Uzbekistan and the Korea Republic have settled the Uzbekistan’s debt as part of the Ustyurt gas chemical complex joint project, the South Korean Ministry of Economy and Finance said.
The agreement was reached during the visit of South Korean Deputy Prime Minister/Minister of Economy and Finance Choo Kyung-ho to Tashkent on September 7 at a bilateral meeting with Deputy Prime Minister Jamshid Khojaev, he was also hosted by President Shavkat Mirziyoyev.
South Korea and Uzbekistan began implementing the Ustyurt gas chemical complex project in 2008 and set up a joint venture, Uz-Kor Gas Chemical, which began gas production in 2016.
Uztransgaz (which buys gas from foreign companies at export prices and sells it to the domestic market at reduced prices) has an accumulated gas sales debt of a $1 billion to Uz-Kor Gas Chemical for the supplied gas. Payments have not been made since 2017, when the foreign exchange market was liberalized and the soum’s official exchange rate was dropped against the dollar by 2 times, due to concerns about a large foreign exchange deficit.
For six years, the parties have been agreeing on a plan to pay off the debt, but details of the plan have not been disclosed due to an agreement between the project operators and creditors.
In February 2008, Uzbekneftegaz and the Kor-Uz Gas Chemical Investment consortium created the JV Uz-Kor Gas Chemical on a parity basis for the Ustyurt Gas Chemical Complex project on the basis of the Surgil field in Karakalpakstan with further fields develpment. The consortium of Korean companies now includes the Korean KOGAS, Lotte Chemical and GSE&R.
The complex, the construction of which began in 2012, was supposed to annually process 4.5 billion cubic meters of natural gas and produce up to 4 billion cubic meters of commercial gas, 400 thousand tons of polyethylene of various grades, 100 thousand tons of polypropylene and about 100 thousand tons of pyrolysis gasoline. The general contractors of the project were the Korean Samsung Engineering, GS Engineering and Hyundai Engineering.
The project, worth $4.16 billion, was financed through loans from a consortium of foreign financial institutions of $2.5 billion, the own funds of the founders of the Uz-Kor Gas Chemical joint venture - $1.41 billion, as well as a loan from the Uzbekistan Fund for Reconstruction and Development - 100 million dollars.
Gas reserves in the field where Uz-Kor Gas Chemical operates were estimated at 109.6 billion cubic meters (the third volume after Uzbekneftegaz and the Russian Lukoil).
