Surhan Gas Chemical comments on investigation about energy system of Uzbekistan

Earlier, information was circulated on social networks about the transfer of Uzbekistan’s right to gas and oil fields to Russian companies.

Surhan Gas Chemical Operating Company has issued a statement regarding the development of the “Mustaqillikning 25 yilligi” field located in the Baysun district, Surkhandarya region.

FE LLC “Surhan Gas Chemical Operating Company” is the operator under the Production Sharing Agreement for the investment block “Uzbekiston mustaqilligi” with additional exploration and development of the “Mustaqillikning 25 yilligi” field with the construction of a gas chemical complex in the Surkhandarya region. The investor under the Agreement is the Hong Kong company Surhan Investments Limited. 

In 2017, in accordance with the Law of the Republic of Uzbekistan “On Production Sharing Agreements” (PSA Law), an Agreement was signed in relation to the investment block “Uzbekiston mustaqilligi” in the Surkhandarya region. This Agreement does not apply to any other deposits and blocks in Uzbekistan.

It is noted that the beneficiaries of the investor under the Agreement are the Uzbek entrepreneur Fozilov B.Sh. and the Russian entrepreneur Filatov A.V., as well as 20% of the shares belong to the state company Uzbekneftegaz JSC. There are no other investors and participants in the shareholder structure.

At the time of signing the Agreement, development and production at the field were not carried out.

“The first well in the field was drilled in 1975 by the Uzbekneft association. Over the past forty years, it was not possible to put the field into operation, since its reserves are hard to recover, the gas is sour, and the field itself is characterized by very difficult mining and geological conditions, which is confirmed by the conclusions of the international company DeGolyer & MacNaughton,” the company specified.

The involvement of the international company Petronas in 2006-2008 also prevented us from moving to the development stage.
The investor undertook to carry out geological exploration, develop the field, implement the plant and the necessary infrastructure. At the same time, the investor bears all financial and geological risks for the project in accordance with the PSA law.

The volume of necessary investments in the project is estimated at $2 billion with the potential to increase. All investments are made by the investor without the involvement of public funds or guarantees in accordance with the PSA law.

In accordance with the Law on Production Sharing Agreements, all work under the Agreement is carried out by an operator established in Uzbekistan. To perform the work, the operator attracts the most qualified personnel from Uzbekistan and foreign countries with extensive experience in the oil and gas industry.

In addition, the operator’s activities are directly controlled by the state at several levels, including through the Steering Committee, whose members are representatives of ministries and the Cabinet of Ministers.

The operator’s annual work programs, budgets, significant contracts and audited accounts are agreed by the Steering Committee.

After the completion of the construction of the gas processing plant and the start of production, the income from gas sales (after paying taxes and reimbursement of expenses) will be distributed in the ratio of 50/50 between Uzbekistan and the investor, and in case of good financial performance of the project, the state’s share will be 80%.

Upon the expiration of the Agreement, the plant, infrastructure and equipment built at the field will become the property of Uzbekistan. Also, the investor is obliged to create a liquidation fund that will cover all costs of decommissioning the deposit in accordance with the PSA law.