Uzbekistan, as any regular quiz participant can answer, is one of the two doubly landlocked countries of the world: both itself and its neighbors are landlocked countries. This is unfortunate given that one of the main export commodities, natural gas, is increasingly being sold by sea. Moreover, the trend towards liquefying gas and transporting it around the world in giant tankers has given importers much more choice as to where to buy, informs The Economist.
The result has increased competition, lower prices, and as a result, a much more difficult market for countries like Uzbekistan, which export the gas in an old-fashioned way which was through pipelines.
As if to underline the idea that pipeline gas exports are an unreliable way to make a living, China has cut Uzbek gas imports by two-thirds this year amid the economic slowdown caused by the covid-19, and Russia shut them off entirely. Last year these countries accounted for 80% of Uzbekistan’s $ 2.3 billion in gas exports, leaving Uzbekistan with a lot of gas it cannot sell.
The government solved the problem and decided to use the gas itself. Near the industrial city of Qarshi, the country is investing $ 3.6 billion in a plant that will convert Uzbek gas into gasoline and other liquid fuels. This process is called gas to liquid fuel conversion. It also encourages the construction of factories that use gas as a feedstock for the production of plastics and other petrochemicals. For example, a Chinese PVC factory opened at the end of last year, about 140 km from Qarshi. It is planned to end all gas exports by 2025, even though gas production has increased.
The global gas market is unstable, complains Ulugbek Saidov, chairman of the state-owned company that operates gas pipelines in the country: “We are better off using this gas in the domestic market than exporting it.” The government believes that it can make a good profit by processing gas, as well as creating jobs and attracting investment. It believes that the production of polyethylene, for example, should bring in eight times more value than simply selling the gas from which it is produced. The government wants plastic production to increase by 20 times by 2030. Gas is not the only resource the country wants to use more efficiently: it also hopes to stop exporting raw cotton this year.
But at the very least, converting gas to liquid fuels is a capital-intensive technology that is usually only viable when oil prices are high, notes David Ramberg, a former scientist. It is used only by 4 countries now: Malaysia, Nigeria, Qatar, and South Africa. However, the government insists that even at current oil prices of $ 40 a barrel, it will save $ 1 billion a year in fuel imports. Oltin Yo’l (Golden Road), the gas-to-liquids plant, will be profitable when it opens next year, promises Bekhzot Normatov, a deputy energy minister. Even skeptics admit that its production is more valuable than unsold gas, untouched under the steppe.