Uzbekistan oil and gas industry: history and development prospects

The Republic of Uzbekistan goes with assurance on the way of independent development. In the course of the years, the Republic covered the most difficult transition period. Today in the country macroeconomic and financial stability is already achieved, the program of structural transformations is realized, updating and technical modernization of production is carried out, new branches are formed, necessary foundation and conditions for further steady and dynamical growth of economy are created.

Possessing the big stocks of base metal and rare earth metals, oil, gas, building materials, phosphorus, and various kinds of salts, quarts and many other minerals recourses, Uzbekistan tries to use these natural recourses rationally. For this reason, attraction of the foreign capital for the extraction and complex processing of minerals is one of the major priorities of the country development and meets its long-term interests. Investment and financial climate created by the Government of the Republic makes Uzbekistan an attractive and reliable partner for foreign investors.

Reduction of the state share is supposed for expansion of foreign capital in the Republic`s economy while attracting investments into the increase of authorized capital of joint-stock companies.

One of the main sectors of the economy is oil-energy industry. Within the years of independence in Uzbekistan, dynamical development of the oil-and-gas sector was observed and stabilized. In last period huge work for improvement of the sector`s structure, its technical equipment, and re- equipment, escalating oil recovery and gas volumes is done due to intensification of deposits prospecting and discovery of new ones.

The Government of Uzbekistan works successfully to implement the tasks of creating favorable investment climate in the sector to attract all forms of foreign investments and supports the cooperation under the priority investment projects. The laws of promoting attraction of foreign capital have been adopted in the Republic, namely: “On Republic Foreign investments”, “On Guarantees and Protection Measures of Foreign Investors Rights”, “On Investment Activity”.

Thus, in Uzbekistan advantageous conditions for attraction of foreign capital to oil-and-gas sector of the Republic`s economy have been created.

Growing extraction volumes of liquid hydrocarbons and natural gas give the base for creation and development of refinery and gas and chemical subbranches in the sector.

The Altyareksky (1906) and the Fergana oil refinery (1958), the Mubarek refinery plant (1972), the Shurtan gas complex with the sulphor refinery constructions (1980) , and also the Bukhara oil refining plant (1997) were built and put into operation. The reconstruction of the Fergana refinery plant with putting into operation hydrodesulphurization installation was completed (2000). The new Shurtan Gas and Chemistry Complex (2001) was built and put into operation, which is the largest enterprise in the Central- Asian area producing polythene.

The Republic of Uzbekistan has entered the XXI century with introduction of high technologies in oil refining and has changed over from extensive to intensive way of the development.

With a view of further improvement of managerial structure in oil-and-gas sector of the Republic, provision of steady and balanced perspective development increase of coordination level activity in the sphere of geological prospecting, extraction, transportation, processing and selling of gas and oil products, wide attraction of foreign investments into the sector, and on this basis expansion of export potential , stable supply of branches of economy and the population of the Republic with oil products adopted a number of resolutions and decrees the Cabinet of Ministers of the Republic of Uzbekistan.

At the present stage of the Republic economy, development new tasks are put before oil-and-gas sector:

• •    To increase hydrocarbons resources by carrying out large-scale prospecting of oil and gas deposits works in perspective oil regions;

• •    To introduce modern technologies in oil recovery and gas extraction, as well as secondary and tertiary methods to increase oil recovery of beds;

• •    To commission a number of discovered oil-and-gas deposits;

• •    To increase liquefied hydro-carbonic gas production on the base of gas refinery complexes, as an alternative kind of fuel, for the further gas supply of the Republic and export to the countries of CIS and abroad;

• •    To implement the program providing reliability of gas mains;

• •    To develop oil-and-gas machine building on the basis of the machine building complex of the sector;

• •    To implement approved programs for the period until 2010 for oil-and-gas sector development both energy-and resources saving;

• •    The concept of automated management development in the production of the sector.

• 2 70 hydrocarbon raw material deposits have been discovered in the Republic of Uzbekistan, 94 of which are gas and gas – condensate, 96 are oil-and-gas, oil condensate, and oil. 47 % of open deposits are in exploitation, 35% are prepared for exploitation, and on the others prospecting works are being done. Over the past two years, 11 new fields have been opened in the country with the implementation of an increase in hydrocarbon reserves.

More than 15 % of all natural gas extracted in the Republic of Uzbekistan is exported. Gas processing is carried out at the unitary affiliate “The Mubarek Gas Plant” and “Shurtanneftgas”, joint stock company “Uzbekgeoburneftgasdobicha”, and also the Shurtan Gas and Chemical Complex. The Shurtan Gas and Chemical Complex technology is designed for production of about 150 types of polythene of high, average and running low pressure. Polythene, which is produced by the Shurtan Gas and Chemical

Complex is already exported, and is used for domestic needs and products manufacturing. Products of this complex are used for development of new productions, satisfaction of plants’ existing capacities producing films, cable industry, as well as supporting the production of sackcloth from oriented tapes for packing food and industrial goods, etc.

The Republic of Uzbekistan has well advanced, enough powerful system of main gas pipelines, and offtake pipes, allowing transporting natural gas from the field and processing to both domestic and external consumers. General extent of the main gas pipeline of the Republic in one line makes more than 13 thousand kilometers. The main gas pipes are constructed mainly from the pipes of a big diameter of 700 up to 1220 mm. The system of gas mains Central Asia-Centre inludes pipelines of a diameter up to 1400 mm. At large 250 gas compressor units supply the whole system with gas.

With a view of natural gas supply stabilization to the consumers of the Republic, particularly in winter time, the main gas pipeline Gazli-Nukus (1997) and Shurtan-Sherabad (2003) are constructed and put into operation. Regulation of seasonal irregular consumption and gas supply is exercised with the help of underground gas storage in Khodjaadabad, Severosokhsky, and Gazli.

In 2004-2020 gas transportation system’s updating is planned with the provision of: reconstruction and development of natural gas transportation system, construction of 198 km min gas pipeline:

• •    Extension and reconstruction of current main gas pipelines with the length of 445 km. and 878 km accordingly, as well as the construction ne gas compressor station at Sarymaj;

• •    Reconstruction and expansion of 20 curret gas compressor stations, as well as 4 compressor stations at functioning underground gas storage.

Oil and gas condensate refining is carried out at two large oil-refinery pants of the Republic: in Fergana and Bukhara. The Fergana plant is a fuel-oil oriented, with the capacity of 8.7 million tons a year. (with the account of Altiariksky affiliate in Khamza city).

Wide assortment of mineral oil having no analog in Central Asia is produced at this plant. Oil products fully comply with the international standards. In particular, diesel fuel produced is exported oriented. At Fergana oil refinery plant new kinds of oils both transmission and motor for export are brought into operation. At Bukhara plant constructed with participation of “TEKNIP” company (France) basing on the latest achievements of science and technology in the field of oil refining with start-up in 1997, high-quality gasoline for cars is produces, diesel fuel, aviakerosene, etc. meeting international standards.

Mineral oil and liquefied gas are exported to Russia, the Ukraine, Tajikistan, Kyrgyzstan, and to the countries far abroad. Natural gas is exported to the neighbor countries – Kyrgyzstan, Tajikistan, Kazakhstan, and in northern direction. Since 2003 polythene and sulfur started to be exported to Kazakhstan, Russia, China, Iran and Turkey. Almost third part of the supply of “Uzneftegasmash” joint stock company is export. Among foreign partners of “ Uzneftegasmash” joint stock company : “Hurricane oil products” (Canada), “Akhema” company (Latvia), “Takhnip” (France) , “Bentech” (Germany) and others. “Uzneftegasmash” joint stock company production has the right to certify due to international standarts ISO-9001.

For the future development of “Neftegasconstruction” progressive technology is integrated, modernization and reconstruction of the enterprise to develop capacities for producing experimental batch of new kinds of in house production is carried out, instead of import.

With a view to increase efficiency at the enterprises of the sector more than 100 scientific and technical works by the institutes of the Republic is introduced included into plans of introduction of new equipment.

For joint production of commercial oils in 1997 on the basis of the Fergana oil refinery plant with the participation companies “Teksako” (USA) joint Uzbek-American company “Uzteksako” was set up which every year increases production of commercial oils of various brands according to the international standarts exporting products mainly to the countries of Central Asia region.

During the period of 1999-2003, the focus was on attraction of direct foreign investments into oil-and-gas sector of the Republic of Uzbekistan .

Favourable investment climate, granting considerable privileges and preferences to foreign investors promote significantly solving the given target in the Republic.

Interest to make investments into oil-and-gas sector of Uzbekistan, especially in up-stream, has been shown by a number of the world oil-and-gas companies.

“Uzbekneftegas” company is ready to cooperate with foreign investors to intensify the oil exploitation on long term developed deposits in the Fergana and Surkhandarya fields.

Priority direction to attraction of foreign investments is the deepening of hydrocarbon processing, so the investors can participate in projects implementation to increase the volums of liquefied gas at “Shurtanneftegas” and “Mubarek Gas Plant”, and also in ready products and goods production basing on the Shurtan Gas and Chemical Complex production.

“Uzbekneftegas” company builds up its business ties with leading foreign oil-and-gas partners on the basis of mutually advantageous cooperation and expresses readiness to cooperate with foreign companies interested in implementation of investment projects due to various forms of cooperation.

Within the framework of the Action Strategy in five areas, the investment policy of the Uzbekneftegaz National Holding Company is aimed primarily at modernizing and diversifying the oil and gas industry, ensuring deep processing of rich resources of oil, natural gas and gas condensate into semi-finished products and finished export-oriented products with high added value, wide attraction for these purposes of foreign investment.

In 2019, Uzbekneftegaz expects the opening of new deposits of natural gas, oil and condensate.

For the development of the oil and gas sector until 2030, it is planned to implement 30 investment projects worth $ 36.5 billion. Particular attention is paid to the need to attract direct investments of large companies in Europe, Japan, the United States, the United Arab Emirates, with extensive experience in the oil and gas industry.

Due to the implementation of these projects, it is expected to increase production of high value-added products by 5.8 times by deep processing of natural gas, mastering the production of 15 new products, such as polyvinyl chloride, ABS plastic, synthetic rubber, superabsorbent, aromatic hydrocarbons.

The implementation of projects will create more than 13 thousand new jobs.

The implementation of new projects and the implementation of the tasks will lead to growth, as well as raising the development of the oil and gas industry of Uzbekistan to a new level.