UZBEKISTAN - The Oil Refining & Petrochemical Sectors.

Uzbekistan has three refineries with a combined capacity of 224,000 b/d, enabling the country to export oil in products form. About 95,000 b/d of the products from these plants' output, are being exported to neighbouring Commonweath of Independent States (CIS).

The latest plant to come on stream was the Bukhara refinery, commissioned in November 1997. The two plants dating from the Soviet era are the Ferghana refinery with a capacity of 108,000 b/d and the Alty-Aryk refinery with a capacity of 66,000 b/d.

The Bukhara plant, which was the first refinery built in the CIS since the break-up of the Soviet Union and cost in excess of $400m, currently has a capacity of 2.5m t/y (50,000 b/d). It is expected to expand to 5m t/y and refine both crude oil and condensate.

In 2005 the state-owned UzbekNefteGaz (UNG) exported oil products worth about US$770m. UNG reported earlier this year that its had seen its production of crude oil gas condensate in the first quarter drop 13.5% compared with the same period in 2005: 1.284m tons.

Crude oil output fell 13.7% to 798,200 tons; the condensate output fell 13.1% to 485,400 tons. Production of natural gas in January-March grew 0.7% to 15.569 BCM.

In the first quarter, UNG's refineries produced 321,800 tons of gasoline (down 14.6% on the first quarter of 2005); 87,500 tons of kerosine (down 12.8%), 228,600 tons of fuel oil (down 25.5%), 339,500 tons of diesel (down 5.2%), 60,600 tons of petroleum bitumen (up 4.4%), and 56,000 tons of LPG (up 8.1%).

In 2005 UNG's natural gas production fell 0.3 % compared with 2004 to about 59.686 BCM. Production of liquid hydrocarbons in 2005 fell 17.2% to 5.449m tons.

In 2001, Mitsui of Japan completed a $200m upgrade at the Ferghana refinery, expanding its desulphurisation system. Texaco and UzNeftePere-Rabotka formed the UZ-Texaco JV in 1996 to produce and market Texaco brand lubricants for engines, transmissions and hydraulic systems.

Under the JV deal, Texaco is allowed to convert earnings in soms into US dollars, which is usually not permitted by Uzbekistan in its contracts with outsiders.

Uzbek natural gas has high sulphur content and this must be reduced considerably in processing. The Mubarek gas processing plant is the largest one in Uzbekistan and has a capacity of over 28.3 BCM/year.

The Shurtan Gas Chemical Complex came on stream in December 2001. The complex cost about $1 bn. The Japan Bank for International Co-operation (JBIC) gave $400m for this project and the US Ex-Im Bank provided $200m. The gas plant at Shurtan cleans the gas and compresses it.

The complex has plants which can produce ethylene, polyethylene and 137,000 t/y of LPG. The complex is located in the Shurtan gas fields in south-western Uzbekistan in the Kashkadarinsky region (see the petrochemicals section below).

There is an underground gas storage facility at Kodzhaabad in the Andijon region. This was completed in 1999 at a cost of $72m, allowing increased gas shipments to Uzbekistan's industrial heartland in the Ferghana Valley.

UNG and the state-owned GAIL (India) Ltd are to have more than one LPG plant built in western Uzbekistan as JVs, with each to have a capacity of 100,000 t/y. During Indian Prime Minister Manmohan Singh's visit to Uzbekistan in April 2006, GAIL and UNG signed a memorandum of co-operation (MoC) to jointly pursue gas projects covering E&P, gas processing, production of petrochemicals as well as training. Each of the LPG plants will cost about $50-60m. The LPG will be consumed locally.

The MoC was to pave the way for India's entry into Uzbekistan oil and gas E&P business. UNG has provided India's leading companies with a list of E&P projects in which they may invest.

A $63.6m LPG plant is under construction for UNG's gas processing unit ShurtanNefteGaz (SNG) in the Kashkadarya region. SNG, one of three gas processing firms in Uzbekneftegaz, runs 11 BCM/y of gas. After three stages of construction, the plant will produce 175,000 t/y of propane and butane by 2010. After the first stage of construction, to be completed by end-2006, the unit will have a capacity of 45,000 t/y. UNG wants to have a number of plants to increase LPG production at the Mubarek gas processing complex and the Shurtan gas production complex.

The three refineries are now running at about 225,000 b/d of crude oil and condensate, up from 216,000 b/d 2003 and 211,000 b/d in 2002. But because the two older refineries are not efficient, the amount of crude oil being lost in the process is considerable. In 2002, the three plants processed 6.1m tons of crude oil and condensate.

Most of the local demand for refined oil products - now averaging about 120,000 b/d compared with a peak of 275,000 b/d in 1988 - is met by these three refineries. Uzbekistan imports some oil products and crudes.

UzNeftePereRabotka (UNPR), a unit of UNG, is in charge of the oil refining sector. The government is hoping to sell a 39% stake in UNPR, as part of a privatisation process decided in 1998 and delayed repeatedly.

The government is also offering a 49% stake in UNG, a holding concern created out of nine companies in 1998 to unite the country's petroleum sector, as well as 44% of UzNefteGazDobycha (UNG's oil and gas exploration arm), 44% of UzTransGaz (a UNG unit in charge of the local gas market and the gas pipelines), and 39% of UzBurNefteGaz (a drilling company). BNP Paribas has acted as a financial adviser to the government for the privatisation process.