Case study: Uzbekistan’s GTL project lays foundation for further ECA-backed industrial project financings

The success of the Uzbekneftegaz $3.6 billion GTL (gas-to-liquid) project – launching in early 2022 - paves the way for other major industrial projects in the country. Following on from this project we can expect to see greater involvement from a wider range of international financiers.
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There is a sense of urgency about the development of large-scale industrial projects in Uzbekistan, which to a large extent stem from the country having been in the financial wilderness for a number of years when it came to accessing international debt financing. All that has changed over the last few years, and arguably the re-engagement of the EBRD with the country and the new Uzbeki presidency in 2017 have been major factors and a spur for external financiers.

This has led to the most recent major industrial financing in the country with the signing this September of the export credit-backed financing for the Shurtan Gas Chemical Complex (Shurtan GCC) expansion project. The total cost of the project is $1.8 billion, of which $1.2 billion will be contributed by a consortium of foreign banks and financial institutions, and $600 million from Uzbekneftegaz. 

Export credit agencies (ECAs) involved to date in Shurtan GCC include Euler Hermes (Germany), Sace (Italy), and Atradius (Netherlands). Commercial banks involved include Deutsche Bank - for €500 million ($580 million); Landesbank Baden-Wuerttemberg – for €300 million; and Landesbank Hessen-Thüringen Girozentrale (Helaba) – also for €300 million.

The expansion of Shurtan GCC has been made entirely possible through the earlier financing and development of the Uzbekneftegaz GTL (UzGTL) project. The raw material base for the projected expansion facilities at Shurtan is synthetic naphtha, which will be produced at the UzGTL plant. 

Both Shurtan GCC and UzGTL stand out from the plethora of DFI solar and wind financings that have largely dominated the project financing scene in Uzbekistan over the past two years. 

Diverse group of financiers come together for UzGTL 

The UzGTL project has an overall cost of approximately $3.6 billion. Construction of the plant in the Kashkadarya region began in late 2017. Initial signings took place in December 2018, although full financial close of the project is understood to have been June 2019. The construction project and technological testing is currently just about completed with the official launch and full production anticipated in early 2022 (see below). 

Of the $3.6 billion, some $740 million is being provided by the Fund for Reconstruction and Development of Uzbekistan and approximately $570 million directly from  Uzbekneftegaz. 

On the debt side, tranche 1 is a $500 million direct loan from the Export-Import Bank of Korea (Kexim). Tranche 2 is a commercial of $225 million with lenders Credit Suisse, MUFG and SMBC. Tranche 3 is a $1 billion direct loan from China Development Bank (CDB). Tranche 4 is a $220 million covered loan from Russia’s Exiar, with Gazprombank and Roseximbank contributing $120 million and $100 million respectively. Tranche 5 is a $135 million covered loan from Korea’s K-Sure, with Credit Suisse, ING Bank, Mizuho, MUFG, SMBC and Woori Bank involvement. The tenor on all these loans is 10 years (principal) + 2.5 years (investment period).  

The debt package is backed by a sovereign guarantee. The official borrower is Uzbekistan GTL. The sponsor is JSC Uzbekneftegaz. Facility agent and intercreditor agent is MUFG. ING Bank was the financial advisor along with Gazprombank. White & Case acted as legal counsel for the lenders. 

The debt package for UzGTL shows just how comfortable Korean, European, and Japanese lenders were in getting behind the project. The sizeable tranche from CDB was obviously a massive boost for the project and the sovereign guarantee added the silver lining. 

Commenting on the financing, Nosirzhon Babayev, finance director, UzGTL, tells TXF: “Direct lenders always set high requirements to projects they are financing, especially for large-scale investment projects like UzGTL. CDB and Kexim conducted detailed due diligence and after making sure that the UzGTL project complies with all of their requirements, they took the decision to lend. The decision of Kexim and CDB to participate in financing UzGTL was a signal to covered lenders [to come on board].” 

Addressing the complexities of pulling such a diverse financial group and package together, Babayev also adds: “It was challenging to attract financing from such reputable and demanding ECAs and banks. Their participation in the project set up high standards when agreeing the conditions of the financing. Overall, international financial institutions participating in the project showed flexibility which allowed us to put all the conditions together in the common terms of agreement in a relatively short time.” 

Development of UzGTL project crucial to Uzbek industry 

The UzGTL plant is designed using modern gas and petrochemical technologies from such leading companies as Sasol (South Africa), Haldor Topsoe (Denmark) and Chevron (USA). There are only three such plants in the world, operating on the technology of the Sasol company – ‘GTL’ or production of liquid fuels from gas - in South Africa, Nigeria and Qatar. 

The project is being implemented within the framework of an EPC contract concluded on a turnkey basis with a consortium of companies including Korean companies Hyundai Engineering and Hyundai Engineering & Construction, as well as Enter Engineering of Singapore.

As noted above, currently construction and installation, landscaping, laying asphalt, painting and insulation works are being finalised. Some installations have already been commissioned at the energy supply plant. Pre-commissioning, commissioning works, as well as testing of pipelines and equipment continue in all technological zones of the complex. The plant's central control panel was also put into operation and at the moment the plant's central laboratory is undergoing national and international accreditation. 

The development of the GTL project is a major cog in overall Uzbeki industrial development. It is one of the most ambitious energy projects in the world and UzGTL will be a highly technologically advanced plant producing more than 1.5 million tons of high quality, environmentally friendly synthetic liquid fuel per year. The products will be produced under the brand name Oltin Yo'l GTL, which translates as ‘The Golden Way’ and symbolises the route Uzbekistan is taking to a future with more sustainable processes. Resultant products from UzGTL will be used in the transport, agriculture, aviation and petrochemicals sectors of the Uzbek economy. 

Key objectives of the plant from the outset were to: expand the capacity for the deep processing of natural gas; drastically decrease imports of hydrocarbons – an import substitution programme estimated to be worth over $1 billion annually; satisfy domestic demand for high-quality and more environmentally friendly fuel; and provide the market with strategic products made from local raw materials.

 Speaking about the importance of the project for the country, Fakhritdin Abdurasulov, general director UzGTL, says: “It is one of the largest investment projects not only in Uzbekistan but in the entire region. The project will ensure stable and sustainable economic growth of the country by reducing imports of oil products and creating more job opportunities.”

 Abdurasulov adds: “UzGTL will monetise gas resources available in the country through the conversion of natural gas to added value products which can be used domestically or exported to international markets. UzGTL diversifies the Uzbekistan energy industry through introducing a new feedstock to the mix.”

 And on the import substitution front, he notes: “UzGTL will help to eliminate the import of liquid hydrocarbons, leading to energy independence for Uzbekistan.”

 On the subject of further downstream activity, Abdurasulov says: “It is also planned to supply synthetic naphtha from UzGTL to Shurtan Gas Chemical Complex, which will be expanded in the near future. The creation of a local petrochemical cluster will make it possible to produce a number of different kinds of preferential products and organise waste-free production with maximum local processing.”

 And with so much talk currently around the use of hydrocarbons and decarbonisation, what credentials can UzGTL speak of that relate to reduced carbon emissions?

 Odilzhon Karimov, first deputy general director, chief engineer, at UzGTL responds: “GTL fuels are environmentally beneficial in their application as they burn cleaner than crude oil derived equivalents. This is due to their composition as they contain significantly less sulphur and aromatics, while producing lower levels of nitrous oxide due to their burning efficiency. This results in cleaner air in localised areas of application.”

 UzGTL will produce a range of products from naphtha to synthetic kerosene, fuel, diesel, aviation jet fuel and LPG – and all will have improved environmental qualities than most traditional products on the market. And as the world moves through energy transition processes, these technologically more-advanced products will be used for some decades to come.

 Speaking on jet fuel, Karimov states: “GTL jet fuel will make Uzbekistan one of the few producers of the most advanced aviation fuel in the world. Synthetic fuel is a feature of aviation, but GTL jet fuel has the potential to surpass anything achieved to date in terms of performance and air emissions. Thus, aviation is one of the high-value and sustainable global markets for GTL products.

 And, as for naphtha, he adds: “GTL naphtha, being a highly paraffinic product, contains practically no aromatic hydrocarbons or sulphur and, at the same time, contains a very small amount of metal impurities. GTL naphtha is a valuable feedstock for petrochemical industry and steam cracking, its most important process. The effectiveness of GTL naphtha is due to higher product yield and quality of final product when it is used as a feedstock. Another advantage of using GTL Naphtha is a low coking coefficient of furnace pipes during the cracking process, which extends service life of process equipment.”

 Observers of this key Central Asian market and industrial developments within it will no doubt have a keen eye on how the Shurtan GCC project financing goes – which will source feedstock from UzGTL. Shurtan GCC already has three European ECAs involved in the financing, and there could be others involved at a later date depending on the sourcing of capital equipment and technology. Such support potentially bodes well for more involvement by ECAs in a market heavily dominated by DFI support. 

In other sectors of the economy, Uzbekistan looks set to deliver some significant combined cycle gas turbine (CCGT) schemes and renewables financings over the next 12 months, with a strong project pipeline expected to go way beyond 2022. Much of the potential deal flow will require DFI backing, but appetite from international commercial project lenders is also looking strong, spurred by the credit quality of many of the sponsors looking at the market.

Further reading of these Uzbeki developments can be found on TXF at:




 UzGTL deal box

Project initiator and sponsor: Uzbekneftegaz JSC

Borrower and operator: Uzbekistan GTL (100% subsidiary of Uzbekneftegaz JSC)

 Project amount: approx. $3.61 billion

 Total debt: $2.08 billion

 Tranche 1: $500 million Export-Import Bank of Korea (Kexim) direct loan

 Tranche 2: $225 million commercia loan. Lenders: Credit Suisse, MUFG, SMBC

 Tranche 3: $1 billion China Development Bank direct loan

 Tranche 4: $220 million Exiar covered loan. Lenders: Gazprombank, Roseximbank

 Tranche 5: $135 million K-Sure covered loan. Lenders: Credit Suisse, ING Bank, Mizuho, MUFG, SMBC, Woori Bank

 Tenor on all loans: 10 years (principal) + 2.5 years (investment period) 

 Facility agent and intercreditor agent: MUFG

 Financial advisers: ING Bank, Gazprombank

 Legal counsel for lenders: White & Case 

EPC contractor consortium: Hyundai Engineering, Hyundai Engineering and Construction (Korea) and Enter Engineering (Singapore)

Duration of the project: 2016-2022 (Full launch anticipated early 2022)


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