INFORMATION ON UZBEKISTAN’S OIL AND GAS MARKE*
Uzbekneftegaz – Strategic Priorities
Uzbekneftegaz National Holding Company is today a major multi-industry player and one of the key oil and gas companies in Central Asia. It is involved in all types of activities – from conducting geophysical exploration to the production and sale of oil and gas products, including engineering equipment, and construction and installation.
According to Energy Intelligence Group, Uzbekneftegaz occupies 11th place in the world for natural gas production and 34th place in the world’s 100 leading oil and gas companies.
The preventative measures introduced by the leadership of the country to reduce the impact of the global economic crisis have ensured that, during this difficult period, the country’s oil and gas sector has developed rapidly. In the first quarter of 2009 alone, the growth rate of overall production against the same period of 2008 was 119%, and for product exports 132%. Thus, a reduction of 20% has been achieved in production costs.
Uzbekneftegaz is currently implementing 52 investment projects, at an overall cost of $21.5 billion, in accordance with a presidential decree to modernise and re-equip industrial facilities during the period 2009-2014.
Twenty nine investment projects costing $14.4 billion are planned for 2009, using internal funds and direct foreign investment of $2.36 billion.
These projects cover the key strategic priorities, which should provide a route for the holding company to achieve a new level of development.
The first key strategic priority is to increase geological prospecting work in order to establish a reliable, long-term base of raw materials for modernising the production system, oil and gas processing and the transport of natural gas.
About $140 million of internal funds is spent each year on these objectives. It is worth noting that foreign investment in the country has increased rapidly. Every year the volume of foreign investment increases by $300 million and in 2009 it will amount to about $450 million. The geological prospecting work carried out today provides for a 1.5-twofold increase in hydrocarbon reserves to cover excess demand.
The work undertaken has confirmed the promise of the Ustyurtsk region for hydrocarbons, and the presence of sufficiently high reserves in the Bukharo-Khivinsk and Surkhandarinsk regions.
Foreign investment in geological prospecting work has made it possible for Uzbek specialists to master advanced methods and technologies for seismic prospecting in transition zones, shallow water and mountain relief, which requires special tools and equipment. Specialists have learnt how to use modern three-component geophones for the spatial study of oil and gas reserves.
The stock of drilling equipment is currently being upgraded with new drilling rigs which significantly increase the commercial speed of well-drilling, cut the time it takes to construct wells and reduce the production costs of drilling work.
In total, it is predicted that 20 new oil and gas fields will open in 2009, with a growth rate of 133.3%, ensuring an increase of hydrocarbon reserves of 146.7 million TFOE.
The second strategic priority is modernising the technological infrastructure of production facilities and hydrocarbon processing, increasing the export potential of the industry for supplying natural gas and producing liquefied gas, stabilisation and further increasing the production of liquid hydrocarbons.
To this end, work is already underway to construct desulphurisation blocks No. 16 and 17 at the Mubareksk Gas Processing Plant, and preparations are being made for the construction of a gas compressor plant at the South Kemachi field and a booster compressor plant at the Urtabulak field, which will double production of highly sulphurous gas. The reconstruction of the Dengizkul gathering station will be completed in the second quarter of this year with the construction of a booster compressor plant, which will increase gas production at the field to 3.5 billion cubic metres.
At the planned Kandymsk gas processing plant, Lukoil and Uzbekneftegaz are considering producing liquefied gas (up to 110,000 tonnes) using deep cooling technology. In accordance with a decree, a programme to increase production of liquefied gas at almost all of the country’s gas processing plants has been developed. Its implementation will increase production of this product from 360 in 2009 to 1 million by 2015.
Special attention is being devoted to the intensification of production at oilfields which difficult to extract from. Today, the current oil recovery ratio at these fields is 0.28. Uzbekneftegaz plans, with investment, including on the basis of risk service contracts, to introduce new technologies and methods for intensifying production, and to bring the oil recovery ratio at these fields up to 0.56.
The third strategic priority is the reconstruction and modernisation of the gas transport system in order to reliably provide natural gas to internal domestic consumers and to ensure equal export throughout the year of annually increasing volumes of gas.
In the second quarter of 2009, the Gazli Booster Compressor Plant will be brought into operation in place of booster compressor plants 1, 2, 3 and 4, which will provide from the Gazli underground gas storage facilities a daily gas yield of up to 25 million cubic metres, and pump up to 35 million cubic metres of gas per day to the north.
2009 will see the construction and implementation of:
The construction of new compressor plants will be speeded up.
By 2010, the upgraded gas transport system, together with improved production facilities and gas processing, will increase natural gas exports to 24 billion cubic metres a year (of which 20 billion cubic metres will be northbound), while maintaining gas supplies to internal domestic consumers at a level of 38.5 billion cubic metres.
The fourth strategic direction is developing gas chemicals with the production of a diversified product for further developing related production plants and export of gas chemical products.
The first experience of Uzbekneftegaz in this area was the launch in 2002 of the Shurtansk Gas-Chemical Plant, which showed the promise of implementing such projects, as Uzbek gas has a high content of valuable components, including 3.5-8% of ethane and a propane-butane fraction of up to 3.5%.
Work is already underway to construct the Ustyurtsk Gas-Chemical Plant at the Surgil field, which will provide polyethylene and, for the first time in Central Asia, polypropylene products in quantities of 400,000 and 100,000 tonnes a year respectively.
Uzbekneftegaz, together with Petronas and SASOL, have set about implementing a major project to obtain synthetic liquid fuels from natural gas (GTL), based on purified methane from the Shurtansk Gas-Chemical Plant. This new technology will provide 1.37 million tonnes of competitive types of fuel.
A project has been developed to produce diversified polymer products at the Shurtansk Gas-Chemical Plant, aimed not only at increasing polyethylene production but also at mastering the production of reagents for the needs of the oil and gas industry and related sectors. Competitive tenders have been announced for selecting an international engineering company to work on the project. In 2009, a final decision on the project should be made.
The fifth strategic priority is localising production of products at plants, creating new plants to achieve key import substitution objectives, and cooperation with other sectors of the economy.
For 2009-2010, Uzbekneftegaz has developed a strategic programme to significantly increase the range and volume of localised products, which will involve the use and production of high-tech equipment for drilling oil and gas wells, production, transport, processing hydrocarbons, and for related sectors of Uzbekistan’s economy.
Uzneftegazmash plants will manufacture localised products, including equipment for propane-butane installations at Mubarek Gas Processing Plant, absorption tanks for drying gas at Kungrad, and equipment for air cooling at 160 atmospheres for the Alan field and others.
It is also planned to produce oil derricks in the republic and foundations for drilling rigs, equipment for the infrastructure development of oil and gas fields, gas cylinders, drilled mud units, motorised units for overhauling wells, energy saving rocker-machines, and pipeline shut-off and control equipment.
As a result of the measures implemented in 2009 and with the introduction of 38 projects in the localisation programme (including 2 projects for 3.3 billion soums), the volume of localised products at Uzbekneftegaz will reach $60 million, which is three times higher than the level achieved in 2008.
By 2012, the level of localisation will be brought up to $200 million.
The sixth strategic priority is ensuring energy effectiveness during production, and reducing production costs during the financial crisis.
Work is underway to reduce gas loss with the installation of a system to utilise gas at fields, and a Clean Development Mechanism project is being developed to reduce gaseous emissions through the gas transport system.
The President of the Republic of Uzbekistan has ordered the implementation of a programme of measures to support companies in key branches of the economy’s real sector, ensure stable development and increase export potential. In accordance with this, Uzbekneftegaz is reducing production costs, and has already achieved a 20% reduction in the production, processing and transport of gas by optimising technological processes, saving on material and technical resources, and reducing energy usage.
The implementation of these measures will provide a reliable foundation for the effective and rapid development of the country’s oil and gas industry.
Information provided by a source from Uzbekneftegaz.