Halt to Uzbek gas supply hits Tajikistan

Mon Apr 2, 2012 10:13am EDT

* Uzbekistan says needs gas to fill China-bound pipeline

* Tajik aluminium, cement firms to be hit

* Switch to Turkmen gas would need to transit Uzbekistan

* Political differences over dam project

By Roman Kozhevnikov

DUSHANBE, April 2 (Reuters) - The end of Uzbek natural gas supplies to neighbour Tajikistan threatens to further weaken the poorest former Soviet economy as key aluminium and cement firms grapple to adapt.

A planned output hike at aluminium company TALCO, the country's top export revenue earner, may have to be shelved while Tajik Cement is weighing a switch to domestically produced coal, industry officials said.

"Natural gas supplies via the pipeline from Uzbekistan were halted at 00:00 on April 1," an official from state gas transport firm TajikTransGas told Reuters.

The move had been flagged earlier by Uzbekistan, Tajikistan's sole supplier of natural gas, as it switches its export focus to growing demand in China.

"Gas will be delivered (to China) in line with a contract signed by companies Uztransgaz and PetroChina International Company Limited in 2011," Uztransgaz head Shokir Faizullayev was quoted as saying on the www.uzdaily.uz news site.

Mountainous Tajikistan, poorest of the 15 former Soviet republics, continues to suffer frequent power blackouts 20 years after independence.

In the capital Dushanbe, only an upmarket residential area populated mainly by state officials has enjoyed natural gas supplies.

Now even top industrial users such as TALCO, Central Asia's largest producer of primary aluminium and the source of more than half of Tajikistan's export revenues, will have to do without.

"Complete absence of natural gas supplies during a long period will force TALCO to give up its plans of output recovery," a source close to TALCO management told Reuters.

TALCO had hoped to increase output to 332,500 tonnes of the metal this year after an overhaul cut last year's production by 20.4 percent to 277,584 tonnes.

POLITICAL OVERTONES

State-run Tajik Cement was also hit by the halt in Uzbek gas supplies. It produces cement used in the construction of the Rogun hydroelectric plant.

"The (cement) plant was brought to a halt yesterday. We are standing still now, looking for ways to solve the situation and mainly hoping for the government's help," Tajik Cement chief engineer Zalil Kurbonmamadov told Reuters.

"We have plans to start using coal produced in Tajikistan ... but right now, we see no way out without gas."

Construction of Tajikistan's Rogun hydroelectric plant has long been a source of tension with its stronger and more populous neighbour.

Uzbekistan says that the power station could disrupt water supplies downstream and harm its agricultural production.

"We are holding negotiations (with Uzbekistan) through letters and telephone talks," said the TajikTransGas official. "But so far we have made no headway on the issue of resuming gas supplies, as well as on gas transit from Turkmenistan."

Some analysts saw political overtones in Uzbekistan's decision to cut power needed by the largest cement firm involved in the project and said matters could escalate further.

"One can foresee further aggravation of relations between the two countries, up to complete interruption of movement of goods and people across the border," said Tajik political analyst Zafar Abdullayev.

Tajik officials said at the weekend that Uzbekistan had begun dismantling a stretch of a railway to Tajikistan's densely populated south. Uzbek officials could not be reached for comment.

One option for Tajikistan is to turn for gas to Turkmenistan, joint holder along with Saudi Arabia of the world's fourth largest natural gas reserves.

The country does not mind sending its gas to Tajikistan, a Turkmen government official has said, but any such deal would require transiting through Uzbekistan.

In the first three months of 2011, Tajikistan imported 15 million cubic metres of Uzbek gas monthly, or 10 percent of Uzbekistan's daily output. (Writing by Dmitry Solovyov; editing by Jason Neely)

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