The process equipment of the future complex for increasing the production capacity of Shurtan gas chemical complex in Guzar district of Kashkadarya province worth $1.8 billion can be moved to Karakul district of Bukhara province for integration with Saneg’s plant. This is provided for by a draft behind-closed-doors resolution of the President of Uzbekistan.
About Shurtan GCC Capacity Expansion Project
Back in 2017, the Uzbekneftegaz holding developed a concept for the interconnected implementation of projects "Expansion of the production capacity of the Shurtan gas and chemical complex" and "Production of synthetic liquid fuel based on purified methane the Shurtan gas and chemical complex". They included, among other things:
organization of deep processing into polymers of synthetic naphtha obtained from the production of synthetic liquid fuel, 430 thousand tons annually;
optimization of existing engineering communications and auxiliary facilities of Shurtan gas chemical complex
- reduction of transportation costs of supply of synthetic naphtha to the country's refineries due to the integration of these projects.
President Shavkat Mirziyoyev, by his decree dated May 11, 2017, approved a project to expand the capacity of the Shurtan GCC. It provides for an increase in the design capacity of polyethylene production from 125,000 to 405,000 tons per year and the organization of a new polypropylene production with a capacity of up to 100,000 tons per year due to the deep processing of synthetic naphtha in the amount of 430,000 tons.
Enter Engineering (Singapore) was selected as the general contractor. The project was planned to be financed by a special investment account of the Shurtan GCC worth $50 million, a loan from the Uzbekistan Fund for Reconstruction and Development up to $300 million under a state guarantee, loans from foreign banks of $650 million under a state guarantee and refinanced through Uzsanoatqurilishbank.
In December 2021, following the launch of the GTL plant, the president launched the construction of a new complex to increase the production capacity of Shurtan GCC by 3 times. It was reported that the new plant will produce 280,000 tons of polyethylene and 100,000 tons of polypropylene per year by processing 430,000 tons of naphtha produced at the GTL plant.
It was planned to manufacture products for an additional $550 million. Due to these two new plants (UzGTL and Shurtan GCC), the first large gas chemical cluster of the country will be created on the territory of the Shurtan complex, Shavkat Mirziyoyev said.
According to the Ministry of Energy, the new project’s cost is $1.839 billion, including $629 million - own funds of Uzbekneftegaz, $1.21 billion - foreign loans. The payback timeline of the project is 8.5 years, the internal return rate (IRR) is 11.7%.
The licensees and contractors of the project are Chevron Philipps (USA), Lummus Technology (USA), Novelon Technology (Germany) and Enter Engineering.
In fact, the project to expand the capacities of the Shurtan GCC has been implemented at least since the beginning of 2021. At the end of that year, design work was already completed by 52%, construction and installation work - by 2.14%.
In September 2021, the Ministry of Energy reported that "major European banks" signed agreements worth 1.1 billion euros to finance a project to expand the capacity of the Shurtan GCC. Agreements were signed with Deutsche Bank for EUR 500 million, with Landesbank Baden-Wuerttemberg for EUR 300 million and with Landesbank Hessen-Thüringen Girozentrale (Helaba) also for EUR 300 million.
Chairman of Uzbekneftegaz Mekhriddin Abdullayev expressed gratitude to the banks for financial support and trust and noted that this "was a significant confirmation of the progress of Uzbekistan and the role of Uzbekneftegaz in this."
“The expansion of the production capacity of the Shurtan gas chemical complex, the flagship of the gas chemical industry in Uzbekistan and a key producer of polymers in the region, is another step towards achieving our goal of increasing the volume of deep processing of hydrocarbon raw materials for the production of high-added-value petrochemicals,” he said.
What can become of the complex now
According to the draft presidential decree mentioned above, Saneg (former Jizzakh Petroleum) proposes to transfer the technological equipment of the new complex of the Shurtan GCC to the Karakul free economic zone in order to integrate it with its plant.
FEZ "Karakul" was formed by a presidential decree dated August 13, closed to the public, on 400 hectares of land in the Karakul region. It is planned to build a Saneg MTO (methanol to olefins) gas chemical complex there.
The investment project is planned to be implemented in 2021-2025, according to preliminary estimates, it will cost $4 billion. Enter Engineering was selected as the contractor, and Gas Chemical Complex MTO Central Asia, which is 100% owned by Saneg, is the operator for the construction of the MTO complex.
If now the project of the new complex of the Shurtan GCC is owned by Uzbekneftegaz, then after the transfer of equipment, the construction will be carried out by a joint company, which will be created with the participation of Gas Chemical Complex MTO Central Asia and Uzbekneftegaz. At the same time, Saneg will have a share of 60%, and Uzbekneftegaz will receive 40%, that is, it will lose control over the project. In addition, the leaders of the joint venture will be determined by the design company Saneg.
Moreover, the joint venture will purchase all naphtha produced by the GTL plant under a long-term contract. Now Uzbekneftegaz almost completely exports this raw material at a market price and supplies part of the naphtha to the domestic market. Although it was originally planned that the naphtha and liquefied natural gas produced at the GTL plant would be supplied to the Shurtan GCC for further deep processing and an increase in the production of polymers.
Within a month after the creation of the joint venture, all obligations and rights under the contracts and agreements signed under this project, as well as pre-project, design, engineering-geological and other documents, must pass to it.
The investor and attracted international consultants within two months should develop a formula for determining the cost of naphtha from Uzbekistan GTL.
To transfer the complex to expand the capacities of the Shurtan GCC for the free economic zone, it is planned to provide another 600 hectares of agricultural land (1000 hectares in total).
Karakul FEZ provides benefits and waivers. In addition to this, the draft presidential resolution proposes to exempt taxable income (tax base) of non-resident organizations from sources of payments in Uzbekistan during the implementation of the project and other projects implemented on the territory of the Karakul FEZ, if the payers are Saneg, the project company, as well as involved contractors and subcontractors.
It is planned to allow contractors and subcontractors to import M category vehicles (transport for transporting passengers) and N (goods transportation), regardless of their environmental class, without environmental certification, certification of goods and permission to use them, recycling fee.
Saneg (Sanoat Energetika Guruhi, formerly Jizzakh Petroleum) was established in June 2017 by Uzbekneftegaz and Gas Project Development Central Asia (was a subsidiary of Gazprom International through its subsidiary Securing Energy for Europe (Sefe), which was nationalized by the German government in December, according to moneyhouse and Northdata, Bakhtiyor Fazylov and Robert Martin Fuser are listed on the board of the company). According to the project, the shares of participants in the authorized capital were redistributed with a decrease in the share of Uzbekneftegaz from 60% to 30% and an increase in the share of foreign founders from 40% to 70%.
In June 2020, Saneg’s owners were: Belvor Holding Limited from Cyprus (68%), Uzbekneftegaz (30%) and Gas Project Development Central Asia (2%), at the beginning of February 2021, shares between Uzbekneftegaz and Belvor Holding were distributed at 49%.
In May 2021, Uzbekneftegaz decided to alienate a 49% stake in Jizzakh Petroleum and transferred it to the Cypriot offshore Belvor Holding. The company did not report whether the share was sold, at what price, and whether a competition was held. In addition, at the end of 2019, Uzbekneftegaz transferred the right to use subsoil plots of 196 oil and gas fields (mainly oil).
The Russian Kommersant, citing the Cypriot registry, reported that Belvor Holding is owned by Bakhtiyor Fazylov, who, according to media reports (as of September 2022), is the majority shareholder of the oilfield service company Eriell Group, Enter Engineering (one of the largest EPC contractors in Uzbekistan) and Ferkensco (an investment company that manages the construction of agrochemical plants). He also owns a minority stake in Sanoat Energetika Guruhi Enera, 99% owned by Belvor Holdings. In addition, he owns the Samarkand Touristic Center company, which built a tourist complex in Samarkand, as well as a number of other companies.