of the plant, which will burn urban and hospital waste to produce hot water for the city, is scheduled to start in April 2000.
Although the plant has come under fire from ecological groups because it will increase pollution and toxic emissions, the project's backers have refuted those claims.
They also argue that the plant, which should be operational in 2002-2003, will make Kyrgyzstan less dependent on Uzbek gas and therefore less vulnerable to supply disruptions that leave Bishkek without heat.
Organization: Kyrgyz oil and gas are produced by the state-owned Kyrgyznaft Association. Oil products are distributed by Kyrgyznefteprodukt.
Refineries: Dzhalal-abad (10,000 bbl/d)
Power Stations (Type) (Capacity): Toktogul (Hydro) (1.2 gigawatts); Bishkek (Thermal) (0.76 gigawatts)
Source: United States Energy Information Administration.
© 2000 Mena Report (www.menareport.com)