Uzbekistan: UZB: SURGIL NATURAL GAS CHEMICALS

Nonsovereign Project | 44944-014

Summary

The project is located approximately 1,300 kilometers (km) from Tashkent in the Ustyurt region of Karakalpakstan, an autonomous republic in northwestern Uzbekistan.

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Project Name UZB: SURGIL NATURAL GAS CHEMICALS
Project Number 44944-014
Borrower/Company UZ-KOR GAS CHEMICAL LLC
Country Uzbekistan
Location Uzbekistan
Approval Number 7351/2850
Type or Modality of Assistance
7351/2850 Loan USD 125.00 million Committed
7351/2850 Political Risk Guarantee without Govt Guarantee USD 275.00 million Cancelled
Strategic Agendas
Drivers of Change
Sector / Subsector Industry and trade - Industry and trade sector development
Gender Equity and Mainstreaming
Responsible ADB Department Private Sector Operations Department
Responsible ADB Division Infrastructure Finance Division 1
Responsible ADB Officer Thomas M. Minnich
Project Sponsor(s) Kor-Uz Gas Chemical Investment Ltd.
Uzbekneftegaz
Description

The project is located approximately 1,300 kilometers (km) from Tashkent in the Ustyurt region of Karakalpakstan, an autonomous republic in northwestern Uzbekistan. The integrated gas-to-chemical project consists of (i) upstream development and operations at the Surgil Field involving drilling new production wells and constructing upstream infrastructure including expanding the complex gas treatment unit to supply up to 3 billion cubic meters per annum (BCMA) of gas and 115 thousand tons per annum (KTPA) of condensate; (ii) downstream development and operations at the gas treatment site, located approximately 115 km southwest of the Surgil Field, involving constructing a new gas separation plant, an ethylene cracker, a high-density polyethylene plant, a polypropylene plant, and associated utilities and supporting facilities; and (iii) associated gas pipelines, product transportation, and water supply infrastructure; the project also includes three 35-megawatt gas turbine generator sets for power supply independent of the national grid.

The project will source gas from its own Surgil Field and will also purchase gas, through a gas supply agreement with UNG, from the East Berdakh and North Berdakh fields. Each of the fields is currently in production and the incremental production of the three gas fields available to the project provides the required gas volume. Condensate supply (another raw material required for the polymer process) is provided under long-term supply contracts.

The upstream and downstream components of the project will be connected by two parallel 115-km pipelines constructed to supply gas and condensate from the Surgil Field to the gas separation plant. The process technology will be supplied by each of the downstream engineering, procurement, and construction (EPC) contracts and will be fully aligned with technology license arrangements, providing the project with process performance guarantees and ongoing technical support from the process licensors.

Objectives and Scope The ADB assistance will finance, on a limited recourse basis, the engineering, procurement, and construction of gas wells, connecting pipeline, gas separation plant, ethylene cracker, polymer process plant, and associated utilities and offsite installations.
Linkage to Country/Regional Strategy The Uzbekistan Country Strategy and Program (CSP) 2001-2010 seeks to promote development in sectors where Uzbekistan has a comparative advantage, namely natural gas and manufacturing. Demonstration of the Investment Agreement structure supports the strategy objective of improving the business environment through improved financial norms and enabling investments for sustained GDP growth. The Project is aligned with the Strategy's focus on developing sectors where Uzbekistan has a comparative advantage in natural gas and manufacturing and leveraging that advantage for increasing the value-addition of exports and upgrading the practices and skills of its large scale manufacturing industry.
Status of Development Objectives The Project seeks to add incremental economic value to Uzbekistan's natural gas resources, enabling higher value products to be manufactured and exported. Demonstration effect of successful implementation of a pioneering investment framework will catalyze foreign direct investment in Uzbekistan's private sector large-scale manufacturing industry. ADB's presence as a direct lender provider will incubate scarce long-term cross-border commercial lending into Uzbekistan. Natural gas is a core economic resource for Uzbekistan and the project is a PPP of government and foreign investors.
Material Changes None
Safeguard Categories
Environment A
Involuntary Resettlement B
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The proposed Project involves drilling additional production wells and constructing upstream infrastructure including expanding the complex gas treatment unit (CGTU) and constructing a 115km pipeline at the Ustyurt plateau to connect to the Ustyurt Gas Chemical Complex (UGCC) which will be located within a 100 hectares greenfield development site as well as access roads and other support facilities. Since the Project involves existing facilities, an environment and social compliance audit of existing facilities and activities within Surgil Field will be conducted by the Borrower in accordance with the SPS requirements. Where land has already been acquired for any of the project components, the compliance audit will identify past or present concerns related to impacts on the environment, involuntary resettlement and indigenous peoples and plan corrective measures to address outstanding compliance issues. Where new land acquisition is required, appropriate resettlement planning documents will be prepared to mitigate impacts. The Project has created approximately 10,000 jobs during construction and 2,000 jobs are expected during operation.
Involuntary Resettlement No impact. The Surgil gas field will utilize 1,188 ha of land in the bed of the Aral Sea; the pipelines, transmission lines, UGCC, and other support facilities will be constructed on 1,423 ha of state-owned semi-arid, uninhabited, and undeveloped desert lands in the Ustyurt Plateau.
Indigenous Peoples No impact. Karakalpakstan has a multiethnic population and the project facilities will not affect any indigenous peoples.
Stakeholder Communication, Participation, and Consultation Consultations were conducted in July 2010, March and July 2011 in Akchalak, Muynak and Kungrad settlements which were attended by local residents and officials from the district governments. Information on the Project and its impacts were disclosed and issues and concerns raised were incorporated into the project design. The ESIA was disclosed on ADB website in August 2011. Uz-Kor has appointed a Community Liaison Officer to address enquiries or complaints related to the Project.
Timetable for assistance design, processing and implementation
Concept Clearance 24 Jan 2011
Due Diligence 13 May 2011
Credit Committee Meeting 14 Nov 2011
Approval 17 Jan 2012
PDS Creation Date 11 Aug 2011
Last PDS Update 24 Sep 2014
Title Document Type Document Date
Surgil Natural Gas Chemicals Project Reports and Recommendations of the President Dec 2011

Evaluation Documents

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