Energy minister: SOCAR, Uzbekneftegaz may build oil refinery in Uzbekistan - INTERVIEW

Energy cooperation between Uzbekistan and Azerbaijan in recent years has acquired a strategic nature, covering such areas as oil and gas, electric power, renewable energy sources, and petrochemicals. Joint projects in geological exploration, energy resource transit, and green energy development are being implemented between the two countries, and partnerships between national companies are being strengthened.

Uzbek Minister of Energy Jurabek Mirzamahmudov spoke to Report in an interview about current initiatives, major joint investment projects, and prospects for cooperation in the energy sector.

- How would you characterize the current state and prospects of energy cooperation between Uzbekistan and Azerbaijan?

- First of all, I would like to note that thanks to our leaders, relations between Uzbekistan and Azerbaijan have reached an unprecedentedly high level. This trusting format of interaction between our presidents has contributed to enhancing cooperation between ministries and companies of the two countries in all areas.

Previously, we mainly cooperated with Azerbaijani companies in trade and logistics, now, we are discussing joint investment projects. Among them is SOCAR's participation in geological exploration on the promising Ustyurt plateau. In addition, a joint venture of Uzbekistan, Azerbaijan, and Kazakhstan has been created for the construction and operation of power transmission lines for supplying green energy to Europe. Practical steps have already begun on this project, and other international players are showing interest in the initiative. In particular, Saudi Arabia joined the project at COP29.

We are also actively developing cooperation in the field of personnel training, experience exchange, and scientific research. In the future, petrochemicals will become another key area of interaction with SOCAR and other partners. Thus, our cooperation covers all areas - from exploration and production to processing and development of renewable energy.

- Recently, the Ministry of Energy of Uzbekistan, SOCAR, and Uzbekneftegaz signed a Production Sharing Agreement (PSA) for the Ustyurt region. When is the start of geological exploration planned, and what are the parties' shares in this project?

- This is one of the most promising areas in the region, where previously mainly gas was extracted. After studying all available materials, SOCAR expressed interest in exploring oil reserves. An operator has already been created under the signed PSA. Now the operator has begun conducting all necessary contractual negotiations.

We face an ambitious task - to accelerate the start of work. We plan to begin physical seismic exploration work covering more than 3,000 linear kilometers by the end of this year. Based on the results of this work, we plan to drill the first well.

The distribution of shares is standard - 50/50: the state and investors. The investors are SOCAR and Uzbekneftegaz. BP has shown interest in the project, and preliminary negotiations are underway. All commercial conditions - product sharing, taxation, etc. - are spelled out in the agreement.

- What timeframes are outlined in the roadmap - from the beginning of geological exploration to possible first production?

- Seismic exploration, drilling, and obtaining initial results are planned for the first three years. It will take three to five years to reach first production, considering the construction of the necessary infrastructure.

- Were geological exploration or seismic surveys previously conducted on these blocks, and were archival data transferred to SOCAR?

- Drilling was not carried out directly on these sites, but was conducted in neighboring territories. SOCAR decided to participate in the project after studying the historical data that we provided. Technology has advanced significantly: if in the 1970s no major discoveries were expected in the Ustyurt region, modern interpretation methods have shown high potential. This is confirmed by research results and other analytical companies.

- The total investment in the project is estimated at $2 billion. Are there preliminary estimates of oil and gas reserves?

- I would not like to get ahead of ourselves, as these data relate to the commercial part of the PSA. However, specialists, primarily SOCAR specialists, predict good oil indicators. If the forecasts are confirmed, we will simultaneously begin work on the construction of an oil refinery.

- Who is financing the project in the first stage?

- As in most PSAs, financing is provided by the consortium of investors - SOCAR and Uzbekneftegaz. Also, as I already mentioned, BP's participation is being considered, with whom SOCAR has historically established good relations.

- Does Uzbekistan maintain interest in participating in the development of the Shah Deniz field, and are concrete steps being taken in this direction? In addition, are possibilities for cooperation with Azerbaijan being considered for other major fields, such as Absheron, Azeri-Chirag-Gunashli, and Umid-Babek?

- We do not rule out such prospects. However, our main focus now is on increasing our own production, as many of our fields are depleted. In the long term, within the framework of strategic cooperation with SOCAR, we do not exclude other options, not only in Azerbaijan but also joint entry into third countries. This is because today relations between our companies have developed at a very high level. And this is on a long-term basis.

- At what stage is the preparation of technical specifications and economic justification for the underwater HVDC cable across the Caspian Sea? What work is being done in parallel to form the resource base, in particular, what volumes of green energy is Uzbekistan already producing and what volume is planned to be directed for export? To what level is the export potential planned to be brought by 2030?

- We have already created a joint venture with the participation of Azerbaijan, Kazakhstan, and Uzbekistan. Together with the Asian Development Bank, we are now selecting a consultant to prepare a feasibility study in accordance with international standards.

Other countries, including Saudi Arabia, are showing interest in the project. From a technical point of view, the construction of an underwater cable does not cause difficulties - world experience allows this to be implemented. In parallel, we are working with potential electricity buyers and investors.

Today, the share of renewable sources in Uzbekistan's energy balance exceeds 20%. By 2030, we plan to bring it to 54%. In the Ustyurt region alone, projects with a total capacity of more than 2.5 GW are being implemented, predominantly wind farms. The first 100 MW have already been put into operation. In the future, we plan to create hybrid installations - a combination of wind, solar, and storage generation - with a total capacity of at least 5 GW.

- When could the actual supply of electricity begin under the project?

- This will be known after the completion of the feasibility study. International consultants will determine the implementation timeline based on the route and technical parameters of the project.

- Is the possibility of localizing oil and gas processing, as well as the production of petrochemical products, with the participation of Azerbaijani companies, being considered?

- Yes, certainly. Upon confirmation of oil reserves, the next stage will be the construction of an oil refinery. In addition, projects for small-tonnage chemistry are being actively developed - we are open to cooperation with SOCAR and other partners.

- Have sites for future projects already been identified?

- We have special industrial economic zones in Bukhara, Karakalpakstan, and Khorezm. These sites are considered the most promising in terms of infrastructure and logistics.

- Is the creation of a joint venture for the export of petrochemical products or hydrocarbons to third countries, for example, to Türkiye, Kazakhstan, Hungary, or China, being discussed?

- This is no longer under discussion; the project is being implemented. Together with SOCAR Trading, an enterprise has been created that is already selling gas chemical, in particular polymer, products. The expansion of cooperation in the field of oil products and fertilizers is now being discussed.

Taking into account SOCAR's rich experience in trading and Azerbaijan's strategic importance as a link in the Middle Corridor, we intend to actively develop this direction.