Business Environment

Oil and Gas Industry

Modern oil and gas industry of Uzbekistan is one of the largest industries of economy, the most important energy base of the country. The industry has significant science and technology potential, achieved certain success in its development.

For the years of Independence, Uzbekistan experienced stabilization and then dynamic development of oil and gas industry. In 1995, Uzbekistan achieved self-sufficiency in oil and stopped import of oil. Achieving energy self-sufficiency was carried out despite deep economic crisis in the FSU republics, breakup of economic and trade links, increase of prices and intensification of inflation.

Sub-soils of Uzbekistan contain huge reserves of hydrocarbon resources. About 60% of the territory of the country is prospective for oil and gas. In five oil-and-gas-bearing regions of Uzbekistan, 211 deposits of hydrocarbon resources have been discovered: 108 – gas and gas-condensate, 103 oil-and-gas, oil- and-gas-condensate and oil. More than 50% of deposits are under exploitation, 35% prepared for development, others are continuing prospecting works.

Oil and gas industry of Uzbekistan, is satisfying the energy field of the country for 96% through supplies of primary fuel resources. The annual production of hydrocarbon resources in Uzbekistan is about 86 million tons of conventional fuel. Only 25% of produced resources are exposed to refining, thus producing 250,000 tons of liquefied gas and 125,000 tons of polyethylene.

xport potential of all produced gas today constitutes US$ 1.4 billion, creation of refining/processing capacities into finished products (polyethylene, polypropylene and other petrochemicals) will allow to add the value to the production and increase it 10 times.

Enterprises of oil and gas industry are united into the National Holding Company Uzbekneftegas: It’s 6 joint stock companies: Uzgeoburneftegazodobycha (production of oil and gas), Uztransgaz (transportation), Uznefteproduct (refining, processing), Uzneftegazmash (production of technological equipment for the industry), Shurtan gas and chemicals complex (production of polyethylene, liquefied gas, sulphur and sales gas).

Today, NHC Uzbekneftegas is the large multi-sector industrial and economic complex, carries out works on search, prospecting, production, sales of oil and gas, including their derivatives, provides construction of production facilities and social development.

Uzbekistan possesses developed refining/processing infrastructure. Farghona and Bukhoro Oil Refineries specialize in refining/processing of oil and gas condensate. Muborak and Shurtan Gas refineries, as well as Shurtan Gas and Chemicals Complex are engaged in processing gas.

Such world known companies as Lukoil, Gasprom (Russian Federation), CNPC (PRC), Korean National Oil and Gas Corporation KoGas and Petronas Charigali (Malaysia) are successfully operating in the industry.

Energy Sector

Currently, over 50 percent of generating capacities of the Central Asian United Energy System are concentrated in Uzbekistan. This system also includes energy systems of Turkmenistan, Tajikistan, Kyrgyzstan, and Southern Kazakhstan.

The State Join Stock Company Uzbekenergo is a regulatory body of the electric energy and coal industry. At this stage, the company is comprised of 54 enterprises and organizations in charge of design, construction and assembly, operation and maintenance. The industry is staffed with over 55,000 people.

The installed capacity of the country’s power stations amounts 12.4 million kW (including SJSC Uzbekenergo – 12.0 million kW). The share of departmental power stations does not exceed 3 percent.

The bulk of electric energy (up to 90 percent) is produced at 10 thermal power plants with a total installed capacity of 10.6 million kW.

Twenty-nine hydropower stations with a total capacity of 1.4 million kW operate within the Company. The length of electric grids of all voltages exceeds 238.5 thousand km.

The leadership of the country pays close attention to issues of the energy sector development. The Resolution of the President of the Republic of Uzbekistan (N PP-1442 dated 15 December 2010) On the Program for the Industrial Development of the Republic of Uzbekistan for 2011-2015 stipulates for key areas of the industry’s development until 2015 envisaging implementation of 44 investment projects totaling over 5.2 billion U.S. Dollars.

Upgrading of the Tashkent combined thermal power plant aimed at the introduction of three gas turbine installations (GTI) with a capacity of 27 mW each has started.

A model project Increasing Energy Delivery through Introduction of High Performance Cogeneration Gas Turbine Technology are underway in partnership with the Japanese State New Energy and Industrial Technology Development Organization (NEDO) and Tohoku Electric Power Company.

The implementation of the investment project designed to expand Navoi TPP through the construction of a combined cycle gas turbine (CCGT) with a capacity of 478 MW is ongoing.

High energy efficiency of the CCGT with energy generation of 2.4 billion kWh will allow reducing specific fuel consumption throughout the plant.

There is a plan for expansion of Talimarjan TPP through installation of two combined cycle gas turbine units with a capacity of 450 MW each. The commissioning of CCGT units in 2014 will double the plant capacity and ensure a reduction in specific fuel consumption.

Activities concerning the switching of power generating units N 1-5 at Novo-Angren TPP over to year- round coal combustion with the view of reducing natural gas consumption for energy generation have started.

The implementation of the project will enable an increase in coal use proportion from 4 percent in 2008 to 9% in 2015 (from 2.2 to 5.2 million tons) and achieve savings of 825 million cubic meters of natural gas per year.

There is a plan for installation of a power generating unit with a capacity of 150 MW with an introduction of a modern technology of low-grade fuel at Angren TPP to allow using about 1.0 million tons of coal with 45 percent ash content at the plant.

Cost of construction is 150 million U.S. Dollars funded through foreign loans.

For the purpose of gaining skills of using the wind capacity, there is a plan to set up an experimental wind power plant with a capacity of 750 kW during this year. The estimated electric energy production output is approximately 3 million kWh.

The project value is 1.85 million U.S. Dollars.

At this stage, there are activities to measure wind parameters at the selected sites in different regions of the country.

The Company is paying close attention to upgrading the electricity metering system through the introduction of Advanced Metering Infrastructure.

There is a plan for installation of nearly 4.5 million modern electricity meters at the company’s electric grids and individual consumers.

Estimated project value is 134.1 million U.S. Dollars. The Loans of the ADB and the World Bank will be attracted for the implementation of this project.

Transportation Network

Uzbekistan is dynamically developing country and progressive growth of its economy requires anticipatory development of its transport and communication network.

Main directions of transport policy of Uzbekistan are integration into international transport communications, development of efficient international routes for transportation of foreign trade and transit goods, modernization of transport complex and raising of transit potential.

Further construction of motor and rail roads, renewal of rolling stock and electrifying of railways is of great importance for us.

In December 2010, the President of Uzbekistan issued Resolution On Rapid Development of Infrastructure of Transport and Communication Construction for 2011-2015, which will serve as a strong impact for further facilitation of development of transport sector of the country. The total amount of investments to be disbursed by 2015 is US$ 6.9 billion.

The above document envisages large scale construction and modernization of motor and rail roads, bridges, renewal of the fleet of the vehicles, railway locomotives and carriage fleet, purchase of new mid and long distance passenger air fleet manufactured by Boeing and Airbus.

Besides, by the end of 2011, the country intends to launch two Spanish high speed trains Talgo-250 which will travel between the cities of Uzbekistan in some sections reaching the speed of 250 km/h.

Railway transport

In transport complex of Uzbekistan, special role belongs to railway transport. Total cargo transportations through railways comprises about 70 million tons p.a. with more than 35% to be export- import and transit cargoes.

The total length of railways is more than 7,000 km, with 4,600 km to be the main trunk. For further development of railway complex, with phased approach, the country is constructing new railway sections, modernizing existing trunks, electrifying of railway lines, renewal of carriage fleet.

For the last several years, projects on construction of railway sections Navoi-Uchquduq-Sultanuizdag- Nukus with the total length of 341 km and Toshguzar-Boysun-Qumqurghon with total length of 220 km have been implemented step-by-step. These sections are supposed to ensure uninterrupted railway communication among Northern, Southern and Central regions of Uzbekistan.

Moreover, railway Toshguzar-Boysun-Qumqurghon provided direct access to Afghanistan.

Stabilizing of situation in Afghanistan would create realistic prerequisites for forming of entirely new Trans-Afghan transport route with access to the Iranian ports Bandar Abbas and Chakhbakhor, as well as to the Pakistani port Guadar.

Beginning for this was put by the construction and launch of the railway Khairaton-Mazari Sharif, which is the first in Afghanistan. Under the ADB financing, the State Joint Stock Railways Company Uzbekiston temir yullari acted as contractor for construction works of this road with length of 75km.

Today, Uzbekiston temir yullari is one of strong railway companies in CIS. The fleet of locomotives, cargo and passenger carriages, special construction machines and laboratory equipment, scientific base, labor potential and experience of construction works in various climate and geodesic environments allow the Company to perform as contractor on implementation on infrastructure projects not only within Uzbekistan, but also is quiet competitive for participation in international projects.

According to ADB experts, project on construction of Khairaton-Mazari Sharif railway appeared to be the most successful in the ADB history in co-relation of costs, implementation terms and the quality of the works. It should be noted, that the progress of construction was monitored by the international independent experts, which gave high evaluation to the quality of the work.

Motor transport and roads

As of today, the total length of the motor roads of Uzbekistan is 183,000 km (with 42,500 km of regular highways, including 3,200 km of international motorways).

Motor transport covers about 10% of foreign trade and 88% of domestic passenger and cargo transportations. An annual growth rate of volumes of motor transport services is 20%.

With aim at creation of unified national transport system through construction and renovation of motorways meeting international requirements and standards, in 2009, Uzbekistan issued National Highway Development Program, 2009-2014, implementation of which started earlier this year.

In the context of large scale program of construction of national highway, it’s intended to renovate and construct motorways with total length of 1,501 km, including Uzbek section of trans-European highway Р•-40, passing towards Beineu – Kungrad – Bukhoro – Navoi – Samarqand – Tashkent – Andijon, with total length of 1,139 km.

Logistic centers

This factor became one of the key factors, laying basis for the project of creation of large hub with international intermodal logistic centre on the base of the Navoi airport.

Navoi Airport, located in the centre of the country, on the crossroads of international inland and air corridors North-South and East-West, represents ideal regional centre for management of international freight flows.

10 capitals of different countries with total population of 90 million people are located in radius of 2,000 km from Navoi airport. Such location, which provides optimum access to the customers and partners, equal distance from large airports of the region creates environment for transforming Navoi airport into large regional hub for international cargo transportations.

The objective prerequisites for achieving this goal are sufficient. Projections state that by 2015, transportations within Eurasian area will increase 2.4 times vs 2006, while transit of cargo transportations will increase 4 times.

In 2001-2006, air transport carried 3 million tons cargoes through Eurasian route p.a., which is 17% of all international air cargoes and 30 million people or 6% of all international passenger flow. Attraction of only 5% of cargo flows between Europe and Asia to the Navoi Airport could turn it into sub-regional hub

Use of air routes with landing in Navoi provides tangible saving in time and costs for transportation of cargoes. Thus, the distance from South-East Asia to Europe through Navoi is 1,000 km shorter than from Dubai. While time saving in air flight comprises 1.5 hour, fuel – 15 tons per airplane.

The most tangible benefit from using advantages of location of the Navoi airport could be received by Japan, South Korea, Vietnam, Indonesia, Malaysia, Singapore, Thailand and Southern part of China, as well as the United Kingdom, Germany, Italy, France and other European countries.

In direct proximity from airport pass international transport routes – Trans-European Highway E-40, connecting Paris with Beijing, railway with access in Western direction through Turkmenistan to the markets of the Middle East, Caucasus and Europe, in Eastern direction through Kazakhstan to China and other countries of Southeast Asia, in Northern direction through Kazakhstan and Russia to European countries, in Southern direction through Afghanistan to Pakistan and India.

At the moment, the National Air Company Uzbekistan Airways is flying from Navoi airport cargo flights to Bangkok (Thailand), Deli, Mumbai (India), Dakka (Bangladesh), Dubai (UAE), Istanbul (Turkey). In 2010, the Company launched flights of cargoes through the route Navoi-Frankfurt-Navoi, Navoi-Dubai- Navoi, Navoi-Istanbul-Navoi and Navoi-Bishkek-Navoi. Also, through this airport the aircompany KoreanAir is transporting cargoes through the routes Seoul-Navoi-Brussels, Seoul-Navoi-Vienna (Milano), Seoul-Shanghai Seoul-Shanghai-Navoi-Vienna and back.

Creation of intermodal logistic centre on the base of Navoi airport is practical example of organizing efficient mechanism of distribution of cargoes and services for the region on the basis of advanced international experience.

In 2009, in Angren, there was established Angren Logistic Centre. The main goal of the centre is accepting and handling of cargoes, as well as their delivery by trucks to Andijon, Namangan and Farghona provinces through mountain pass Qamchiq, thus providing reliable transport communication of Farghona valley with other regions of the country.

In 2010, through mountain pass Qamchiq was transported more than 4 million tons of cargoes, out of which 467,000 tons of cargoes was processed by the logistic centre.

Electrical Engineering Industry

Uzbekistan, as known, is the most industrially developed country of Central Asian region. Electrical engineering is one of important industries of the county.

Enterprises of this field are united into Association Uzeltekhsanoat, which was established in 1994 through re-organization of the then Uzbek State Concern of Radio, Electronic and Electrical Engineering Industries and Device Production Radioelektrontekhpribor. Today, the Association has 23 member- enterprises of different forms of property, operating in electrical engineering industry. Among them, also, there are successful enterprises with foreign investments.

In particular, in the system of Uzeltekhsanoat, there are 3 enterprises producing cable and conductor products (more than 1,000 types of cables and wires), 6 enterprises on production of industrial- technological products (transformers, substations, switchboards, elevators, different components and junctions for other industries), 11 enterprises on production of compound electronics and radio- technical products (modern models of TVs, household and industrial refrigerators, ACs, electrical teapots, irons and etc.) and 3 enterprises on service and maintenance.

For the last several years, growth rates of electrical products in the country relatively have increased. For example, the value of the products of the enterprises of the association produced in 2010 comprised in valid prices US$ 344 million or 126% versus 2009.

Export of the products of the industry in 2010 comprised US$ 97.7 million. Projectiontargetwasmetby108.7%. Outofallproduction, 33.9% wereexported.

In the context of implementation of State Investment Program for 2010, US$27.61 million of investments were disbursed.

Today, electrical engineering industry of Uzbekistan is one of the most attractive areas for investments due to the following key factors:

  • steadiness and sustainable growth of the industry;
  • available rich natural resources. The country has huge reserves of copper, gold, silver, silicon, silica and other materials, as well as raw materials for production of plastic and other components used in high tech electrical engineering productions.
  • convenient geographic location in the centre of Eurasian continent, that provides significant export opportunities for electrical engineering products made in Uzbekistan.
  • the country has firm base of highly qualified human resources and professionals in electronic, technical/ technological, electrical and production areas. Number of educational institutions, including branches of international universities, educates engineering-technical staff for the industry.

In the framework of State Program of Diversification of Export in 2009-2012, the industry is observing sustainable growth rates of exports. The enterprises of the industry intend to annually increase exports mainly through launch of production of new products and access to new customer markets, including:

  • modern cable and conductor products;
  • high and low voltage devices;
  • different types of home appliances and electronics;
  • crystalandceramicproducts;

Current volumes of production of enterprises operating in Uzbekistan in the field of production of compound electronics do not satisfy the needs of the local market. Within CIS, there is no large scale production of home appliances and/or electronics, meeting modern quality standards.

The majority of the demand in the markets of our region is satisfied through import that creates favorable environment for establishing profitable production of electronics in Uzbekistan and further access to neighboring markets.

 Chemical Industry

Chemical industry is among basic industries of Uzbekistan which has been formed based on the needs of intensifying agricultural production, through establishment of productions of mineral fertilizers.

Today, chemical industry of Uzbekistan is one of the basic segments of the country’s economy, which lays the basis for its long-term and sustainable development. It’s exactly chemical industry that is large supplier of raw materials, different materials and works almost to all industries, and seriously influences scopes, directions and efficiency of their development.

The history of modern chemical industry of the Republic of Uzbekistan starts from the launch of Shursu sulfur mine in 1932.

In 1940, the largest enterprise of chemical industry Chirchiq Electrochemical Combine (currently Maxam-Chirchiq) starts to produce output.

In 1962, Farghona Plant of Nitrogen Fertilizers (currently FarghonaAzot) is launched.

In 1964, Navoi Chemical Combine (currently NavoiAzot) starts to produce output.

In 1969, Olmaliq Chemical Plant (currently Ammofos) was launched, and etc..

At present, the companies Maxam-Chirchiq, FarghonaAzot and NavoiAzot are producing nitrogen fertilizers: ammonium nitrate, carbamide and ammonium sulfate. The companies Ammofos, Samarqandkimyo and Quqon Superphosphate Plant are producing phosphorous-containing fertilizers, ammophos, superphosphate, simple ammonized superphosphate, ammonium-sulfo-phosphate and nitro-calcium-phosphate. Qyzylqum Phosphor Combine supplies raw materials to these productions. JVElectrokhimzavod produces different types of plant protection chemicals.

The most chemical enterprises are in the structure of the State Joint-Stock Company Uzkimyosanoat (holding company for chemical industry), which unites 12 large industrial enterprises, 13 regional distribution entities, which sell chemical products to agricultural sector, design and scientific-research institutions, transport-forwarding company.

Based on the type of production, the enterprises of the Company could be divided into the following major production complexes:

  • production of mineral fertilizers, inorganic chemicals and chemical agents for energy, gold-mining and chemical industries;
  • production of organic chemicals, artificial fibers, polymer materials;
  • production of plant protection chemicals;
  • production of soda ash.

The enterprises of Uzkimyosanoat produce more than 250 types of chemicals.