The Kyrgyzstan government plans to submit a proposal to parliament in the near future on the restructuring of the gas sector and the reorganization of AO Kyrgyzgaz, involving the partial privatization of the company, Anatoly Makarov, deputy chairman of the State Property Committee, told Interfax.
He said that this decision was reached at a government meeting at the end of last week dealing with the reorganization of the gas sector.
Makarov said that the program for the privatization of AO Kyrgyzgaz would involve the restructuring of the company, with a gas transportation company being spun off. This company will own a trunk gas pipeline and two pumping stations supplying gas to the north and south of the republic. The company plans to set up several smaller structures based on this infrastructure at a later date.
The Property Committee's press service told Interfax that at the meeting Kyrgyzgaz CEO Avtandil Sydykov said that in its current financial situation the company does not have sufficient funds to fully restore the trunk pipeline and the mid and low pressure gas distribution network, which will require significant investment.
He said that international experts estimate that the total investment needed to modernize Kyrgyzgaz's production assets amounts to $522 million. "An investor would be well able to handle this task," Sydykov said.
The proposed scheme for the restructuring of AO Kyrgyzgaz does not involve the privatization of the trunk pipeline, which will remain 100% state owned, but distribution companies will be sold to private investors.
Sydykov said that with this scheme the state will receive more revenue from the company's gas transportation, tax revenue will increase and cross subsidizing of distribution chains will stop. The state will retain control of the gas transportation system and will continue to set tariffs for natural gas.
He said that Kyrgyzgaz fixed capital as of January 1, 2004 Amounted to 309.2 million som. The company is a natural monopoly provider of a full range of natural and liquefied gas supply services in the republic. The company operates 704.8 km of trunk pipeline, 565.3 km of mid-pressure pipelines, 1,581.4 km of low-pressure pipelines and about 900 gas distribution points.
Kyrgyzgaz supplies natural gas to consumers in Kyrgyzstan and transits Kazakh gas in the north of the country and Uzbek gas in the south.
Natural gas consumption in Kyrgyzstan in 2003 amounted to 716.3 million cubic meters, which was 12% less than in 2002. The gas tariff for the public on June 1 this year amounted to 2.8 som per cubic meter, and for companies - 3.4 som per cubic meter.
Interfax, June 15, 2004