S&P Global Assesses Uzbekneftegaz's Role In Nation's Growing Gas Market

(MENAFN- Trend News Agency) TASHKENT, Uzbekistan, June 8. Given the Government of Uzbekistan's near 100 percent ownership of Uzbekneftegaz JSC (UNG) and the high likelihood of state support if needed, S&P Global has applied a one-notch uplift to UNG's standalone credit profile (SACP) of 'b' in its rating assessment, Trend reports.

S&P highlights UNG's critical role in Uzbekistan's economy. The company produces approximately 60 percent of the country's natural gas and supplies it at low prices to domestic users, thereby supporting the local economy. Additionally, UNG provides a variety of refined products to local markets, including synthetic fuels produced at Uzbekistan's gas-to-liquid (GTL) plant, which uses domestic gas. Together with its subsidiaries, UNG ranks among the top three contributors to the state budget.

The agency emphasizes UNG's strong government linkage, noting that the government owns 99.94 percent of the company and holds significant representation on its supervisory board. Historically, UNG has benefited from state support, receiving loans at favorable rates guaranteed by the government. However, recent failures by the company to recognize issues such as covenant breaches and liquidity needs have led S&P to downgrade its assessment of UNG's link to the government from "very strong" to "strong," indicating that government oversight is now considered less rigorous than previously expected.

Currently, UNG's provision of cheap gas helps make consumption more affordable and offers a low-cost input for the industrial sector. However, Uzbekistan plans to liberalize its gas market in the long term and transform UNG into a more competitive and independent gas producer, which limits S&P's view of its role and government linkage.

Moreover, while synthetic fuel production from UNG was expected to reduce fuel imports, production has declined in recent years. Restoring output to 2021 levels of 33-34 billion cubic meters (bcm) will require significant efforts. To make up for the gap, gas imports will have to climb to 60 bcm by 2030, according to government projections, from the present 43–46 bcm. The economic significance of UNG as a gas producer is anticipated to dwindle over time due to this.

Finally, potential gas shortages-particularly during winter-could force UNG to reduce supply to its major refining plants, further lessening its economic significance.

S&P Global, founded in 1860 and headquartered in New York, is a leading provider of financial information and analytics. Best known for its credit ratings through S&P Global Ratings, the agency also offers data, benchmarks, and market intelligence across various industries worldwide.

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