Newly privatized Uzbek refinery begins major modernization

Privately owned Sanoat Energetika Guruhi LLC (SEG) is moving forward with the second phase of a major project to modernize recently acquired subsidiary Fergana Oil Refinery LLC’s (FNPZ) 5.5-million tonne/year (tpy) refinery in Fergana City, Fergana Region, Uzbekistan, as part of a program previously launched by the government to safeguard long-term economic viability of the formerly state-run entity (Fig. 1).

Initiated in 2020 and scheduled for completion in 2023, the modernization and reconstruction project entails replacing existing but obsolete units and equipment with new and modernized installations to increase processing of domestically produced crude and upgrade production qualities to international standards at the now-privatized refinery, one of only two operating in Uzbekistan.

Alongside providing an overview of FNPZ’s privatization and refinery modernization program, this article examines project works concluded to date as well as SEG’s plans for the processing complex’s future.

Privatization, integration

Formerly known as Jizzakh Petroleum JV LLC, SEG—which took over trust management of FNPZ in early 2020—acquired 100% interest in the Fergana refining business from state-owned UzAssets Investment Co. in May 2022 for $100 million following a year-long competitive tender process held as part of Uzbekistan’s state-asset privatization program.

Upon announcing integration of the refinery into its portfolio in June 2022, SEG—which produces about 80% of Uzbekistan’s oil and holds 22% of its proven gas reserves —said the refinery acquisition complemented its vertical integration strategy of maximizing production and processing of Uzbek crude into high-demand finished products for domestic markets.

As FNPZ’s trust manager, SEG processed its total 2021 annual crude production of nearly 500,000 tonnes at the Fergana plant, supplying local consumers with more than 285,000 tonnes of diesel and 209,000 tonnes of gasoline by yearend, according to the operator’s website.

The refinery—which mainly processed imported oil from Kyrgyzstan and Kazakhstan before coming under SEG’s management—now mostly processes crude production from Uzbekistan’s Mubarek, Karshi, and Andijan regions, reducing the plant’s need for foreign oil imports in January-July 2022 to less than 4% from requirements of 24% and 37% during the first 7 months of 2021 and 2020, respectively, SEG said.

Modernization mandate, objectives

The Fergana refinery’s proposed modernization and reconstruction program follows a February 2020 resolution by Uzbekistan’s Cabinet of Ministers identifying priority tasks regarding efficient use of the aging plant’s processing capabilities to support compliance with presidential mandates aimed at strengthening the country’s broader oil and gas industry as a pathway to ensuring national fuel security and economic growth.

In addition to helping reduce Uzbekistan’s need for foreign product imports and increasing the refinery’s overall deep-processing capability by at least 92%, FNPZ’s phased modernization program will enable the plant to use an additional 1 million tpy of its available spare capacity, with post-modernization crude throughputs rising to 2 million tpy from average throughputs of 1 million tpy during the last decade (Fig. 2).

Post-modernization, the refinery also will become the country’s first to produce Euro 5-quality gasoline and diesel, as well as API Group II+ and Group III base and lubricant oils.

Upon completing the refinery’s overhaul in late 2023, SEG anticipates FNPZ will be able to produce:

• 560,000 tpy of Euro 5 AI-92 gasoline.
• 538,000 tpy of Euro 5 diesel.
• 198,000 tpy of JET A-1 TC-1 aviation fuels.
• 175,000 tpy of API Group II+/III base and commercial lubricating oils.
• 290,000 tpy of construction and road bitumen.
• 64,000 tpy of LPG.
• 25,000 tpy of other unidentified oil products.

Designed to replace 30% of the refinery’s existing but obsolete units and equipment, the modernization will involve grassroots construction of a light naphtha isomerization unit and vacuum gas oil hydrocracking plant to enable production of Euro 5-quality gasoline, diesel, and jet fuel. A new hydrogen production unit will be added to meet increased hydrogen requirements of the refinery’s existing and planned hydrocatalytic processes.

Alongside a new water treatment plant and four steam boilers, the project also will add a combined 36 tanks for crude and product storage, as well as a 12-km gas pipeline to supply natural gas to revamped and newly added production units.

Originally approved at a budget of $300 million, SEG confirmed in October 2022 the refinery overhaul will require an investment of more than $400 million to complete.

Progress to date

Following the 2020 government decree, FNPZ—under trusteeship of SEG—began preliminary activities for implementing the modernization project by awarding several major contracts to service providers, including:

• Axens Group for technology licensing and design of new hydrocracking and isomerization units.
• John Wood Group PLC for delivery of front-end engineering design (FEED).
• UzLITI Engineering JV LLC for execution of the project feasibility study.
• UzGASHKLITI LLC for carrying out engineering surveys at planned construction sites.
• Enter Engineering Pte. Ltd. for delivery of overall engineering, construction, and procurement.

With necessary regulatory approvals gained and preparatory works at the site completed between 2020 and mid-2022, SEG confirmed in early October 2022 major construction activities for the modernization project’s Phase 2 works—including construction and installation of new units and infrastructure—were officially under way as of late-September 2022.

FNPZ completed the program’s major Phase 1 works involving reconstruction and upgrading of existing units in late 2020 with commissioning of the refinery’s revamped 1.7-million tpy diesel hydrodesulfurization unit, which began producing Euro 4 and Euro 5-quality diesel on Nov. 5, 2020. Works completed during the project’s first phase also enabled the refinery to produce its first batch of AI-95 gasoline in May 2021 and high-octane B-92 between March-April 2021, the operator said.

Future plans

As part of the operator’s ongoing vertical integration plan, SEG said in June 2022 future development plans for the Fergana refinery will include the addition of a petrochemical complex. Further details regarding this proposed expansion plan, however, have yet to be revealed.