Uzbek Gas for Export: Will Political Maneuvering between China and Russia Result in Higher Export Price?
The main research question is “Will political maneuvering between China and Russia result in higher export price for Uzbek gas?” In 2008, the price of gas exports from Uzbekistan was US$160 per 1,000 cubic meters. On the other hand Gazprom used to charge its European customers an average of US$350 per 1,000 cubic meters. 
 
On July 1, 2008, Uzbekistan and Kazakhstan has begun laying their respective stretches of the Turkmenistan-China gas pipeline. The construction began at the settlement of Saet in the Bukhara region. The cost of the Uzbek stretch of the gas pipeline is estimated to be over USD 2 billion. The total cost of the 1,818-kilometer long gas pipeline Turkmenistan-China is about USD7 billion. If implemented, the Turkmenistan-China pipeline might undermine Russia’s ability to manipulate the Central Asian gas market and stir up energy competition between Russia and China. It should be noted that with estimated natural gas reserves of 66.2 trillion cubic feet (Tcf), Uzbekistan is the third largest natural gas producer in the Commonwealth of Independent States (after Russia and Turkmenistan) and one of the top fifteen natural gas-producing countries in the world. 
 
According to the schedule approved by the decree of the Uzbek President, the first line of the gas pipeline and compressor station is expected to be completed by the end of 2009. According to schedule, the first stage will end in January 2010. The second line of the gas pipeline and two more compressor stations are expected to be launched by January 2012. 
 
Gazprom’s reaction to this development was almost immediate. Therefore, the purchase prices in these countries more than doubled in 2009 compared to the levels at which Gazprom has bought gas in 2008 
 
The conclusion of the research is that alternative pipeline to China will strengthen the bargaining power of Turkmenistan and Uzbekistan and may result in higher export gas prices. However, given the fact that Chinese themselves are unwilling to match the price that Europeans are paying for gas, the increase will not be very significant. Therefore, Uzbekistan, as well other Central Asian countries, should continue their efforts to construct and participate in other alternative gas pipelines, such as Trans-Caspian, Nabucco, Trans-Afghan, and Iran-Pakistan-India pipeline projects.
Report and Recommendation of the President to the Board of Directors
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Risk Assessment and Risk Management Plan
Risk Description Risk Assessment Mitigation Measures or Risk Management Plan Construction and completion Medium The completion risk of any hydropower projects falls mainly on geological conditions and their relevant time and cost overruns. Many geological investigations and drilling studies undertaken for more than 3.5 years during project preparation found 80% of the rock tested to be in good order. The detailed project report prepared by a qualified engineering firm and the PPTA conducted due diligence studies including extensive field and laboratory investigations, such as hydrological, geological, geotechnical and geophysical, sedimentation, mechanical, and electrical requirements. Uncertainties of geological conditions remain as residual risks of construction delays and cost overruns, which could be affected by price increases in labor and materials. To address these risks, contingencies total $32 million or 22% of the base cost. Contractual mitigations are included in engineering, procurement, and construction contracts with liquidity damage clauses on a milestone basis. DGPC has adequate experience in procuring and managing contractors for construction of hydropower projects, demonstrated with Dagachhu hydropower plant implementation. Experienced staff of Dagachhu will support project construction. Project site accessibility is very good, i.e., along the main east–west national highway close to access roads and transmission connections.